Rise of the second wines

Brand-led demand in Asia has levelled prices across vintages and seen second wines surge in value. Jack Hibberd, research manager at Liv-ex charts the trend and the reasons behind it.

Following in the path set by Carruades de Lafite, the last 12 months have witnessed large price rises for almost all of the first growths’ second wines.

More than 30 wines from the 2000 vintage onwards have increased in price by 50% or more, with 14 wines seeing their prices double in just 12 months. The key driver here is undoubtedly increased Asian appetite for all things first growth. The second wines are simply perceived to be the cheapest way to gain exposure to the grand vin.

If we look back three years to September 2007, just before Carruades embarked on its vertiginous ascent‚ you could buy seven cases of the second wines for the same price as one case of the grand vin, on average. At the end of September 2010 this ratio had fallen to just above 4:1.

If we look at these numbers on a château-by-château basis, we find a large variation: Carruades/Lafite has a ratio of just 3:1, and Clarence (Bahans)/Haut-Brion a touch above 5:1.

While it may be attractive to use these ratios to highlight wines that might represent value, the key point here is that the second wines’ phenomenal price appreciation is due to brand-led demand. The main driver of purchase is visual: the second wines (particularly to those who do not read the Western alphabet) look almost exactly the same as the first wines, apart from the names of the wines themselves.

And when the brand becomes mightier than the score (or vintage) and quality becomes largely immaterial to the purchaser, prices across vintages become equalised.

This is clearly demonstrated by looking at the difference in price between the most and least expensive vintages for each château.

The difference in price between the most and least expensive vintages of the first wines is, on average, almost 70% (ie the cheapest wines cost a third as much as the most expensive)‚ for the seconds this difference is just 25%.

If we look at Carruades de Lafite, perhaps the most brand-driven purchase of all, we find this in extremis: all physical vintages sit within a £250 price band, equivalent to a difference of just 8%. Bahans Haut-Brion, on the other hand, has by far the largest price difference across vintages, likely because it fails the key visual test (its label is different to that of the grand vin, an issue rectified with the launch of Clarence).

Using this approach, we also find that the 2008 and 2009 vintages look undervalued, with Clarence, Forts and Carruades 2008 and Petit Mouton, Pavillon and Carruades 2009 all currently priced at more than 8% below the average for their châteaux.

With Asian buyers preferring to purchase wines when they are physical, the 2008s are arguably the better bet for those looking to make a quick turnaround (the 2008s become physical early next year). Although, with second wine pricing currently moving at a blistering pace, keeping a keen eye on the market is key.

Jack Hibberd, research manager, Liv-ex, from November’s db Fine Wine Monitor