La La Land
24.06.22 – Fine Wine Investment –
We are drawing inexorably to the close of this year’s en primeur campaign and the release prices are unfortunately pretty much in line with the gloomier prognostications. Very few bargains thus far, plenty which defy reality, and others which, as we shall see, are notable but unfortunately not for their relative attractiveness. If anything they have drawn attention to back vintage opportunities, but if you have a helpful algorithm you don’t need the hallucinations of hopeful chateau producers to achieve that.
We note with interest that a lot of the 2019s have been in demand of late and we can attribute this directly to the current release prices. 2019 was a very good year, and the reasoning goes that if such a good vintage costs less than the relatively poorer 2021 then that must represent good value. Unfortunately that reasoning is flawed, because it presupposes that the release prices are the “right price”. We would strongly suggest that this is nonsense. How so?
Well for a start if the en primeur prices were “right” the “wine futures” would be flying off the virtual shelves, and history suggests that this often simply doesn’t happen. A lot of the wine is “left with the underwriters”, in this case the negociants, or otherwise never actually leaves the chateau cellars. In addition, to take Ducru Beaucaillou as an example, why might you pay £1,908 in full for forward delivery of a wine which most critics suggest might sit at around 95 points, from an indifferent vintage, when you can buy a 98 pointer from 2019 (a good vintage) for around £1,800?
Your correspondent has just finished the last bottle of a case of 1996 Gruaud Larose bought en primeur back in the day, so was interested to see this year’s release price. Gruaud isn’t really an investible fine wine because it is at that awkward lowish price point which is impacted negatively over time by storage charges, but it certainly tastes fab. With a score barely creeping into the 90s an attractive price would have been around £600, but what’s this? £744! Shan’t be picking up any this year.
Although this is very much the story of another missed opportunity by the producers, there are a couple of stand-out bargains, and from top names to boot. Just over a week ago Lafite priced its 2021 offering which has received an average critical score of 96, a creditable effort in a challenging year, at £5,808. Had they followed the route of many others and priced it near the 2019 they would have charged £8,000. This is a highly laudable strategy, not just to the benefit of potential investors, but also for themselves further down the line. Why might we say this?
We try to talk a lot at Amphora in mainstream investment market parlance, not because the fine wine market is mainstream, or anywhere near it, but because it helps to frame investment decisions. In mainstream markets initial pricing is vital to engender a positive after market which benefits investor and issuer alike. If an offer is priced incorrectly not only will it be difficult to get away, but a poor after market will reflect badly on the issuer. We see this a lot in our market place with producers like Latour, who price fresh tranches of back vintage wines at premia to existing freely available stock. Performance languishes as a result.
As a test of the validity of our way of thinking we will closely monitor the performance of Lafite 2021, as we will Lafleur, who also priced attractively. Even more attractively than Lafite. They have crafted a 97 pointer, equivalent to 2017, 2018, and 2020. 2018 and 2020 were superior vintages to 2017, and the wines are priced at over £14,000 and £12,000 respectively. The 2017 costs over £8,000 so they could have been excused for approaching that sort of figure, but if you have been lucky enough to pick any up it will have set you back only £6,508. Again, we expect this to have entered very willing hands and will watch with interest what happens to the price over time.
Regular readers will be aware that at Amphora we love L’Eglise Clinet, believing it, as a house, to be one of the most undervalued in the market. That does not, however, blind us to its failings, and although its 2021 wine, with a score of 95, (strictly speaking 94-96) may not seem to have been over-priced against the two prior vintages (nor should it have been, obviously) it seems to be trying to use the en primeur campaign as a tool to lever its way into a higher price point. Who knows, this may work, because the market doesn’t seem to be finding its own way to what we would suggest are fully deserved higher prices.
The difficulty is that L’Eglise Clinet has so many back vintages that are as good as the 2021, (2006, 2008, 2012, 2014, 2015, 2017) and they are all at a considerable discount to the current offer price of £2,500. 2008 was a great year in Pomerol and the 95 point wine costs £1,500. The work of an arithmetical moment will suggest to you, quite correctly, that this is a 40% discount.
If you think that’s bad spare a glance at L’Evangile. They have made an excellent wine, to be sure, at 95 points (again, could be 94 when it goes to bottle, could be 96), but it has come out at a higher price than everything bar 2005 and 2009, (looking back 2 decades). It is a hopeful strategy, to say the least, but we won’t be picking any up at these levels.
We will keep a close watch on all of these but the evidence suggests that the more coherently a wine is priced, the better its performance over any time frame. Needless to say if you have any particular favourites about which you would like our opinion please just ask and we’ll give you a clear analysis.