Market Report June 217 MARKET DATA: Index Level 31.5.17 M.O.M (%) YTD (%) 1 Year (%) 5 Year (%) Liv-ex 5 345 1. 2.7 2.9 7.1 Liv-ex 1 34.4 2.2 19.5 9.2 Liv-ex 5 32 3.1 2.3 18.1 Liv-ex 1 311 3.6 21.4 23.8 Liv-ex Investables 331.5 2.3 19.3 14.6 FTSE 1 7,52 4.4 5.3 2.7 41.3 S & P 5 2,412 7.7. 15. 84.1 Gold 986.7 5.9 17.8-2.8 Source: Liv-ex.com, 31ST May 217 The June report has to cast an eye towards the current political environment. Exactly twelve months on from the UK Referendum vote and we are back at the centre of another political maelstrom. The Brexit affect has of course been sat firmly on the dashboard since June 216, but who would have thought that we would find ourselves with a hung parliament, Jeremy Corbyn having a revived public persona and Theresa May, who, having lost the predicted landslide, has scraped past the post with the alliance with the DUP, and is now looking far from strong and stable. The PM suggests that her continued leadership provides certainty as we approach the start date of the Brexit negotiations, but there is probably more uncertainty now than in any time in the UK political history post WWII and questions abound over her own future. So where does that leave us; seeking safe havens, shoring up against the storm to come? Parallels in terms of financial markets and currency dynamics can be drawn to the period immediately following last year s Referendum vote - Sterling has fallen and FTSE shares in multinational corporations with international currency-based reporting have already risen in value. Investors will continue to seek safe havens and gold and fine wine are obvious targets. In 216 fine wine saw over 25% growth, 16% of that was post the Brexit vote, with currency an influencing factor. The market saw an unprecedented 16 months consecutive rise from December 215 to March 217, a minor blip in April, possibly due to the trade distraction with 216 en primeur, and all Liv-ex indices grew in May 217. 13 125 115 11 15 1 Comparing C aring wine wine with with other o ther assets: assets: December c ember 215 -- MMay a y 216 217 Historically, and last year s Brexit effect was a classic example, there is heightened demand for tangible assets which protect wealth in times of economic uncertainty and inflation. We can expect to see that demand hit the fine wine market anew following June s election results and the commencement of the Brexit negotiations. 95 9 Source: Liv-ex.com FT SE S&P GOLD WINE DOW
PERFORMANCE: The fine wine market in May was back in growth territory despite the background noise of the 216 en primeur campaign. All of the Liv-ex indices rose with the LX5 and LX1 running consistent % growth with S&P 5 and the LX1 saw its eighteenth month of consecutive growth in May. FTSE meanwhile had a solid month seeing 4.4% growth ahead of June s election and the First Growths heavy LX 1 and Investables indices saw more modest growth of.4% and.5% respectively, primarily due to bargain hunting elsewhere. Our May report highlighted the potential for reduced supply of the 216 en primeur wines being made available by the chateaux for this year s campaign as a result of the April frosts, and this came to pass. Volumes are down but prices generally are not on last year s en primeur releases. Clerc Milon Clinet Figeac Top Market Performers April 217 Vintage Region April to May Change (%) 27 24 213 Lot 27.1 18.6 12.3 Some of the 216 releases have been Pavie 28 over-subscribed and the first big brand Yquem 22 to market, Chateau Cos d Estournel, prior to the frosts at the end of April, was Source: Liv-ex.com 31st May 217, (Mid Price 12 x 75) a classic case in point. Those lucky enough to secure an allocation at this stage look well positioned as later releases are expected to be at higher prices and certainly supply to market will be carefully managed with the future 217 vintage availability in serious question for as a whole. As a consequence buyers have sought better value in back vintages and major movers this month have come from years traditionally viewed as off-vintages. See the table above. Our previous special report on Vintage Diversification (https://www.vin-x.com/documents/ VinxReportVintageDiversification.pdf) set out in some detail the benefits of identifying outstanding wines from offvintages as they can offer potential for good returns on investment and enhance your portfolio performance. Questions are again being asked over the future of en primeur as a sales strategy as a number of key chateaux seem to be following Latour s lead and becoming decreasingly engaged with the process. As the campaign closes we set out our thoughts on 216 in the In Focus section of this report. 