Tuesday, January 22, 2013

Capital Vintners Special Report: Fine Wine and China

In 2008 the fine wine market was affected by a single piece of legislation in Hong Kong to such an extent that the small island off the coast of China is now, after only four years, Bordeaux’s number one export market.

The duty on fine wine was reduced from 40 to 0 per cent and Hong Kong instantly got the bug for fine wine consumption and investment. In 2010 the Liv-ex 100 rose by 40 per cent, compared to the FTSE’s 9 per cent increase. Most analysts put this huge increase largely down to this reduction in duty-related customs in China.

Arguably the most famous wine in the world – Lafite Rothschild – saw a rise in value of the majority of its vintages by 70-100 per cent in 2010, as Chinese palates fell in love with the fantastic Bordeaux First Growth.

Since then the Chinese market has rapidly diversified, as investors come to realise there is more to France than just a tiny section of the Bordeaux region. The First Growths remain the ultimate investment opportunity, but many other French regions and chateaux are now highly desirable. Wines from Burgundy, Côtes du Rhone and Champagne are now all sought-after in Asia.   

As a gateway to mainland China, Hong Kong not only has a huge geographical advantage, but it has also entered into an agreement with China to allow wine to be transported to the mainland under enhanced customs regulations, known as the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA).

As the market grows and diversifies, investors are starting to look to the ‘lesser’ known wines. Chinese portfolios have become more advanced as more people have more access to knowledge on the market. 

Demand Outstripping Supply

The Premier Cru wines – Lafite, Latour, Margaux, Haut-Brion and Mouton – only produce around 180,000 bottles a year. Bearing this tiny supply in mind, a nation of well over one billion people will dramatically push up the demand for the top wines. With such a large potential market, wine companies and distributors have flocked to Asia to take advantage of the rapid increase in consumption and investment.

Asian buyers now account for 60 per cent of Sotheby’s global wine sales. One example of this extraordinary boom in fine wine sales was the Lafite 2009, which sold for £43,000 a case in Hong Kong, three times the London price. Wine auctions in Hong Kong regularly break records, with cases of top wines going for £30,000+.  

The Asian Connection

Business relationships between Europe and Asia are being formed all the time. In November 2012 the first chateau with Grand Cru Classé status – Bellefont-Belcier – was bought by a Chinese businessman. This is a clear indication that the Chinese influence over the fine wine market will only increase in the coming years.  

Robert Parker’s infamous journal, the Wine Advocate, is opening up a large office in Singapore. Parker is due to step down as editor soon, and will be replaced by his Singapore-based Asia correspondent, Lisa Perrotti-Brown. This is yet another signifier of the change in focus in the global wine market towards the East. Emerging nations with growing middle classes with Western ideals will flock to fine wine, seen as one of most prized status symbols. 

Capital Vintners: Champagne 2012 report

After initial worries about the Champagne 2012 harvest - poor weather and a huge harvest shortage - it would appear that the vintage could be a special one.

Thanks to a great end to the season (ideal weather conditions throughout August and September), the Champagne 2012 vintage has already been compared to the 2002 and 2008 vintages - both great years.

Bruno Paillard, a leading Champagne producer, has noted that "the grapes are perfectly healthy, with high levels of sugar but also acidity."  

The overall quantity of the harvest is down 40 per cent on 2011, which will push up demand even more than usual, especially as most people are talking of the vintage as being rather special.

Dom Perignon's chef de cave, Richard Geoffrey, is very optimistic about his chateau will produce a superb 2012 champagne. He told Decanter magazine that "the quality and the intensity are definitely there to make an outstanding vintage."

At Capital Vintners we will be keeping a close eye on the 2012 vintages and we are looking forward to sourcing some fantastic bubbly!

Thursday, January 10, 2013

Capital Vintners: Fine Wine Investment 2013 Report (Part 3)

The final part of our 2013 fine wine investment report focuses on some countries which often get overlooked  in the wine market.


In the last four years the wine consumption per capita in Poland has increased by 14 per cent to 2.05 litres. There is increasing evidence that points towards the Polish population moving away from the stereotypical vodka and turning to wine. Granted, wine consumption in Poland is still smaller than most European countries, but its economy is growing rapidly and eastern European countries by and large have a love of alcoholic beverages. Poles spent 430 million euros on wine in 2011.


