Wine investors savour top Burgundies and vintage Champagne
Investors in vintage Champagnes and top-end Burgundies are toasting a year of big gains, but some of the fizz is coming out of the market as the global economic outlook worsens.
Burgundy prices soared 27.4 per cent in the first 11 months of this year, according to wine exchange Liv-ex’s Burgundy 150 index, while its Champagne 50 index has jumped 21.6 per cent,
In part this reflects indulgence on the part of wealthier consumers, who have returned to restaurants after the end of the pandemic, often flush with cash saved up during months of lockdowns. Also, the supply of high-end vintages is limited. For specialist wine investors, though, this niche market has also provided a shield from soaring inflation and falling financial markets.
“It’s been a phenomenal year” for vintage Champagne and Burgundy, said Gregory Swartberg, chief executive of London-based wine investment company Cru Wine, which manages around £30mn in client assets. “With vintage Champagne, there’s just not enough of it being made” to keep up with demand, he said, adding that his business had seen record demand for fine wine from investors over the past four months.
Climate change has been a major factor in reducing the supply of Burgundy, which is produced in east-central France. Unusually warm spells in early spring last year led vines to stir into life early, only for brutal frosts to kill the buds in early April. Hail in June caused further damage.
Volumes of the 2021 Burgundy vintage, which is coming to market now and which starts to be bottled from next summer, are down by around 50 per cent, with some growers losing up to 85 per cent of their crop. Champagne houses, which mature the wines for years before releasing them, have meanwhile been more inclined to hold bottles back to cover years of poor harvests.
Among the top performing Burgundy wines this year are Domaine Leflaive’s Bâtard Montrachet 2014, a Chardonnay that soared 122 per cent to £13,952 for a case of 12 bottles, according to Liv-ex. Prominent producer Domaine Romanée Conti’s exclusive red Burgundy, Grands Échézeaux 2008, doubled in price to £43,792 a case.
Among Champagnes, Perrier Jouët’s Belle Époque 2012 rose 68 per cent to £1,821 for a case, while Salon’s Le Mesnil, one of the most sought after Champagnes, posted strong gains across several vintages. Its 2007 surged 67 per cent to £12,200 per case.
Beyond such grandes marques, there has also been increasing demand for so-called “grower Champagnes” — artisan wines made by the same person who grows the grapes. Cédric Bouchard’s 2012 La Bolorée, an unusual 100 per cent pinot blanc Champagne, trades at £360 a bottle, up 80 per cent this year, according to fine wine merchants and traders Bordeaux Index. A 2002 vintage from Jacques Selosse has jumped 63 per cent this year to £1,750 per bottle.
The strong gains stand in stark contrast to a bleak year for traditional markets. The FTSE All World share index fell 16 per cent in the first 11 months of the year in US dollar terms, driven by sharp losses in technology stocks, while government bonds have sold off sharply as central banks have raised interest rates.
Overall, Liv-ex’s Fine Wine 100 index rose 7.1 per cent this year in sterling terms, although in dollars it fell 4.3 per cent.
Yet the darkening global economic outlook is beginning to sour sentiment in the fine wine sector. Burgundy prices fell 0.9 per cent last month and Champagne dropped 2.5 per cent, while the ratio of buyers to sellers in both wines has fallen sharply this year, according to Liv-ex.
Liv-ex co-founder Justin Gibbs pointed to the technology and cryptocurrency sectors, where the destruction of wealth in 2022 after years of huge gains is starting to hit demand.
“We’re seeing demand drop away and supply is beginning to build,” he said. “At the end of a bubble, prices get pushed really high as people scramble to get invested. That’s what it feels like,” he added.
Some industry insiders such as Cru Wine’s Swartberg believe the relaxation of China’s strict zero-Covid policy could revive demand from Asia. Should that happen, then one of the winners could be Bordeaux, whose relative value compared with top bottles of Burgundy and Champagne should stick out to Chinese buyers, said Matthew O’Connell, head of investment at Bordeaux Index.
“Looking at it from an investment angle, of course, it makes sense to buy top Bordeaux,” says Paulo Pong at Altaya Wines in Hong Kong. But he notes that the lighter, elegant flavours of top Burgundy have definitely caught the fancy of his Chinese clients.
Nevertheless, many in the industry admit the boom period for fine wine could be ending.
“We might see the slowing down of the stratospheric price rises, and some small reversals,” said Tom Gearing, who was previously a finalist on the UK version of The Apprentice and who is now chief executive of £300mn-in-assets investment firm Cult Wine Investment. His clients have benefited this year from buying wines such as Egly-Ouriet’s Brut Millesime Grand Cru 2012, a “grower Champagne” that rose around 260 per cent in value.
“We’ve had two years of outperformance. It would make sense for the wine market to slow down,” he said.