Sauternes – an early Christmas delight

The Sauternes 50 index – a notoriously slow market mover – has risen 4.6% over the past three years. The broader Bordeaux 500 index has gone up 12.6% over the same period.

So far this year, Bordeaux’s fortunes have been mixed. Within its sub-indices, the Right Bank 50 has dipped the most (-3.1%), closely followed by the Sauternes 50 (-2.5%).

None of the Sauternes 50 constituent wines have made gains in the past year. As the chart below shows, Climens has fallen the most (-8.0%), while Suduiraut the least (-1.8%). Yquem, which recently released its 2017 vintage, has also dipped 7.3%.

The Sauternes story is not one of investment potential – especially when compared to the development of the broader market. But the sweet wines of Bordeaux continue to hold an allure to buyers, promising great quality (supported by broad critical acclaim) and representing the most affordable entry point into the fine wine market. And with the festive season upon us these honeyed treasures of Bordeaux are guaranteed to delight.

Bordeaux 2017: risers and fallers

The 2017 En Primeur campaign saw average release prices drop by almost 12% and volumes sold fall by 60% against the highly regarded 2016 release. Sales by value also dropped 45%. Numerous wines thus remain readily available at opening prices in Bordeaux.

According to the international merchant community, interest in the vintage was very focused on the First Growths and the most popular brands – the majority of releases struggled. Critical opinion was mixed while collectors showed a reluctance to pay 2015 prices for a vintage that was generally judged to be at the level of, or below, the 2014 vintage.

For a summary of the 2017 campaign, you can read our concluding report, Bordeaux 2017 – a risky strategy, here.

The wines are now bottled and will soon to be delivered. Critics are expected to release in-bottle scores in the coming months. UK merchants will be tasting the wines tomorrow at the annual Union des Grands Crus de Bordeaux tasting in London. It is time then, to examine what has happened to prices since release.

Of the 50 wines represented by the Bordeaux 500 index, only 7 have risen in value, 3 haven’t moved, and 37 have dropped. On average, prices are down 1% since April 2018. The Bordeaux 500 index has dipped by 0.9% over the same period. The best and worst performing wines can be found in the table above.

As with its 2016 vintage, Lafleur has been the best performer, rising 57% from release. Buyers of the second wines of the First Growths have once again done well – Carruades Lafite has jumped 37% while Petit Mouton has risen 8% in value.

As is too often the case with Sauternes, prices have struggled in the secondary market. Two First Growths feature among the reds that have drifted: Margaux down 9% and Mouton Rothschild down 10%.

But all is subject to change, especially as the wines become physical in the secondary market. How might the trade’s and critics’ renewed attention influence prices? The trend since release has been downward. Those holding the wines will be hoping for some good news from the tasting season ahead.

 

The increased demand for Italian wine

Value of bids and offers for Italian wines on Liv-ex

Market participants have shown increased commitment to the Italian market as demonstrated by growing exposure: the rising value of bids and offers. These are firm commitments to buy or sell a wine on the market.

Back in 2015, the total value of Italian bids and offers stood close to £2m. It now surpasses £5m and is driven largely by active buyers, as demonstrated by the bid line on the chart above. This reflects an increased interest in Italian wines.

Initiatives such as automated trading have contributed to rising exposure as more wines from more places have become readily available to more buyers.

Number of Italian wines traded vs trade share by value

As the chart above shows, the number of individual wines (including vintage) has risen an impressive 1,056% over the past decade. The number of labels trading alone has been doubling every two years.

With more Italian wines on offer, trade by both value and volume has also risen – Italy is now the third most active regional group after Bordeaux and Burgundy. Its share of trade by value has climbed from less than 2% in 2010 to account for 8.5% of the total trade so far this year. This has benefitted wine producers, international merchants and collectors alike.