Bordeaux has regained its position as the big hitter in the Liv-ex Power 100, and the top five brands are the five first growths. Patrick Schmitt MW appraises its resurgence.
It’s been a while coming, five years in fact, but Bordeaux is back. And this is no anecdotal claim from an excited winemaker, critic, or merchant. Rather, this is the key finding from the trade’s most comprehensive and revealing annual report: the Liv-ex Power 100.
Devised to rank the world’s dominant fine wine labels using a range of measures – such as the value and volume traded, as well as price movement over the past 12 months – the report highlights, quite simply, what brands the major merchants have been moving.
In 2016, those wines were mostly claret, and in its most classic form: the great classed growths. Indeed, as you can see on the tables over the following pages, not only does cru classé Bordeaux litter the list, but the five most powerful fine wines of 2016 are Bordeaux’s five first growths – selected as leaders as long ago as 1855 (except, of course, for Mouton, which became a premier cru in 1973).
Now, this isn’t the first time we’ve seen such a result since Liv-ex began compiling this study in 2004 – the famous quintet took all the top slots in 2010. But, that was at the peak of the fine wine market.
It was a year when Bordeaux was enjoying its most successful en primeur campaign of all time with the 2009 release, and it was a period when Asia was the driver of demand. So what, you may be asking, is the parallel with today? Well, there is a similarity.
The nature of demand in 2010 was, in hindsight, a blip, fuelled primarily by a temporary surge in the buying of the greatest names for an unfamiliar market – China.
As we reported at the time, this nation, as a newcomer to fine wine, was looking at the most straightforward way of ranking wines, which the 1855 classification provided. Consequently, the market became “absurdly concentrated” on the left-bank first growths, with 61% of the Liv-ex trade in that year made up by those five wines.
Fast-forward to 2016; the China bull market is merely a memory, but 2016’s ranking also appears to be due to a short-term acceleration in demand for the fine wine market’s most famous and liquid labels through London merchants from buyers outside the UK. And the reason for the sudden escalation? The fall in the value of the sterling following Britain’s decision to leave the EU, announced on 24 June.
Corney & Barrow sales director, Oliver Hartley says: “2016 has distinct halves: pre- and post-Brexit vote. PreBrexit vote we were finding that anything that was ready to drink now, and in good condition was flying out of the door – we couldn’t get enough of it, as long as it was at the right price.
But I have never seen the blue chips on the secondary market fly as fast as they have been in the last few months, post-Brexit vote, with the weakening pound.” He adds he is referring to “the likes of Petrus and Domaine de la Romanée-Conti”, as well as the first growths, which were suddenly being “snapped up” for a “20% saving”.
Concurring, Liv-ex director Justin Gibbs observes how Sterling’s weakness has prompted dollar- and euro-based buyers to purchase high-value fine-wine power brands from UK-based sellers.
“From June we saw a change in growth; that was after the Brexit vote, and the 10%-15% devaluation in the pound, which created a sudden demand from dollar buyers, mostly from Asia, but also America, who have moved on Bordeaux, particularly the firsts; they have moved on liquidity.”
For Simon Staples, Berry Bros & Rudd sales director for Asia, the story is the same: “Bordeaux has come back with a vengeance this year, and has gone a tad bonkers since the Brexit vote.” He adds: “All levels of Bordeaux have done well but demand in favourites have continued – Lynch-Bages, Figeac, Gruaud, Grand-Puy-Lacoste, Giscours, Haut-Bailly – and of the first growths, Lafite has remarkably bounced back far more than I thought possible, while Latour and Mouton have followed.”
PEAK OF THE MARKET
With history seemingly repeating itself, Gibbs then looks back at what’s happened over the past six years. Starting with 2010, he says: “It was the peak of the market, and the five first growths were the top five wines, the 1855 classification was basically shaping the market.”
But by the time 2011 had finished, the market had peaked, and buyers were moving away from the first growths, but still shopping within Bordeaux. As a result, the rising stars of that year were the so called ‘super seconds’ (labels such as the Pichons and Cos d’Estournel) and the ‘flying fifths’ (such as Lynch-Bages and Pontet-Canet).
The first growths were still within the top 10, but the taste for Bordeaux was broadening, says Gibbs, primarily because buyers were looking for less expensive alternatives to those at the top of the classification.
Moving to late 2012, however, and the only first growths in the top 10 were Lafite and Latour, and DRC had become the world’s most powerful fine wine brand. “Bordeaux was heading south,” says Gibbs.
As 2013 drew to a close, the new high-flyers weren’t from the 1855 classification, but comprised Right Bank labels, the top three being the recently upgraded Pavie and Angelus along with fine wine investment stalwart Petrus.
