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Fine Wine Market Update

The past few months have breathed a bit of life back into the fine wine market. This exhibits a contrast to a fall characterized by predominantly stagnant prices. However, relative to the financial markets, the wine market has exhibited a more moderate resurgence. The overall impression is that consumers are still spending trepidatiously when it comes to their wine cellars.

More buyers are dipping their toes into Bordeaux again. Pristine examples of drinkable wines from maturing vintages such as 1982, 1985, 1989 and 1990 are all doing quite well these days. The 2010 Futures saw a significant uptick after strong reviews from Robert Parker. It remains to be seen how the prices will hold up once they are released and traders begin to flip them. We expect a dip due to too much supply, where there will likely be some buying opportunities in the secondary market.

Burgundy has enjoyed a strong season thanks in large part to several auctions: the Zachys La Paulee sale, the Hart Davis Hart Celebration of Burgundy sale and an Acker Merrall & Condit Hong Kong sale featuring wines direct from Domaine Dujac and Domaine Roulot. Prices for the top items at these auctions were well above average, at times even double the standard rate. The Sothebys sale of wines direct from the cellar of the now defunct El Bulli restaurant also saw prices soar. These sales reinforce the power of pristine provenance combined with strong marketing.

Due to the recent glut of auctions, the less highly touted sales have offered excellent buying opportunities. For example, we recently bought some magnums of 2007 Chambolle Musigny Amoureuses Domaine Georges Roumier for $1200 each – an incredibly rare wine in that format and a great deal considering a pair of single bottles typically sell for considerably more. We also took advantage of some 1974 Barolo Monfortino Giacomo Conterno in very nice condition. As always, it pays to pay attention!

Bordeaux has just begun to release prices for its 2012 vintage and many are immediately down more than
30% from the 2011’s. It is nice to see the Bordelais starting to pay more attention to the overall market
and what it can handle. Due to very small recent crops, Burgundy prices unfortunately won’t see much of a
drop, if any.

Two trials involving fraudulent wine continue to make headlines: those against Rudy Kurniawan and Eric Greenberg. The latter was just found guilty and ordered to pay Bill Koch $12 million in damages – well above the value of wine involved and legal fees combined. The severity of this verdict shows just how seriously counterfeit wine issues are now being viewed. In the long run, these ongoing developments should help to further clean up the market. The cases at hand will continue to be very interesting to monitor in the upcoming months.

We look forward to following the continued development of the fine wine markets and offering our professional insights.

Kind Regards,

David Beckwith, Robert Bohr and Ned Benedict

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The Brains Behind Some of the Finest Cellars