12.3 1. REGIONAL MARKET NEWS: s trade reached its year-todate peak in May (69% of trade by value Best Performing Burgundies Over 5 Years: on Liv-ex), not unsurprising given the focus on this region with the 216 en Vintage May 212 May 217 % Change primeurs. As a result Burgundy s market share slipped to 12%, still well above its historical trend performance, but the DRC, Grands Echezeaux Rousseau, Gevrey Chambertin 26 26 6,96 1,92 17,532 4,836 151.9% 151.8% lowest level year to date. USA put in a DRC, Tache 24 11,46 28,5 148.7% decent regional performance at 4.7% of share by value traded on Liv-ex with DRC, Grands Echezeaux 27 5,88 14,4 144.9% Screaming Eagle and Stag s Leap the DRC, Tache 28 12,192 28,8 136.2% stongest brand performances. Source: Liv-ex.com 31st May 217, Market Price per 12 x 75 Château Pichon Longeville Comtesse de Lalande,
SPECIAL FOCUS SHOULD INVESTORS BUY EN PRIMEUR AND SPECIFICALLY 216? This lack of supply (reported about 2% down on last year) may well have engineered the rationale for higher prices but does it help the cause? Those chateaux and negociants who sold out their en primeur allocations within hours of release would argue yes, but we note that their release prices offered fair value, i.e. measured as considered fair when compared to scores and prices of back vintages. Lafite Rothschild excited the market with just such a move, however this proved to be the case for a small portion of their release stock only. A second tranche is due out and it will be interesting to see the pricing strategy on this. Further down the supply chain merchants and brokers will struggle to offer value on the wines which have adopted the higher price strategy to their clients especially when they are compared to back vintages of outstanding wines from stellar years such as 29 and 21. Château Margaux winery Why buy en primeur? Let us remind ourselves the en primeurs process, i.e. the ability to acquire future positions of vintages, was established as a key sales mechanism by the region s power brokers last century to afford some financial security to the chateaux and to provide buyers with certainty on supply at first release price - theoretically the lowest value the wine should ever sell at. The pricing strategy adopted by the chateaux, their advisers and negociants since the release of the 211 vintage, has led to the industry now questioning whether the original purpose in terms of the buyers risk v reward is being ignored. Since the 213 campaign launch in Spring 214 there has been a rising clamour at the year on year release of ever rising prices, not always directly correlated to quality and critics scores. The UK market has also had the double-whammy with the 215 and 216 campaigns of a challenging currency dynamic as Sterling has fallen against the Euro and US$ in both periods as a result of the Brexit Referendum June 216 and the recent general election this year. En Primeur Price Comparisons For 215-216 Mouton Rothschild Lafleur Palmer Mission Haut Brion Cheval Blanc Haut Brion Montrose Cos d Estournel 215 Price 216 Price 75cl Btl (Ex-Negociant) 75cl Btl (Ex-Negociant) Increase % 82.8 21 3 54 385 12 12 24 336 552 12 23.3 14.3 12 11.4 9.1 For example, Chateau Palmer s 25 and 29 vintages both scored 97 points and are currently being offered at a 2% discount to the 216 release price ex-merchant. Liv-ex Director, Justin Gibbs commented on the 216 campaign as it drew to a close in his trade communication 14th June: The past five days have seen a flurry of releases, almost all of them, big names. Indeed it was a week, suggested one major international merchant, that would decide whether 216 was to be more successful (or not) than 215. It turns out, that bar a handful, the releases flopped. Most were simply too rich for the market to stomach. Last Friday in particular, was a very bleak day. So how does the campaign look, in the round. We are getting mixed signals. Some merchants have sold more by value than in 215. Far fewer seem to have sold more by volume. Indeed, it seems that, despite the size of the 216 crop, there is a real danger that volumes sold will be down on last year. Château Cos d'estournel 216 prices have risen on average 13% across the board in comparison to 215, but the supply released onto the market is notably reduced as a result of the devastating frosts in April 217. There are question marks over supply and when the bountiful 216 vintage will see further releases onto the market. The vintage quality is good but this 216 s production will have to compensate for 217 s losses due to frost damage. s pricing has left the market disenchanted with the current campaign, but with global demand for s top brands it is highly likely we will see prices sustained in the current market conditions. We will continue to watch the space for the best options for growth and keep you informed.
