Wine traders – or negociants – in France usually buy top wine long before it has been bottled and sell it on at high prices if the wine is expected to be high quality. However Chateau Latour has now told traders that its current vintage will be the last that they can buy in this way as it looks to stop wine speculators profiting from as-yet unproven wine.
Starting with the 2012 vintage, Chateau Latour will disregard the en primeur system and only sell its wine in bottles when it feels it is ready to drink. Experts said that the decision is good news for wine collectors, as buying already-bottled wine will take some of the uncertainty out of the process. Prices of previous vintages will no doubt increase with a lack of future supply.
A Chateau Latour source said: "Our team will taste the wine often and decide when it is ready. That’s the goal. We wanted to kill the speculation side of the market." However some traders reacted angrily to the news.
They speculated that the change has been designed to cut out the hundreds of middlemen in Bordeaux, who take a cut of the profit when they sell the wine on. Stephen Browett of Farr Vintners said that Chateau Latour's owner, Francois Pinault, the third richest man in France, according to Forbes, with a net worth of £13billion, could probably afford the change in system.
“For the consumer it might be a very good thing if a rich bloke in Paris is prepared to finance the maturation of all this wine," he said.
Mr Browett questioned whether other chateaux will follow suit.
“Personally I don’t think others will follow suit. Even the other first growths, with all their fame and pull find the negociant system works for them because they have other properties whose wines they want to sell. Lafite has Rieussec and properties in South America, for example," he said.
Probably the world’s most successful modern airline brand, Dubai-based Emirates, has announced this week that it has invested over US$500 million in fine wine over the last decade. Following an investment strategy which includes en primeur purchases, Emirates claims to hold 1.2million bottles in their own cellars in Burgundy where they are held for at least a decade before being poured to First and Business class travellers as they traverse the globe
Bordeaux first growths are the most traded commodity in the wine market, a new deal could see the tax on fine wine imported into India slashed by around 73pc. India's trade deal could result in India finally being opened up to the wine investment market, with a consequent leap in demand.
The abolition of tax on alcohol in China in 2008 resulted in Hong Kong becoming the world’s premier wine trading hub.
Last year Sotheby’s made 52pc of total sales in Hong Kong, against 16pc in New York and 32pc in London. The total value of the sales was $85.5m (£54m).
The current trade negotiations between the EU and the Indian government have been going on for four long years but – finally – a deal looks about to be struck in the coming months. This could have a dramatic impact on the global wine industry. Any deal would see India slash tariffs on imported alcohol in return for an opening-up of the European market to India.
Imported wines currently face a 150pc tariff in India as well as an “extra additional duty” of 4pc. This is before any additional taxes imposed by India’s individual states, these range from 30pc to more than 100pc and have made investing in wines relatively unattractive. The new agreement could see import duties slashed to just 40pc, boosting the sale of investment-grade wine.
Comparisons have been drawn with the situation in Hong Kong in 2008, which saw the fine wine market explode after import taxes were scrapped altogether.
“The changes will be big for investors,” Mr Shakeshaft argues, but “we would not expect the market to explode like it did with Hong Kong.” He does concede that any drop in import duty will have a beneficial effect for the fine wine investment market. India is a rapidly growing market and the demand will only get higher with the proposed changes.
“Wine also has a rich history in India and the country has a real affinity with certain labels of Bordeaux such as Chateau Cos d’Estournel. As a result we are able to predict individual labels which will benefit from the changes and advise investors accordingly,”
Like other areas of Asia, wine has hugely grown in popularity in India over the past decade, as a rapidly expanding middle and upper class scramble to get their hands on it.
Wine imports have doubled to £17.8m over the last two years and with India’s consumer markets expected to quadruple over the next two decades, the lowering of import duties could not come at a better time.
There has also been some comments that a break-up of the eurozone may boost wine investments, as people scrabble to find “hard assets” to deploy their wealth.
What can you get for a hundred quid? Not much these days it seems.
It might cover the cost of a week’s groceries at a stretch, a tank of petrol, or a decent meal out with the family (tip and alcohol not included).
If we go back to 1952, the year of the Queen’s Coronation, then that £100 would have gone a lot, lot further. It might have bought a decent second hand motor, or paid a good chunk of the deposit on a new home.
