Business: Fine Wine Monitor – All roads lead to Rhone

The Rhône has produced more 90-plus-point wines than any other region, including Bordeaux, and is increasingly hard to ignore

After a short while the Bordeaux 2005 en primeur campaign tailed off in July, though it remained the main focus for the market. Volumes were down on June’s record levels, but trade in July was still up 256% year on year. The First Growth 2005s dominated the market as second and third tranches were released to satiate the remaining demand. Stock held by leading stockholders was down 17%, reflecting the reduction in 2005s as the campaign broadened. The Liv-ex 100 increased 4.5%, bringing the 12-month gain to 58.2%.

Bordeaux has dominated our trade this year, accounting for more than 90% of turnover, compared with 80% in 2005 and 76% in 2004. Other regions have been little more than an afterthought.

The table (see PDF) shows the performance of the main fine wine producing regions that make up our Liv-ex 500 Index. Not surprisingly, the 300 Bordeaux wines in the Liv-ex 500, top the performance tables so far this year. The Liv-ex 100, which concentrates on the very best names (and is 92% weighted to Bordeaux), has done even better, producing a 40% return year to date. Champagne (comprising the best vintages of Cristal, Dom Pérignon and Krug) has also outperformed the Liv-ex 500 as a whole, with a 17% return. Indeed, over five years the top marques have put in a 51% return, outpacing the broad church of Bordeaux wines in the Liv-ex 500, but lagging behind the Liv-ex 100 Index, which is up 73%.

Although many Italian wines have been a pretty tough sell recently, due to increasing production and ambitious pricing, the major Super Tuscans represented in the Index (Sassicaia, Ornellaia and Tignanello) have performed solidly in the last year. New World and Port, on the other hand, have been the perennial dogs of the Index and, despite making some great wines in recent years, are out of fashion.

Burgundy has also under- performed. Despite a steady performance over five years, the market for wines from the very top growers has failed to keep pace with the best Bordeaux names in the last year. This may change in the autumn as the market focuses its attention on Burgundy 2005. High prices for these wines seem likely and may well push up the value of the back vintages as supply is so tight. Our outside bet, however, is the Rhône. Of all the top wine growing areas, there is no other that has produced so many high-scoring wines in the last decade. While Bordeaux produced 700 red wines between 1998 and 2004 that score 90 points or more from Robert Parker and 96 wines that score 95 points or more, the Rhône has produced 1,200 and 165 respectively. Indeed, this has been part of the problem. Year after year of high quality harvests have left the consumer a little jaded and suppressed demand. But with top Bordeaux now up nearly 60% over 12 months, this is starting to become a little silly. While a 95-point claret at less than £500 is considered a bargain, one can find plenty of CNDPs of the same pedigree at half the price. This just does not seem sustainable. See our February market report for some top tips.

© db September 2006