Fine wine in focus: California

Italy and Champagne are hot topics in fine wine at the moment but California, and Napa in particular, is emerging strongly too thanks to the broadening market, better distribution and top scores.

golden gate bridgeFor a state with such a reputation for glitz, glamour and ostentatious display, the emergence of Californian and principally Napa Valley wines – outside of the US at least – has been decidedly low key.

There are a number of well known factors for this: the popularity of the wines in their domestic market (they were the ‘cult Cabs’ after all) coupled with a lack of demand for them in the UK and Europe which limited distribution is key and even if the famous ‘Judgment of Paris’ in 1976 jolted some interested in such matters out of their preconceived notions of what Californian wine was, a little lingering snobbery no doubt remained.

As the market has broadened, matured and tastes become more catholic however this is starting to change.

That change has been in the wind for a while now. When Liv-ex introduced its ‘Fine Wine 1000’ index in January 2014 to better reflect the changing nature of the fine wine market, it included two Napa labels, Dominus and Opus One, in its ‘Rest of the World 50’ sub-index.

The very next month it was clear that non-Bordeaux labels were bucking the usual January slump in trading and head of the pack were Dominus and Opus One.

From 2012 to 2014, Dominus’ 2005 was the fourth best-performing label (behind two Burgundies and a Super Tuscan) having risen 48.8% while its sister 2006 vintage had registered a 41% rise. Meanwhile Opus One’s 2007 vintage had risen 39.2%.

By the end of the year the RoW 50 was streets ahead of its fellow Fine Wine 1000 sub-indices. At the end of November it was the only sub-index with positive numbers for both its year-to-date and yearly levels while its progress over the previous five years was only marginally eclipsed by the Burgundy 150.

Of course, Dominus and Opus One were sharing the glory with Penfolds Grange, Vega Sicilia and Taylor’s Port who share the index but the weight of the laurels rested rather squarely on their combined brow as the chart on the right shows.RoW index by brand

As 2015 progressed the growing dynamism of Californian brands grew more evident. In 2011 California’s share of the whole market by value was just 0.14%. in 2012 0.45%, in 2013 0.46%, then it jumped to 1% in 2014 and by the end of November 2015 stood at 2.1% – a figure that now makes it rival the struggling Rhône index which accounts for just 2.3% after steady declines.

What’s important to note here is that it’s not just the US buying these wines anymore, the demand is global. Liv-ex has noted it and the merchants say that demand is tangible as well.

“Interest in California is pretty consistent at the moment,” says Will Hargrove at Corney & Barrow (which handles Dominus and Cakebread Cellars), even if there is still a slight preference for “estates that make a more European-palate sensitive wine such as Dominus or Ridge.”

“There’s definitely demand for them,” agrees Goedhuis’ Georgina Crawley. “I think Napa’s on the up. We’ve just got to the tip of the iceberg and Californian growers know the UK and Asia has a taste for their wines.”

Importantly this means that more regular supply is available now and, surprising as it may seem, this means wines that weren’t even available a year ago are now listed over here. As with all products, now it’s available to buy it’s therefore finding an audience who are increasingly finding that (to slay that last dragon), yes, “the best wines from Napa can stand up to the best of Bordeaux, no question,” says Renaissance Vintners’ Joss Fowler.


Taking the shine off?

If Californian wine’s value has gone up on Liv-ex’s marketplace it’s because prices have been rising and part of the reason for that is the scores the region gets. California and Napa in particular has always been blessed with good Robert Parker notes and a run of good vintages this decade has done nothing to slow the rush of ‘perfect’ scores. In one of Parker’s most recent California reviews for example, Screaming Eagle picked up 100 points for its 2007, 2010 and 2012 wines – and those were just three of 22 shiny new 100-pointers named in the same article.

A full list of Dominus and Opus One’s price progression can be seen below. What’s evident is that each has only had one wine between the 2004 and 2012 vintages with a negative tendency and for Dominus this is easily explained away as the 2011 being the ugly 89-point duckling between the rather more majestic 100-point 2011 and 98+ point 2012 (all Parker points). Elsewhere, the appreciation of wines from the 2004 to 2007 vintages has been impressive.