Denmark and Sweden have seen huge increases in the wine consumption per capita in the last four years. Denmark's consumption increased by 27.1 per cent to 35.09 litres per person, and Sweden's consumption increased by 22.08 per cent to 22.08 litres per person. These two countries are among the fastest growing economically developed countries in the world in terms of wine consumption.


The oldest wine industry in the New World has seen a sharp increase in production - 40 per cent between 2006 and 2011 - and an increase in quality too.
According to the Mexico Sales Alliance only 35 per cent of wine consumed in Mexico is produced domestically

Consumption is also on the rise. According to the Mexican National Wine Council, consumption has doubled in the last ten years and the near future also looks good. This increase is mainly due to a large youth population beginning to drink wine.

Wednesday, January 9, 2013

Capital Vintners: Fine Wine Investment 2013 Report (Part 2)

Who will be the next China? That's the question on everyone's lips as we enter 2013.

The front-runners are India, Brazil and Russia. But as well as the BRIC nations, there are other dark horses that may feature in the global market.


Now that protectionist regulations have been staved off and Brazilian wine producers have come to a provisional agreement over wine imports. There are still things that need to be ironed out though. For example there are talks of a minimum price for all imported wines, which would obviously harm the market and make it difficult for distributors to break into the country.  

The overall aim for the Brazilian wine industry is to double sales by 2016, reaching a sales volume of 40 million litres per year. The shorter-term aim for 2013 is to increase sales by 35 per cent to 27 million litres.


Russia's wine market is almost exclusively wine for consumption rather than investment.

The volume of the wine market has risen from 409 million litres in 2000 to 1058 million litres in 2011, so the market has more than doubled in the last decade.

Modern Russia is synonymous with the modern billionaire. Once a few of the oligarchs start to boost the wine market in Russia, there is bound to be a bump in investment opportunities. Added to the fact that Russia is outside the Euro means that it has avoided the economic crisis on its borders.


With 1.2 billion people (and rising), India is thought by many to be the untapped wine market of the near future. The current size of the total wine market stands at 1.2 million cases and it has been reported that the market is growing at a rate of 25-30 per cent. However the wine consumption per capita is miserly; only two teaspoons per person! With a growing middle class developing Western aspirations and tastes, that figure is only going to go one way. Small cultural changes, like Bollywood actresses drinking wine on screen, combined with a concerted marketing and PR effort by wine companies, will ensure India is the number one target for the industry in the coming years.

In the final part of the report tomorrow we will focus on the dark horses of the global wine market: Nigeria, Mexico and Poland.

Tuesday, January 8, 2013

Capital Vintners: Fine Wine Investment 2013 Report

This week we will be focusing on the year ahead, with an emphasis on the areas of the market we think will see growth in the next 12 months.

After a disappointing first half to 2012, the fine wine market bounced back in the final few months, leading to key pundits and experts predicting a solid 2013 for the trade.The Wine Investment Fund has predicted that the Liv-ex 100 will end this year 14 per cent above where it finished in 2012.

A 24 per cent decrease in the First Growths in 2012 has led to a real slump in the finest Bordeaux wines, especially Lafite. With high hopes for 2013 and a likelihood of a worldwide economic recovery on the horizon, this year should see a resurgence in the market and the very best wines.

2012 saw the rise of the 'other' French wines. Now it's just not the big Bordeaux wines, but Burgundies and Cote de Rhone wines which are making moves. Names such as Domaine de la Romanee-Conti and Guigal are now becoming just as ubiquitous as Haut-Brion and Mouton Rothschild.

Saturday, January 5, 2013

Liv-ex indices finish 2012 strongly

After a rather disappointing year for fine wine investment, there was at least good news from the Liv-ex indices as we enter 2013. The Liv-ex Fine Wine 100 finished 2012 on 260.78, a six-month high. The Liv-ex Fine Wine 50 achieved the strongest finish to the year, up 1.8 per cent to 302.22, its highest level since 7 July.

The first six months of 2012 were so poor though that even a strong end to the year meant that the key indices fell over the course of 2012.  The Bordeaux 500 index performed best, with a decline of 5 per cent