Fine Wine Market Update

As we approach the fall 2010 auction season, it is worthwhile to reflect on the past few months. The end of spring auctions saw prices hold onto their gains from the previous months. Prices seemed to level off in May and June, but the market as a whole is up significantly from the end of 2009.

We have yet to see the full impact of the 2009 Bordeaux futures campaign. Prices were higher than anyone thought possible with some wines opening nearly double their 2005 counterparts. The wines sold well out of the gate, but that was primarily due to the Chateaux releasing minuscule quantities causing demand to increase when buyers could not purchase significant amounts. Once this game became evident to the consumers – and prices simultaneously increased – the wines did not sell as briskly. Prices have been fairly consistent the past month.

The lack of summer auctions left retailers and brokers a bit up in the air with regard to pricing as they had no immediate gauge to use as a benchmark. This allowed for some bargains to be had especially with the recently released 2007 White Burgundies. Some of these wines are easily at the highest quality level White Burgundy can offer so it was a treat being able to secure them at excellent prices for our clients. Two particular examples of wines which we bought as much as we could access from reliable sources included the 2007 Montrachet Domaine de la Romanee Conti around $2300 per bottle and the 2007 Corton Charlemagne Coche-Dury around $995 per bottle. We feel these
two wines work very well from both consumption and investment positions as they were trading for significantly less than inferior older vintages from the 21st Century. The Coche-Dury also benefited buyers by having not yet been reviewed by Allen Meadows (aka Burghound).

Some retailers and brokers took the hard line of keeping prices high this summer. Needless to say, here we were not buyers unless something was particularly rare with pristine provenance such as immaculate bottles of 1971 La Tache Domaine de la Romanee Conti for $3800 per bottle. We feel that in today’s market, prices should reflect the current market value and not the potential market value.

As the first wine auctions of the season approach, broker activity and pricing has increased a bit especially in regard to Lafite Rothschild and other high quality wines in original wooden case. They seem to be betting that their prices will appear to be bargains after the auctions begin.

At the moment, the future of pricing is dependent on the global financial markets. As we saw in the fall of 2008, wine prices and stock markets are more correlated than ever before. Assuming international markets remain as is, prices will likely continue to slowly rise with the Hong Kong market breaking away and seeing higher gains than the New York market. Reasons include:

1) The continued flow of new buyers into the Asian fine wine market.
2) The stronger economic and financial conditions of the Asian countries compared to those of the US.
3) The 2009 Bordeaux setting a new precedent for pricing which will eventually cause more buyers to backfill on older vintages that are less expensive in comparison.

All that being said, we do expect certain producers and vintages to remain undervalued which we will continue to identify and purchase on behalf of our clients. We look forward to following the continued development of the fine wine markets and offering our insights.

Kind Regards,

David Beckwith, Robert Bohr and Ned Benedict


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