2017 En Primeur selections
20.06.18 – Fine Wine Investment –
It seems fair to suggest that the producers simply don’t want your money this year, and this may help explain the rally we have seen in the Liv-ex 50 over the last three weeks or so. Anything from a cursory glance to an in-depth examination of en primeur release prices for the 2017 vintage suggests that not a lot of contracts are going to be drawn up.
With interest rates as low as they are, and little sign of their moving up any time soon, the Bordelais seem to be taking the gamble that they are more comfortable borrowing from the bank than taking the investment Euro. Much as a lot of people in the industry come over all odd when you talk to them about fine wine investment, an en primeur purchase is nothing more or less than an investment. You could even argue that it is a derivative, heaven forfend!
This was verbalised yet again recently, this time by the new Head of Chateau Angelus, Stephanie de Bouard-Rivoal, in a Drinks Business interview earlier this month. Despite being a former investment banker she managed to come out with: “I really don’t like the idea that wine is an investment asset. You can’t forbid people doing that but you cannot help promote it and I am not helping it.” She went on to add: “We want our wines to be drunk not sitting somewhere in a storage room”.
Now pardon us for being picky, but let’s take the 2016 vintage, just as an example. Neal Martin when he was at the Wine Advocate in scoring it 96-98 posited a drinking window of 2026 to 2060. So what might the redoubtable Mrs Bouard-Rivoal think will happen to it between physical release and 2026? In the same interview she talks of altering the distribution geographic because too much of the 2010 went to Asia, but of course without disrespect Asia was the only market place where it was drunk straight away. No storage required!
Excuse us for addressing this point again, because it is as significant as it is remarkable how the producers don’t seem to get it. Between physical release and drinking window there is often as much as a 10 year wait, particularly in better vintages. If Stephanie B-R doesn’t want it “sitting somewhere in a storage room” it must, by very definition, be changing hands, and if something changes hands it tends to lead to something called a market place. Market places only exist because the things that change hands in them do so at different prices, and offer smarter people the chance to make some money.
It is this muddled thinking that is likely behind some of the more ludicrous pricing witnessed in every campaign, but repeated in an unusually high dosage this time round. As mentioned earlier, low interest rates may be a factor and as a former investment banker you would expect the owner of Angelus to be up to speed with the benefits they confer, but whichever way you look at it it is a vote of confidence in the market. They aren’t all hoarding it (Angelus released volumes 60% lower than last year) to sell at some point in the future at a lower price, or so they hope.
There is one shining light amid the 2017 EP gloom, and it emanates from Chateau Lafite. They have been more on track with release prices than most others in recent years and with both the Grand Vin and the Carruades they are hitting the right note again now. We have discussed in articles earlier in the year that Second Wine pricing seems more to follow principles of age than critical acclaim, and Carruades has been released at a reasonable discount to previous releases.
It is the Grand Vin we should be concentrating on now, however. It may lack the general critical acclaim of the 2016, although the Wine Advocate thinks it is a notch up at 97-99 points (from 96-98), but at a price a shade under £5,000 it is absolutely priced to go. All physical Lafites going back as far as the eye can see cost at least £5,000, and usually a great deal more. 2017 is a decent vintage in Pauillac, even if not a thoroughbred, and the wine is of a very high quality.
The Liv-ex platform produces a good graphic illustrating the “value” of new releases against older wines:
In essence, the nearer the vintage is to the bottom right hand corner, the better the value relative to other available Lafites. We should point out that this is a totally binary exercise: there are only the two elements, price and score.
Regular readers will recognise that the Amphora proprietary algorithm has 9 elements, assessed on a weighted basis whereby not all the variables count the same, so that device offers a much more robust conclusion. The best relative value according to the algorithm is offered by the 2009, 2010, and 2014, in that order. The algorithm only deals with physical vintages, but for the moment we believe the 2017 en primeur is highly compelling.
Amphora is currently offering Lafite 2017 at £4,950 plus fees. Please get in touch to secure a holding of this fantastic opportunity or for a more in-depth look at this opportunity click here.