The first growths were still high up in the survey, but led by the cheapest – Haut-Brion was at number five – and a general search for value was driving trade for brands from outside Bordeaux.
By 2014, Gibbs says: “The bear market was long in the tail,” and the risers were from a surprisingly broad array of regions (northern and southern Rhône, Sauternes, Tuscany, Piedmont, Napa, Champagne, and Australia all featured in the top 20). Meanwhile, he adds: “Bordeaux was on its knees.”
Then, last year, “the market had stopped falling, Bordeaux was stabilizing, and three first growths were in the top 10, but those were the least expensive: Haut-Brion, Margaux and Mouton,” records Gibbs. And what about 2016? “This year, for the for first time since 2010, the first growths are in the top five.
Bordeaux is back. The market is rising and it is being led by Bordeaux.” Indeed, there are even more Bordeaux brands in 2016’s power list than the 2010 report: the region accounted for 63 of the 100 this year, and 62 in 2010.
At Bordeaux’s lowest point, in 2014, that total was 53. Nevertheless, fine-wine collectors aren’t turning their back on non-Bordeaux labels.
Having discovered the quality, and investment potential, in first-growth equivalents from the likes of Tuscany, Piedmont and Champagne, they are continuing to buy and drink more broadly than they did before the market fell in 2011. (Champagne and Italy have more labels in this year’s Liv-ex Power 100 than ever before).
So, while Bordeaux may have more brands in the report than six years ago, in terms of its share of trade by value on Liv-ex, it is much smaller: 75%, compared with almost 96% in 2010.
Today’s level is also back to where it was 12 years ago, when Liv-ex first compiled the Power 100. “Bordeaux is now three quarters of the market, which is probably the norm, that’s what it was in 2004, before China, which is what took it up to 95%.”
And as for the first growths, their share of trade is less than half what it was when they peaked at 61% in 2010, accounting for 26.6% by value this year. In fact, the fine wine market of 2016 is broader than ever before.
Gibbs explains: “This year we have traded more than 4,000 different wines and vintages from 670 brands, from which 199 qualified for the list – we only include brands where there is a minimum of £10,000 traded, and this must be across at least three different vintages.”
Proving further evidence for the stretching of the market, he adds: “We had more than 250 brands where we only saw a single trade.” To compare this situation with last year, Liv-ex trades included more than 3,000 different wines from 265 brands, yielding 166 potential power labels for the 2015 list.
This year’s higher number of trades is “a record”, and so too is the number of active markets, which now total 7,250, according to Gibbs, along with the value of wine bids and offers, which has reached £40 million.
“The liquidity is building, and the tail is growing: it is a very broad market, with a very long tail,” he says.
He believes: “The obsession with single brands and the top, top wines is less profound.” Helping this trend is the fact that there are “more and more interesting wines being made around the world, so there is more to choose from.” A further influence is the source of demand.
Gibbs explains: “The biggest change we’ve seen is the US, which has grown from quite a low base: it used to account for less than 5% of the demand on Liv-ex.
Today it is around 18%; it is the fastest-growing. And the Americans don’t obsess about Bordeaux or the big brands from Burgundy like they do in Asia. America is a far more sophisticated market, it doesn’t need to overspend, and it has a long history of buying wines from Italy, and the Rhône, as well as, of course, the wines of California.
So this great long tail has a lot to do with the emergence of the US.” While the significant development of 2016 is that Bordeaux is the bestperforming sector of the Liv-ex Power 100, its share of trade hasn’t gone up.
“Bordeaux is back, but it is not necessarily taking market share, and that’s because other regions are now part of the furniture.” He adds: “When Bordeaux gave up its share it was filled by other interesting stuff from great vintages… and those wines are holding their own.”
It should also be noted that Bordeaux lost its share of the market dramatically because of the poor performance of en primeur campaigns with the 2011, 2012, 2013 and 2014 vintages.
And while 2015 has proved a better release, the trend for buying large quantities of claret before it’s bottled hasn’t resurfaced.
Hartley says: “2015 Bordeaux was a lot better for us than the previous three campaigns, but was it back to the levels of 2005, 2009 or 2010? Absolutely not.
“I get a sense that there is a generational change, a sea-change in the way people are buying. Fewer people understand en primeur; we live in a world where people want instant gratification, and I see fewer younger customers buying en primeur; they don’t mind spending £1,000 on a case of wine, but they want something they can drink tomorrow.”
Speaking specifically about the 2015 vintage release, Gibbs recalls: “There was a sense that good things would happen, and the vintage was right, but the price was wrong.
