Global Investing

Burgundy bounce lifts fine wines

By Reuters Staff
April 9, 2013

Investors are reaching for a glass of Burgundy as fine wines have enjoyed a more robust start to 2013 after the weaker performances seen in 2011 and 2012.

Wine investors will rejoice that the Liv-ex 100 index, the industry’s main benchmark, has posted four consecutive monthly gains and is now 8.7 percent up from its last November low. Cellar Watch, the market data provider, says that the wider fine wine market has begun to recover over the last four months, with  the Liv-ex 100 having risen 7.3% year to date.  That’s not too far behind the 10 percent gain on the S&P500 and 8 percent on the FTSE100 share indices. And after a lacklustre couple of years, turnover in Liv-ex fine wine indices is also on the rise,  hitting a one-year high in March, up 21 percent on February.  (For the non-connoisseurs  among us, the Liv-ex Fine Wine 100 represents the price movement of 100 of the most sought-after fine wines for which there is a strong secondary market).

Cellar Watch attributes the gains to the surge in interest in Burgundy, which increased its share of trade to 9% for the second time this year—well above its 2012 average of 5.5%. Top sellers were  Pape Clement (2010),  Pichon Baron (2004) and Talbot (2000) , with gains of 45.9 percent, 18.9 percent and 13.3 percent respectively.

Cellar Watch notes that last month the DRC index, which tracks the price moves of recent Burgundy vintages, was just 1.8% shy of its April 2012 peak. In contrast,the Bordeaux 500 Index was off its peak of June 2011 by 13.2.

But actually, Bordeaux, the mainstay of most wine investment portfolios, isn’t doing too badly either — Liv-ex Fine Wine 50—the Bordeaux equivalent of the DRC 50 Index—has gained 6.8%, Cellar Watch points out. The question now, according to Cellar Watch, is:

With prices for DRC hitting new highs—often in excess of £2,000 per bottle— is this growth unsustainable? As the Bordeaux market gains more traction, will DRC continue to outperform?

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