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April 20, 2013 · 8:25 am

Fall 2011 Fine Wine Update 10/11

The fine wine market has remained surprisingly resilient in the opening weeks of the new auction season in spite of recent fluctuations in global financial markets. We attended auctions in both Hong Kong and New York and wines continued to sell at a brisk pace with all sales achieving a sell through rate in excess of 95%. Prices do appear to be softening for top Bordeaux, but not as much as many thought they would. Lafite Rothschild has continued to fall off its peaks, but still commands high prices, albeit at the low end of the estimate ranges these days. Latour is now the Chateau to watch as prices have been steadily climbing at a more accellerated rate than the other First Growths.
    Burgundy, on the other hand, shows no signs of decline which can be partly attributed to the continued education of Chinese palates. Domaine de la Romanee Conti prices are higher than ever as an original wooden case of 1990 Romanee Conti broke a record at Acker Merrall & Condit’s Hong Kong sale for $297,179 USD. Other top producers such as Dujac and Mugnier are gaining strength on a near daily basis. At the recent Zachys New York sale, the Dujacs across the board were 20% higher than the Spring auctions. There is a palpable excitement in the air for Burgundy and new records will likely be set at Acker’s November Hong Kong sale featuring wines from the Collection of Don Stott who has arguably the largest private Burgundy cellar in the world. There was a noticeable difference in the auction rooms of New York and Hong Kong where the latter remains more of a spectacle full of energy. Hong Kong is still a bit unpredictable with pricing as evidenced by California wines on offer. Harlan Estate has traditionally been one of the top sellers there while recent sales showed numerous lots passing. Simultaneously, other California wines such as Bond and Peter Michael were consistently selling at the top range of the estimates. The French influenced fine dining scene in Hong Kong also seems to be constantly improving. Meals at L’Atelier de Joel Robuchon – featuring a thrilling bottle of 2000 Bonnes Mares Roumier purchased off the wine list – and  Le Mieux Bistro were some of the best we’ve had yet in the city. While at Robuchon the wine service was flawless, at many restaurants there is still some work to be done which will undoubtedly get better over time.
  The New York auctions seem to be doing extremely well when it comes to “safe” wines such as Bordeaux and Burgundy in the $100 – $300 USD range. People are willing to push up prices for wines they know well and enjoy drinking, but 40+ year old wines are not faring as well. We were able to take advantage of this by purchasing a magnum of the legendary 1926 Cheval Blanc at reserve for $4,000 USD. No one else was willing to take the risk of an older magnum even though from what we saw the color was strong and the fill appropriate for age. It is also interesting to see the psychology at play with the current wine market. While fine wine is certainly a luxury, the price for a few cases of top wine is nominal compared to many other luxury items allowing buyers to feel comfortable as they remain active. For example, $10,000 USD can allow a buyer to obtain a world class case of wine, while that price does not come close to purchasing a fraction of a proper, top level painting. 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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La Paulée de New York 2011

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Fine Wine Market Update

The first wine auctions of the season this September saw intense bidding from buyers all across the globe. All auctions were simply on fire. While Burgundies held their own, the top Bordeaux unanimously stole the show. The latter’s best wines from the greatest vintages saw a sharp increase with most wines moving 10% – 20% above their prices from this past spring. Our clients who sold wines in these first auctions were very pleased with the results.

Buyers in China are still noticeably excited about their newfound wine market. For example, while most US auctions have on average around 60 buyers in the room, in Hong Kong the number is closer to 150. They are also becoming more educated about wines and palates are becoming more discerning. Some regions do still struggle in the Hong Kong market such as Italy and Champagne in particular. We were able to take advantage of this by picking up some legendary wines for discounts such as a case of 1973 Krug for $675 per bottle.

An important distinction we recently observed in Hong Kong is that fine wine is becoming more embedded into the wealthy Chinese culture. This is true not just in Hong Kong where auctions are taking place, but across the mainland. This type of cultural shift shows the staying power the wine market will have in Asia. It seems nearly impossible for it to sustain the growth trajectory it has had the past year, but prices for the finest wines will likely remain high for quite some time.

While the Chinese are clearly a driving force in the market, apparently there were a surprising number of new American bidders that stepped forward this fall. For many of the top wines, it was neck and neck between them and Asian buyers in the US auctions.

While the top First Growth Bordeaux were certainly some of the stars of the auctions, September saw a steep increase in prices for Second Growths as well. It is almost as if the world’s billionaires are driving the prices of the Firsts while the millionaires are pushing the Seconds forward. Items such as 1982 Leoville Las Cases selling for $11,950 per case and 1989 Lynch Bages selling for $4750 per case are not normal occurrences.

The retail market has yet to catch up to the auctions. Some retailers are savvy and immediately raised prices, but others tend to not pay much attention to recent auctions allowing for nice shopping opportunities. Immediately upon our return from Hong Kong the other week we purchased significant quantities of Bordeaux on behalf of our clients looking to invest. Wines such as 1995 Latour for $6000 per case can be considered steals in this market.

The demand for the greatest Bordeaux Chateaux in original wooden cases seems almost insatiable these days. How long the party will last is the big question. In the meantime, for our clients looking to actually drink their wines we have been finding good values in some of the more mature lots in odd bottle quantities. Regardless of market conditions, there are always buying opportunities when one has focus.

We look forward to following the continued development of the fine wine markets and offering our insights.

David Beckwith, Robert Bohr and Ned Benedict

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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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