17.01.18 – Fine Wine Investments –
We’ve been promising our diligent readers a closer look at Champagne for some time – partly because the sector had a pretty decent year in 2017, and partly because it’s a while since we last reviewed it.
As you can see from the chart below, it’s a useful constituent of the Liv-ex 100. Whilst the general trend may be similar, there are periods of out and out underperformance, which are very helpful to those looking to invest in fine wine and get enhanced returns.
That being said, the expression ‘enhanced returns’ should beg the question: ‘against what?’ The answer should be: ‘the benchmark’, which in this case might helpfully be considered the Liv-ex 1000 – as the broadest index in our universe. It’s important to have a benchmark with fine wine investments, because it helps you control risk and provides a yardstick to judge your efforts against.
For example: it’s all very well making a 10% return over a given period, but if your benchmark is up 20%, you might conclude you’ve got some work to do! Equally, of course, if your benchmark is the risk-free rate (interest on deposits in the bank), you’d consider 10% a fabulous effort.
Fine wine investments in Champagne
The complexity of the Champagne sector lies somewhere between that of Bordeaux and Burgundy. In index terms, there are 9 producers, 3 of which throw in a Rosé for good measure.
The scale of output from these producers varies enormously. Moët releases some 2 million bottles of Dom Perignon, compared with just 20,000 Clos Goisses brut from Philipponnat. And even then, with varying degrees of frequency. Salon might think only 4 harvests per decade are worthy of making their vintage Mesnil, whilst Taittinger could reckon that in as many as 6 or 7 years (per decade) their Comtes de Champagne effort is repaid.
Champagne is therefore much more difficult to compare and contrast than is the case in any of the Bordeaux sub-sectors. Roederer produce a Cristal in 1997 and 1999, Krug offer neither and instead plump for the 1998. Remember that climatic conditions prevail as much in Champagne as elsewhere in the world, so there is clearly something else at work here. All producers are subject to the same economic realities – so you would think they’d take advantage where possible.
But of course, they’ve got an even more acute awareness of their reputation than of economic reality – so they wouldn’t allow themselves to produce a dud. If their grapes ain’t good enough, they’ll sacrifice the vintage.
The wine investment critics
The Parker Factor further adds to the complexity. Some observers regard Richard Juhlin as the best Champagne critic, but his opinions don’t hold the same pre-eminent place in the market psyche as Robert Parker’s in Bordeaux. Nor, incidentally, do Parker’s Champagne opinions hold as much sway as his Bordeaux and Napa scores. So the fine wine investments market in Champagne has one less branch to cling on to.
In exactly the same way as with the rest of the market, there’s no one homogenous ‘fine wine investments’ price. You’ll get odd occasions where consecutive vintages appreciate by the same amount – but these are the exception rather than the rule. Take for example, the Salon Mesnil 1996 and 1997, which have both appreciated by 15% over 1 year and 107% over 5, and the Cristal 2002 and 2004, both of which are both up 48% over 5 years. It’s not unheard of – but it’s also certainly not the norm.
A more typical example comes with Taittinger’s Comtes de Champagne 2002, which achieved -17%, +35% and +95%, respectively, over 1, 2 and 5 year periods. Compare that to the 2004 vintage which performed a comparative +7%, +26% and -2% over the same time periods. As ever, we have to analyse the whole space and feed inputs into the algorithm to help steer us to the right bargains.
The age factor
An interesting point always arises when we discuss Champagne in the overall fine wine investments market context: does it last as long as a quality red wine? Generally not. Particularly spectacular vintages might go north of 40 years, but by and large after 30 you should be measuring the distance to the door. But can 2 million bottles of Dom Perignon be drunk in 30 years?
Statistically, global consumption of Champagne is encouragingly high. Over 300 million bottles were drunk in 2016 alone, and whilst the percentage of total sales which are vintage will be fractional, it seems unlikely that too much will exceed its sell-by date. More important from a fine wine investments perspective, is to be aware of that sell-by date.
As with any high marque wine, pricing reaches ‘work of art’ levels when you’re seemingly the only person in the world owning a case, perhaps of 1945 Lafite, or topically a bottle of 1966 Salon Mesnil (£6,650 in Hedonism). But that’s not how you invest. We have to remain alert to the secondary fine wine investments market which gets as sketchy for older Champagnes as it does for older Clarets.
Which Champagnes make the best fine wine investments?
As we at Amphora see it, there are currently at least 3 main wine investment opportunities available.
Remember – even vintage Champagnes have ‘off and on’ years. Over the last couple of decades, the 1996 stands pre-eminent, with the 2002 just behind. 1998, 1999 and 2000 are next best, followed by 2004 and 1997. Champagne houses take a good few years over production so, though there have been releases since 2004, most of the vintages are not as good – and trading data is more sporadic. We’ll review some of these more recent releases next time around.
In the following instances we compare the average critics’ score (in brackets behind the vintage) because no one individual seems at this point unduly influential.
Krug 2000 (95 pts)
This trades at £1,900. The 1998 (95 pts – for what it’s worth the best Champagne your correspondent has ever tasted!) costs £2,220 whilst the superior 2002 (97 pts) is £3,100.
Cristal 2004 (95 pts)
The Cristal 2004 trades at £1,700. The inferior 1997 (91 pts) costs £2,580. The 1996 (95 pts) costs as much as £4,560.
Taittinger Comtes de Champagne 2004 (94 pts)
This vintage costs £930. The 95 point 2002 costs £1,740.
Are Champagne fine wine investments worth it?
There are clearly huge influences from people’s perceptions of vintage quality but it’s worth pointing out in defence of 2004 that quite a few critics think very highly of it. If not quite as high as 2002, they believe it runs it quite close.
Some of the price differentials between the two seem unjustifiably wide, and none of the three have recently had a particularly vibrant time of it either. The Krug 2000 rose 6% last year, the Cristal 2004 rose 12% (but is down 1% on a 2 year view), and the Taittinger, 7%. Whether you’re balancing a portfolio or simply looking for ideas, we recommend you talk to us in more detail about these 3 future winners.
If you’re looking to invest in fine wine, there’s a good chance you’ll want some pretty robust advice that’ll help you identify the best opportunity for wine investment returns. Find out more about our fine wine investment services right here.