“The campaign finished on 1 June, and then came the Brexit vote. Although Bordeaux is back, the shift up is not related to Bordeaux 2015, which was not a successful campaign… the market is not buying en primeur, but physical wines.” That aside, “Bordeaux was beginning to creep back into people’s minds,” says Gibbs, suggesting that the rebound for the region should be attributed to more than just exchange rates.
Indeed, as mentioned in last year’s report, there were signs of a recovery for the region in 2015, which, in support of Hartley’s observation, were being driven by bottled Bordeaux, including some well-priced ex-château releases of mature vintages from top estates.
And this year, relative value may be on the region’s side. “The price of first growths has dropped by 40% from their peak, so we are entering a time when Bordeaux is appearing to be good value,” says Gibbs.
DEMAND AND PRICES
Echoing this view, Staples believes the Bordeaux comeback will be sustained due to its prices compared with Burgundy. “The demand for Bordeaux shows no signs of abating, and with the glorious 2015 Burgundy vintage in January, which is bound to be chunkily priced because of the euro and crop size, demand and prices [for Bordeaux] will continue in the right direction until at least spring 2017.” Hartley feels similarly, but adds this warning to producers in the Côte-d’Or.
“Burgundy has got to be really careful not to fall into same trap as Bordeaux.
While Burgundy does have scarcity on its side, my message to the region is ‘don’t push it’, because collectors will by nature only collect if they feel if it is of some value – however they define that.
And if prices get really silly they will go off and find something else, and then the question is, will they come back again? Or will a generation be priced out of en primeur Burgundy?”
Already, Gibbs says: “We are seeing buyers roll out of the big-name Burgs and re-engage with the Bordeaux firsts, but at lower levels.”
If you look at this year’s biggest fallers, there are a number of famous Burgundy domains, which, Gibbs believes, have become too pricy. “Our biggest faller is Cathiard [down 69 places], because it’s now so damn expensive.
When measured according to price performance, there is an increase, but it hasn’t traded; its price has held, but the volume has collapsed.
And it’s a similar story for Coche-Dury or Méo Camuzet… there are five second-line Burgs in the top-10 biggest fallers, and we’ve also got six second-line Burgs that have left altogether – so as Burgundy has become expensive people have become less interested.”
Nevertheless, Burgundy hasn’t stopped growing in terms of the value traded by Liv-ex, it’s just that tastes are broadening as buyers search for value.
“Last year there were 20 Burgs in the top 100, the year before there were 17, and this year there we were 19, so it’s holding its place, but the names change. Consistent are Rousseau and DRC.
“Then you’ve got the likes of Dujac, Cathiard, Coche-Dury, Méo-Camuzet, Roumier, Vougeraie, which buyers roll in and roll out of as the price moves.
“We worry about the silly price Bordeaux has reached, but it’s the same as the village wines from the top growers, which used to be £200 a case – now they are more than double that.”
Staples agrees, commenting: “I think 1er Cru red Burgs are looking a tad expensive, as there is nothing available from 2010 or older, and ‘11, ‘12 and ‘13 aren’t really drinking that well at the moment.
But they will look cheap on the release of the 2015s, of course.” And like Staples, Gary Boom, founder of BI Wines & Spirits, sees this development continuing to help the Bordeaux turnaround.
When asked about his views on the trends for next year, he says: “2015 Burgundies will be in huge demand but we expect the prices to put many wines out of reach of all but the most determined – and the real winner from this will be Bordeaux.
“This most ancient of wines will come full circle and once again look like good value compared with much of Burgundy – and with top wines like Lynch-Bages or La Mission Haut-Brion from ready-to-drink vintages available now for the same price as a Villages Gevrey from a top grower, it’s not hard to see how even the most experienced of heads will turn back towards the Gironde.”
Looking closer at the Bordeaux labels performing best, Gibbs says buyers are still cautious, and are searching for value, which he bases on the fact that there is rising demand for the second wines from the first growths.
Because the report measures ‘brand power’, rather than the power of individual wines, the strength of first-growth clarets includes the 12-month performance of second, and, if applicable, third wines too.
“The Asians are buying a lot of second wines – and our best performing index is the Second Wine Index, which is up by 31.4%. The first growths are up by 19.5% because the second wines are a cheap entry into the brand, and people are still a bit gun shy,” he says.
This is also true of en primeur releases. “Both Carruades de Lafite and Petit Mouton sold out in the 2015 campaign, and their Grands Vins didn’t. You hear stories of buyers being told: ‘If you want Petit Mouton, you’ve got to buy Mouton too’. People aren’t bouncing back thinking ‘I’ll pay anything’; they are frightened of overpaying – the re-engagement with Bordeaux is lower level.”
