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Market Report November 2010

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In contrast to the cold snap that descended across Europe, trade on the Liv-ex Fine Wine Exchange continued to heat up in November. Exchange turnover was up 4% month-onmonth, hitting its second highest level of the year. Overall, the Liv-ex Fine Wine Exchange is set to achieve record levels of trade in 2010, by both volume and value. The 2008 and the 2006 vintages accounted for a third of the action between them. Mouton led the charge for the 2008s, with Lafite taking the lion’s share of 2006 trade. Away from the usual suspects, older vintages (pre- 1988) also saw a boost in demand, accounting for 6% of turnover, a high water market for the year. Italian trade boosted Bordeaux maintained its dominance last month, accounting for 93% of exchange turnover. More notable, however, was the quickening pace of Italian trade. Having achieved just under five percent of turnover, the region’s monthly performance figure is its highest in over five years, largely as a result of keen trade in Sassicaia 2007.

(more analysis in the full report)

Major Movers

The continued effect of Chinese demand is clearly evident in this month’s major-movers table, with Mouton 08 (see below) putting in a massive 80% rise in just one month. The rest of the table is again reserved for First Growths and those brands that are popular in Asian, with the 2008 vintage as a whole putting on a growth spurt as delivery approaches.

(analysed in detail in full report)

Watching Brief

At the close of the month, the worst-kept secret in the wine trade — that Mouton has commissioned a Chinese artist to design its label for the 2008 vintage — was officially announced. Despite this early warning, the announcement caused trading to step up a notch, with the wine reaching a new high of £8,000 per case, more than five-and-a-half times its original London release. Equally salient is the effect that surging Mouton 08 prices have had on back vintages. Just a few hours after the 08 news broke, both the 2003 and the 2006 traded at new highs of £3,625 and £5,100 respectively.

Is Lynch Bages set to be the new Bordeaux favourite in Asia? November saw demand for the brand—which has been building steadily throughout 2010—hit a new high, with multiple vintages changing hands on the exchange throughout the month. Prices are also on the move, with vintages 2000-2008 rising in value by an average of 32% in the year to date. The highest climber is the soon-to-bephysical 2008, which reached £588 per case in November—an increase of more than 40% since the turn of the year.

Critical Corner: Jancis Robinson on 2009 in the N. Rhone

Last year, Jancis Robinson described the 2008s from the Rhone Valley as “decidedly muted” – a reminder of just how exceptional the 2007 vintage was. This year, however, the region’s offerings failed to disappoint, with Jancis describing the quality of the 2009s from the north as “very exciting.” The critic puts the overwhelming success of 09 down, in part, to high standards of winemaking and growers’ “confidence in their very particular terroirs.” In all, the vast majority of red wines tasted were awarded 16 points and above, whilst 11 were accorded 18 points or more. Top scorers include Jaboulet, Chapelle Hermitage and Guigal E, Cote Rotie Turque, both at 18.5+ points.

Final thought — That was the year that was

Fine wine’s momentum built steadily throughout 2010. For the second year in a row, it was Asian demand for Bordeaux that dominated the market, sending prices for Lafite and its First Growth brethren soaring to new heights. The Liv-ex Claret Chip Index was up more than 50% for the year, while the Liv-ex Lafite Index rose almost 80% (see above). Meanwhile, the second wines of the First Growths were loath to be left out, with multiple vintages more than doubling in price in the space of a few Autumn months. Numerous other brands, such as Lynch Bages, Duhart Milon, Beychevelle and Pontet Canet also experienced a sharp increase in demand, and it was those wines from unloved vintages (1999, 2002, 2004 and 2007) that benefited most. Add in the 2009 En Primeur campaign – which saw various score, price and sales records set – and you have a potent and heady mix. With the festive season approaching, it seems the market has much to celebrate. But it is also true that it is approaching 2011 imbued with a slight note of caution. The reason? In short, price rises of the scale we saw in 2010 are clearly unsustainable – or, taking a long-term perspective, even undesirable. And despite the slight broadening we saw in the second half of the year, demand retains a narrow focus; the Firsts alone accounted for a record 60% of exchange turnover by value in 2010. The availability of desirable stock also remains tight. The slow drip-drip of wine into the market by the top chateaux (one has even declared it will not be releasing any more stock until spring) is certainly not helping matters. With some market commentators starting to call “bubble” (you can read economist Andy Xie’s take on this on the Liv-ex Blog) a return to the longterm CAGR of 10-15% in 2011 would do much to calm nerves. The leading Bordeaux chateaux could do much to remedy the situation by easing open the doors to their cellars and releasing more stock. A small correction is probably a price worth paying in order to create a healthy, liquid market.
(analysed in detail in full report)

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