Fine wine in focus: the second wines

In 2010 the second wines of the Bordeaux First Growths surged into the headlines seemingly only to fade away just as quickly, how have they been faring since?

The answer is; surprisingly well. A recent Liv-ex report showed that the five second wines have seen a price change of 1.5% in the past year, they represent 1% of all trade by value and 1.5% of trade by volume, have an average Robert Parker score of 89.7 and cost €109 a bottle.

The upward ascent of the second wines dates back to 2007 at least became more tangible in late 2010 when the market was racing towards its apex.

In November 2010, Liv-ex’s then research manager, Jack Hibberd, wrote for the drinks business that it once been possible to buy roughly seven cases of a second wine for the price as one case of the grand vin.

By September 2010 that ratio had fallen to around 4:1, you could buy three cases of Carruades de Lafite to one case of Lafite and five cases of Clarence/Bahans to one of Haut-Brion.

It is worth recalling that up until 2004, Carruades was available for €25 a bottle ex-merchant, as were Clarence de Haut-Brion and Pavillon Rouge. Les Forts de Latour at €37 and Le Petit Mouton at a whopping €40 a bottle were the “expensive” ones.

Then the brand-frenzy surrounding the Firsts and Lafite in particular propelled Carruades to greater heights and, as was noted by Hibberd, pushing all physical vintages within a £250 price band with prices not varying by more than 8%.

Even the 2007 vintage was caught up in the rush, figures from August of 2010 show that between March and August case prices of Carruades ’07 were up 39% to £2,479.

2007 Forts wasn’t doing too badly either, over the same period it went up 92% to £1,200 a case while 2008 Petit Mouton went up 12% to £536 a case and the 2007 managed a 50% increase to £618.

The climbing continued until the launch of the 2010 vintage in 2011 and by that point Carruades had thoroughly overhauled its second wine peers and was offered for €238 a bottle from merchants, Forts was at €218, Pavillon €138, Petit Mouton €128 and Clarence €119.

Then, as is well known, the market went “pop” and Lafite and its closest affiliates, having been propelled furthest, also fell back the most. The Second Wine 50 became one of the worst performing indices dropping 30% in two years. The meteoric climb had been followed by an equally spectacular fall.

Latour bailing from the en primeur system after the 2011 campaign has perhaps saved its averages from a worse fate but its 2010 Forts is among the worst performing of the last 10 years, as it is for all of the other second wines with the least bad performer in that year being Petit Mouton which has only dropped 11% between its merchant release and current pricing.

Despite all of the second wines having one or more vintages that have declined in value post-2010 and the regressive figures between 2011 and 2013/2014 the overall returns from the second wines over the last decade (2004-2013) have remained strong.

Clarence/Bahans is the only second wine to have declined on average, its collective 10 year return being -3%. It has always been the weakest second wine, in its original incarnation as Bahans until 2007 it was the only wine that didn’t have an evident visual link to its grand vin which made it suffer in the brand-driven rush that boosted its peers. Meanwhile, post its change to Clarence de Haut-Brion the estate has pursued a higher pricing policy which its weaker brand recognition can’t support. Its 2010 offering has seen the worst drop of any vintage for any of the second wines between 2004 and 2013; -46%.

Forts has maintained a 10-year return average of 23%, Pavillon of 42% and Carruades a solid 48%. Justin Gibbs, co-director at Liv-ex, admitted it had surprised him to see Carruades maintain such a positive return considering the drop it had endured but Carruades has not struggled as much as one might have supposed.

The 2009 and 2010 vintages have declined 18% and 35% respectively between their release and now but the 2011 has seen a modest but palpable 10% gain, the 2012 has only declined 2% and the 2013, as yet, hasn’t budged at all.

The real secret of Carruades’ performance is still very much linked to how far it rose from such humble beginnings.

The returns on investment for buyers of Carruades between 2004 and 2008 are astonishing; 527% for the ‘04, 289% for the ‘05, 217% for the ‘06, 161% for the ‘07 and 211% for the ‘08. Against appreciation like that it’s little wonder Carruades is still able to offer a sizeable return over a decade.

Nonetheless, as Gibbs pointed out, if this seems good, if this were being written even three years ago, “Carruades would’ve been a lot higher.”

Yet it is Mouton which offers not only the best average return of the last 10 years for the second wines but also from all 50 of the wines from the Left and Right Banks and Sauternes Liv-ex examined in its recent report.

With an average bottle price of €116 it has shown a 73% return over the last 10 years, with only its 2010 vintage (at €128 p/b ex-merchant the most expensive) showing a negative return of -11%.

Even the 2013 has returned an 11% gain while the 2008 can boast a 178% return and the 2009 58%. It has gone from being one of the most expensive second wines to the second cheapest yet its success is two-fold.

With Mouton being the first growth of the moment, “taking the mantle from Lafite,” as Gibbs pointed out, part of this success is down to simple consumer demand. The second answer is of course cost and it is noticeable that Mouton’s bottle prices are the ones that have changed least since the second wine surge began.

“Petit Mouton’s performance is down to its pricing,” said Gibbs, “it hasn’t taken it too far away from its origins. It’s not such an extreme change.”

Whereas Carruades nearly doubled from 2004 to 2005 going from €25 to €49 a bottle ex-merchant and then jumping again between 2008 and 2009 from €54 to €198, Petit Mouton rose rather more placidly in the same brackets from €40 to €52 between 04/05 and then €44 to €76 in 08/09.

Despite the ups and downs there is no doubt that the second wines have “come a long way,” driven by the brand power of their parent grand vins.