That house 60 years ago would have set you back £1,891, according to the Nationwide. Today it would be worth £164,134 – a very handsome return on your initial investment. And that got me thinking as to just how much you might have made by investing £100 back in 1952 – and would we be seeing diamond returns in the jubilee year? Property has been a very shrewd investment over six decades. But how does this compare with other mainstream and alternative investments? I also looked at the performance of six separate investments (including residential property) over the period since the coronation.
On the list were shares, gilts (government bonds), and the traditional bank and building society account. I also assessed the performance of gold and fine wine.
In reckoning the returns from shares and government bonds, I leaned heavily on an impressive statistical report produced by Barclays Capital called the Equity Gilt Study. What it revealed was on the face of it quite stunning – that a £100 investment in shares would have returned just under £108,000. That same investment in gilts returned £6,850, while £100 deposited in a building society account would be worth around £6,000 today. So investing in a broad basket of shares appears to have been a very effective way of saving for
Now, there are number of observations to make here. None of these figures include the effect of inflation. Real returns would have been far less impressive. Also, the impact of dividend reinvestment was huge so far as equities are concerned. In fact if you excluded dividends, the return would have been a fraction of the original figure I quoted.
The performance chasm between equities and gilts may come as a surprise to anyone who has watched government bonds outperform shares for the past decade. However, our study includes the halcyon era for stock market investing from the early 1950s to the late 1980s.
Forgetting bonds and shares, we all know gold has enjoyed a decent run of late. But what if you had spent £100 six decades ago? Well, it would have bought you just over eight ounces of the yellow metal worth £8,167 today. This is based on an historic bullion price of $34.60, or £12.36 at 1952 exchange rates. So it was a good investment, but definitely not the best.
It being the Diamond Jubilee, it seemed right to calculate whether diamonds are not just a girl’s best friend, but an investor’s too. Unfortunately the Rapaport Price List, the primary source of diamond prices, only goes back to 1978. A one carat, top quality diamond has risen 52pc in value in that 34-year period. So you might, if you were extremely lucky, have seen the price of top-notch diamonds double in 60 years.
This leaves us with fine wine, which has been one of the best-performing alternative investments for many years, though investors should exercise caution and do thorough research before buying. Novices can easily come a cropper and there are some scoundrels operating in the market. According to the investment firm Premier Cru, it would have provided a phenomenal return over the past 60 years. Our £100 could today be worth as much as £478,000 tax free.
‘In 1952 the youngest vintage you could buy would have been the ’51, but that and the 1950 were not very good,’ explains Stacey-Lea Golding, the company’s founder and investment director. ‘If a wine merchant was advising you, you would have probably purchased wines such as the Chateau Latour 1949 and Chateau Mouton Rothschild 1945.
‘At that time the Mouton Rothschild was not a Premier Cru and therefore not as expensive as the Latour.’ Golding reckons £100 would have bought three cases of each vintage. Today the Latour 1949 costs in the region of £3,800 per bottle, or £45,600 per case, while the Mouton Rothschild 1945 changes hands for around £9,500 per bottle, or £114,000 per case. What better way to toast the jubilee than with a glass of wine – but perhaps something a little cheaper than the Mouton Rothschild.
I'm not above a glass of Trader Joe's Two-Buck Chuck.
But for those of you with disposable income that invites angst over terroir, or wine's origins—particularly for Bordeauxs—no other fine wine topic has quite ignited passion like China's new wealthy. Their sheer purchasing power has transformed the Bordeaux market. "As the demand for these wines becomes great and greater from this new market, naturally the prices will rise," said filmmaker Warwick Ross, whose documentary "Red Obsession" recently debuted in North America at the 2013 Tribeca Film Festival. The film, co-directed by David Roach, is narrated by actor Russell Crowe...And oh boy, how prices have risen.
During the height of the Bordeaux ‘bubble’ in 2011, prices for highly sought after bottles soared. Cases of recent vintages of top-tier wines such as Château Lafite were going for as much as £15,000, roughly $23,200 USD.
"The Chinese market has really woken up again to fine wines," said Joe Marchant, director of Bordeaux Index US. As China's economic rise minted more millionaires, curious wine buyers from Hong Kong and mainland China have been showing up at chateauxs in France's Bordeaux region. "A lot of people had access to really cheap cash," Marchant recalled.
While still off the 2011 highs, The Bordeaux Index has rallied about 7.4 percent since December 2012, with some individual wines up 20 percent or more, Bordeaux Index's Marchant said.