Lafite sets heady wine rally pace
Accelerating Chinese demand boosts prices
25 April 2010
Like art, wine investments also seem to be recovering from the depths of the recession. And Chateau Lafite Rothschild, the largest of Bordeaux’s first-growth wine estates, is outpacing rivals as prices rebound from credit-crunch lows, driven by signs of economic recovery and accelerating demand from China.
Three cases of Lafite Rothschild from the 2000 vintage sold for HK$266,200 each at Sotheby’s in Hong Kong this month, about three times the US$11,749 for 12 bottles of the same wine at a New York auction at the height of the financial crisis in October 2008, just after Lehman Brothers Holdings filed for bankruptcy.
The London-based Liv-ex 100 Fine Wine Index, which lost 22 per cent of its value between August and December 2008 as the banking collapse hit wine investment along with other asset classes, has rebounded 27.6 per cent over the past 12 months. Demand for top wines, along with buying fuelled by collectors in Asia, has driven gains among most Bordeaux first growths, with Lafite setting the pace.
“Lafite is still taking the lead role and is making other wines look extremely cheap,” said Miles Davis, a partner of London-based Wine Asset Managers, which has a total of about US$20 million under management in two wine funds. “Demand from Asia is enormous.”
While many investors focus on the 2000 vintage, described by Christie’s International senior wine consultant Michael Broadbent in his book Wine Vintages as the best for Bordeaux reds since 1990, Lafite’s rally is also evident for other standout years such as 1996 and 1986, as well as the landmark 1982 vintage. Two cases of Lafite 1986 sold for £14,950 (HK$178,700) and £13,800 at Bonhams in London on March 26, up from £7,130 fetched at a Sotheby’s auction in London on April 22 last year.
A study by William Beck of Wine Asset Managers, published last year and analysing price trends over more than a decade, showed that on a compound annual growth rate basis, Lafite 1996 rose 17 per cent each year between January 2001 and January last year, while Lafite 2000 gained 21 per cent. That outstripped rival Medoc first-growth Chateau Margaux, which rose 11 per cent and 14 per cent respectively over the same period.
As for the 1982 vintage, Lafite surged 26 per cent a year over the eight-year period, more than triple rival Chateau Mouton Rothschild, which rose just 8 per cent a year.
Part of the explanation lies in Chinese demand. While US and European collectors have traditionally bought Lafite and other top Bordeaux to lay down in cellars for 15 or 20 years before selling it on or consuming it, Asian buyers are drinking it younger. That both pushes up demand for newer vintages and reduces supplies of older ones.
The US$34,300 achieved for Lafite 2000 in Hong Kong on April 3 compared with US$27,225 paid for each of two cases of the same Lafite vintage sold at Sotheby’s in New York on March 20. At the Hong Kong sale, Lafite had to compete with its Bordeaux right-bank rival Chateau Petrus, whose smaller production adds rarity value to its prices. Three lots of 12 bottles from the 2000 Petrus vintage fetched US$49,900 each at the sale.
“The very extreme price differentials are almost certainly going to unwind in time,” said James Miles, a co-founder of Liv-ex, adding that “it’s still very much about Hong Kong and China”.
Lafite, owned by the Barons de Rothschild, has 107 hectares of vineyards and over the past decade has produced an average 45,000 cases a year, including both the Chateau Lafite Rothschild flagship wine and its second wine, Carruades de Lafite.
The 1982 vintage has risen more steeply in price than others, as the wine is drunk and starts to run out. Data from Wine Asset Managers shows that a case of Lafite 1982, released at £300 in 1983, rose more than tenfold to trade at £3,400 by 2000 and now sells for more than £25,000. Five bottles of 1982 Lafite sold at Sotheby’s in London on March 17 for £12,075.
The annual presentation to the world wine trade of the new Bordeaux vintage took place last month, focusing attention on the futures market and also the wider range of wines on offer from the region.
Mouton, Chateau Haut-Brion, Chateau Margaux and Chateau Petrus are all seeing an expansion in demand, according to the Liv-ex market report for March.
“There have already been some signs that the market is starting to broaden out,” Miles said.