CHATEAU LAFITE ROTHSCHILD 29 AND 21 Pick of the month With En primeur 216 look overpriced, particularly in Sterling, many buyers are seeing great value in backvintages and in particular the glorious 29 / 21 prime vintages are swinging firmly back into focus. We are in countdown now for the ten year anniversary of the legendary 29, and we look specifically at, perhaps the world s biggest fine wine brand, Lafite Rothschild 29 and 21, as our picks of the month. Both the 29 and 21 vintages have seen good recovery in values over the last year, up 23% and 18.3% respectively, yet both remain significantly below release prices and the giddy heights they reached in 211, when 29 traded at around 15, per case, and 21 was 12,. Today, both are available for almost half that figure, 3,885 per half case for the 29 and 3,6 (6 x 75cl) in the case of 21. 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, Source: Liv-ex.com The undisputed kings, prime vintage Latife s compared T he undisputed ki ngs, prime vintage Lafi tes compared 99+ 98 Both vintages look exceptional value compared to other high scoring prime vintage Lafite Rothschild's, both are rapidly approaching their drinking windows, and their 1 year on rescores are on the horizon, at which point who would bet against either being given 1 point scores? Contact us now for more information. 98+ 97+ 29 21 2 19 82 Château Lafite-Rothschild
Critic s view: BACK VINTAGE RICHES Robert Parker Jnr on 29 and 21 The trade in back vintages has seen added impetus in early June and in particular the most outstanding vintages of this century, 29 and 21 warrant a regular review when looking to strengthen a wine portfolio. 29, a slightly earlier drinking vintage than 21, will come under the critical microscope in less than two years time as it reaches the landmark ten year tastings and we can expect buying in the top brand wines of this vintage to escalate ahead of this. In the meantime, from a critical standpoint, our weather-vane is still Robert Parker Junior and it is useful to remind ourselves of his view on these stand-out years. 29: In April 21, following the 29 en primeur tastings, Parker declared 29 as unquestionably the greatest vintage I have ever tasted. Parker, who established his reputation critically on the 1982 vintage, wrote the following: 1982 Déjà Vu All Over Again But Greater The one thing about these wines that I love is that the window of drinkability will be enormous. Just like in 199 or 1982, the low acidity, the very ripe fruit, the high glycerin levels from the elevated alcohols, and the stunning concentration and fruit from low yields will give most of these wines incredible appeal in their youth, but at the same time will guarantee that the top wines last for 3 or more years, as the best 1982s have certainly done. I do want to reiterate that for as big, rich, and as high in alcohol as the 29s are, they are remarkably pure, well-delineated and surprisingly fresh and vibrant - a paradox, but a wonderful one at that. 21: Parker rates 21 as another very great vintage in and at the tastings in 213 commented that this year only comes second to 29 in terms of the overall quality of the vintage stating that: it s safe to say that, other than 29, this vintage has turned out slightly better than 2 and as impressive as 25. As the view of still the most influential critic the industry has ever had, if you haven t already built 29 and 21 into your portfolio, now is the time to do so. Investment en in fine wine is all about performance. I believe e in it so much I joined the team in 211. 1. With annual nu growth rate of 14% in the last t1 15 years, you should too. Austin Healey, Leicester, England, British Lion. Proud sponsor of the Financial Planner Awards 217 Essential Investor Information Vin-X regularly produces specialist market reports providing detailed information for fine wine investors. Visit our website www.vin-x.com for details. LONDON BORDEAUX HORSHAM BURTON-UPON-TRENT www.vin-x.com email: info@vin-x.com Tel: 23 384 2262 Vin-X Limited, Barclays House, 51 Bishopric, Horsham, West Sussex, RH12 1QJ.