Wine investors savor the best of classic Burgundies and Champagnes

Investors in vintage champagne and fine burgundy are having a year of big gains, but some crunch is out of the market as the global economic outlook worsens.

Burgundy prices rose 27.4 percent in the first 11 months of this year, according to Liv-ex’s Burgundy 150 Index, while the Champagne 50 jumped 21.6 percent,

This partly reflects the indulgence of wealthier consumers, who returned to restaurants after the end of the pandemic, often flush with cash saved during months of lockdown. The supply of premium grapes is also limited. For niche wine investors though, this niche market has also provided a shield from rising inflation and financial market slumps.

“It was an exceptional year” for the vintage Champagne and Burgundy, said Gregory Swartberg, chief executive of London-based Cru Wine, which manages client assets of around £30m. “With vintage Champagne, there just isn’t enough of it” to keep up with demand, he said, adding that his company has seen record demand for fine wines from investors over the past four months.

Wine growers light candles in the fields around Bouligny-Montrachet to protect the vines from frost in April 2022 © Jeff Pachoud / AFP / Getty Images

Climate change has been a major factor in reducing the supply of Burgundy, which is produced in east-central France. Unusually warm spells in the early spring of last year sent the vines to early life, only for brutal frosts to kill the buds in early April. Hail in June caused further damage.

Volumes of Burgundy wines for 2021, which are on the market now and begin bottling from next summer, are down about 50 per cent, with some growers losing up to 85 per cent of their harvest. Champagne houses, meanwhile, which matured wines for years before release, were more inclined to keep bottles to cover years of poor harvests.

Bottles of Burgundy rest on shelves in a London department store
Bottles of burgundy rest on shelves in a London shop © Simon Dawson / Bloomberg

Among the best-performing Burgundy wines this year is Domaine Leflaive’s Bâtard Montrachet 2014, a Chardonnay that is up 122 per cent to £13,952 for a 12-bottle case, according to Liv-ex. The flagship Domaine Romanée Conti Red Burgundy exclusive, Grands Échézeaux 2008, has doubled its price to £43,792 a case.

Among Champagnes, Perrier Jouët’s 2012 Belle Époque rose 68 per cent to £1,821 a issue, while Le Mesnil’s salon, one of the most sought after Champagnes, made solid gains across several models. The 2007 rate rose by 67 per cent to £12,200 per case.

In addition to these major brands, there was also a growing demand for so-called “farmer’s Champagne”—artisan wines made by the same person who grows the grapes. Cédric Bouchard’s 2012 La Bolorée, an unusual 100 percent Pinot blanc Champagne, is trading at £360 a bottle, up 80 percent this year, according to the Bordeaux Wine Dealers and Traders Index. The 2002 model of Jacques Selous has jumped 63 per cent this year to £1,750 a bottle.

The strong gains stand in stark contrast to a dismal year for traditional markets. The FTSE All World Index fell 16 percent in the first 11 months of the year in US dollar terms, propelled by sharp losses in technology stocks, while government bonds sold off sharply as central banks raised interest rates.

Overall, Liv-ex’s Fine Wine 100 Index is up 7.1 percent this year in pounds sterling, although in dollars it’s down 4.3 percent.

However, bleak global economic prospects are beginning to sour sentiment in the fine wine sector. Burgundy prices fell 0.9 percent last month and Champagne prices fell 2.5 percent, while the ratio of buyers to sellers in both brands has fallen sharply this year, according to Liv-ex.

Justin Gibbs, co-founder of Liv-ex, pointed to the technology and cryptocurrency sectors, where the destruction of wealth in 2022 after years of huge gains is starting to hurt demand.

“We are seeing a decline in demand and supply starting to grow,” he said. “At the end of the bubble, prices really go up as people scramble to invest. This is what it looks like.”

A worker carries a wicker basket full of grapes while harvesting a Burgundy grape vine at the Corton Charlemagne vineyard, in Bernan-Vergilles.
A worker carries a wicker basket full of grapes while harvesting a Burgundy vine © Philippe Desmazes / AFP / Getty Images

Some industry insiders, such as Cru Wine’s Swartberg, think easing China’s strict no-Covid policy could revive demand from Asia. If that happens, Bordeaux could be one of the winners, said Matthew O’Connell, head of investment at Bordeaux Index, as its relative value should be comparable to the higher-end bottles of Burgundy and Champagne from Chinese buyers.

“Looked at from an investment angle, of course it makes sense to buy the best Bordeaux,” says Paulo Pong of Altaya Wines in Hong Kong. But he notes that the lighter, elegant flavors of top burgundy have certainly caught the imagination of his Chinese customers.

However, many in the industry acknowledge that the fine wine boom may be coming to an end.

said Tom Gring, who was previously a finalist on the British version of the Apprentice He is now CEO of a £300m asset investment firm, Calt Wine Investments. This year, his customers have benefited by buying wines like Egly-Ouriet’s Brut Millesime Grand Cru 2012, a “farmhouse Champagne” whose value is up nearly 260 percent.

“We’ve had two years of outperformance. It would make sense for the wine market to slow down.

laurence.fletcher@ft.com

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