Dominus Current Market Price (Nov/Dec 15) First Market Price  First Market Price (date)  % change
2012 1,700 1590 Sep-15 6.9%
2011 792 1060 Nov-14 -25.3%
2010 2,200 1980 Feb-14 11.1%
2009 1,200 1180 Mar-13 1.7%
2008 1,500 1050 Feb-12 42.9%
2007 1,340 845 Jan-11 58.6%
2006 1,150 895 Jul-09 28.5%
2005 1,360 895 Mar-08 52.0%
2004 1,200 520 Feb-08 130.8%
Opus One Current Market Price (Nov/Dec 15) First Market Price  First Market Price (date)  % change
2012 1,664 1733 Sep-15 -4.0%
2011 1,780 1750 Sep-14 1.7%
2010 2,070 1685 Sep-13 22.8%
2009 2,060 1580 Sep-12 30.4%
2008 2,700 1650 Nov-10 63.6%
2007 2,900 1450 Sep-10 100.0%
2006 2,976 1337 Sep-09 122.6%
2005 2,500 1297 Sep-08 92.8%
2004 2,600 1080 Sep-07 140.7%

Screaming Eagle and Scarecrow were the two strongest price performers in the Power 100, their average case prices rising 15.1% and 19.9% respectively over 2015, while Opus One’s 2006 was the third best performing individual wine of 2015, rising 35.9% to £2,900 a case.

But these new found price levels have not come without a word of caution. Napa wines, like all other regions, have profited as Bordeaux suffered the opprobrium of the market. But while Napa wines have risen in price and Bordeaux ones have sunk what has happened is that the former ‘safety net’ claret used to provide has been removed. Californian wines are forging (somewhat appropriately) into new territory.

Last November Liv-ex pointed out that Dominus 2010 with 100-points is nearly £1,000 more expensive than the cheapest 100-point Bordeaux available which is Pontet-Canet 2010; while Haut-Brion’s 2004 is 5% cheaper than Opus One from the same vintage.

Looking at broad averages the situation becomes starker. Although ranked just 83rd in the Power 100 list, with an average case price of £4,428 Scarecrow is more expensive than any of the first growths the most expensive of which on average is Lafite at £3,489 p/cs.

Dominus and Opus One have average case prices of £1,086 and £1,814 which puts them ahead, sometimes well ahead, of prices for wine such as Pichon Baron, Pape Clément, Montrose, Cos d’Estournel and in Opus One’s case alone Pavie, Vieux Château Certan and Eglise Clinet as well.

Even Parker noted recently he found the region’s price escalation “worrisome”, adding that prices are “are escalating to the point where consumers are frustrated and turned off,” describing it further as a, “dangerous trend that the wine industry in Napa Valley needs to discuss.”

Liv-ex added: “Collectors may want variety in their cellar, but when prices are at a significant premium to Bordeaux are they sustainable? At some point, the ‘Golden State’ may start to lose its shine.”

This is of course a natural concern and it’s quite correct to point it out. On the other hand Napa wines are not guaranteed to react in the same way as Bordeaux would (or did) thanks to the small volumes produced and indeed still distributed in this market.

As Fowler notes: “Are they getting too expensive? Some of them maybe, but for the most part they are not made in the same quantities as their Bordelais counterparts and the wines actually sell.”

Crawley reports even with Ridge where one receives a slightly larger allocation “we can still sell it four times over”, while demand for Screaming Eagle and Sine Qua Non is small but “there” and even if Opus One is at a first growth price level, “there’s a finite amount of it. Once you’ve sold your 24 six-packs – that’s it.”

What hurts Bordeaux so much is that it’s still so easy to find, not, it would appear, Californians which helps keep buyers (and ergo prices) keen.

Keeping in mind the words of caution from the wings, it’s not a stretch to imagine greater things for California in 2016.

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