Further exemplifying the search for value among buyers of even first-growth claret since the market peaked in 2010, Gibbs says the cheapest of the five, Haut-Brion, has been the most consistent performer. “It has been in the top 10 five times in the past six reports, whereas Lafite has been in the top 10 only three times since 2010.
Haut-Brion is always there because of the value.” Nevertheless, it is Mouton, then Margaux, followed by Lafite that have enjoyed, in order of highest to lowest, the biggest price increases of the firsts.
Mouton, Gibbs says, has become a particularly powerful brand, including Petit Mouton, and has benefitted, along with Lafite, from a general market recovery and a gradual return of Asian demand for top Bordeaux.
As for Margaux? That may be connected to the fact it was declared wine of the vintage in 2015, as well as the sad early demise of its manager, Paul Pontalier, who died in March. “A bit like art, after the artist has died, collectors tend to buy their work,” says Gibbs. Other Bordeaux brands of note this year include Gruard Larose, up 45 places on last year’s report.
“It has increased by 21% on price, and I get the feeling it is one of those international brands, like Talbot and Lynch-Bages, that is understood by the UK, Europe, the US and, increasingly, by Asia too. And wines such as this are the second part of the Bordeaux story: we have a lot of entry-point wines, old fashioned brands, that are beginning to participate,” he says, before also noting the strong showing this year from Giscours, Batailly and Domaine Chevalier.
Gibbs then outlines the enduring appeal of the classic left bank cru classéclarets. “The thing about Bordeaux is that ultimately it is the most understood, it is the most reliable, and that makes it the safest thing to buy.”
Furthermore, collectors looking to restock their cellars tend to go for the likes of Lynch-Bages, Talbot, Giscours and Gruaud Larose because these slightly boring, old fashioned names have a strong heritage and they are affordable.”
But these are bottled wines. Gibbs stresses: “The 2015 en primeur release was actually expensive, and while a few merchants said they had a good campaign, most found the price rises too much.”
Indeed, when Liv-ex surveyed merchants on the overall average price rise they expected for a basket of wines following the springtime primeur tastings, the forecast was an 18% increase. What did they get? An average jump of 45% on the 2014 release.
Consequently, Gibbs says: “People coming back to the market are not buying en primeur. They think that Bordeaux is still playing its old games, so they are buying physical wines, names they know well, wines that have been tasted several times, have decent notes, and cost between £30 and £60 a bottle.
People are reticent about going back into Bordeaux at the wrong price, they are backing vintages of wines they understand.” Providing more evidence of this, he says: “There is now a lack of stock of Bordeaux pre-2005.”
In contrast, Gibbs says that in 2015, for the first time, not even the first growths sold out, leading him to conclude that “there are huge amounts of unsold wine building up in Bordeaux”.
Alarming as that sounds, he adds: “There is a feeling that the châteaux can afford to keep it, and would rather have the supply in Bordeaux than the UK or elsewhere, so they can control the market.” Finally, how much of today’s bounceback should be attributed to opportunistic buying after the Brexit vote.
“Brexit was a trigger; it made it look as though the good old days were back: the first growths were up 20%, so that is a raging bull market,” says Gibbs. “However, if we attribute 15% of that to Brexit, then it’s a bit more sobering, and if sterling is to appreciate by 10%, then the market will come down.”
Nevertheless, the pre-Brexit trend was upwards. The market was growing by 7%-8% before the referendum, says Gibbs. “It was already moving up, after the longest most drawn-out bear market since the 1970s.”
Hartley explains the currency effect: “Without Brexit, we would be happily ahead of our target, rather than very, very happily ahead.”
So Bordeaux is back, but for ready-to-drink affordable left bank cru classé châteaux, and, since the Brexit vote, first-growth clarets for euro and dollar buyers hoping to make a sound investment on the back of sterling’s depreciation. And such a Bordeaux renaissance is overlaid on a now established broad fine wine market that includes the great brands from a diverse set of regions. Put this together and the picture is positive.
Indeed, the Liv-ex 1000 – the broadest measure of the market – is at its highest, meaning the fine-wine business is now even bigger than it was at its peak over five years ago. So yes, that means not only is Bordeaux back, but the fine-wine business has reached a new high, and comprises the most diverse selection of labels ever recorded on the secondary market.
Over the following pages are the 100 fine wine brands from the Liv-ex Power list for 2016, along with an account of how the labels were ranked, and a look at further regions of note as well as, finally, a word on one stand-out brand from this year’s report. An extended version of this report first appeared in the December edition of The Drinks Business, followed by an updated version in the January edition of The Drinks Business Hong Kong, with all Sterling values converted into Hong Kong dollars. Contact Lewis O’Sullivan on email@example.com to request either of these publications, or click here to subscribe.
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