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Burgundy Collectors – Drink, sell, or hold?

November 15, 2013

This is one of the most interesting times for Burgundy in the global auction market and a critical point with respect to certain vintages.  Those with significant Burgundy collections, particularly of older vintages, should consider creating both a consumption and sales plan.  The 2013 grape loss in both Bordeaux and Burgundy is likely to push prices even higher through the fall of 2014, as the availability of newer wines is limited.  Thereafter, prices are likely to level off for some time so consider evaluating your collection and devising a strategy before the window closes.

Red Burgundy has had a series of good to great vintages since 2008 and many of these wines are still too young to drink.  There is no need for a consumption plan for these wines and investment potential will probably be better realised by waiting to sell.  Wines from 2001 to 2007 may be drunk now and are starting to attract interest at auction.  However, this span includes two critical vintages – 2003 and 2004 - which should be drunk within a relatively short time or sold as soon as possible.  In general the 2003s are already losing favour with critics and knowledgeable collectors, in the US in particular, because of the very ripe 2003 vintage. The odium issues that wreaked havoc on the 2004 vintage are making it very difficult for these wines to age gracefully.

White Burgundy has been showing a slow but steady upwards quality trend since the early 80s and now rarely has a poor vintage.  However, this trend is slightly compromised by the difficulties many producers have had with premature oxidation since the 1996 vintage.  White Burgundies, other than those of the very best vineyards and producers, thus have a shorter optimal drinking window than in previous years and anything earlier than 2005 should be either drunk or sold relatively swiftly. As with Red Burgundies, any White Burgundy wine from 2003 and 2004 should be liquidated as soon as possible.

The principal reason that fine wine continues to enjoy such strong investment value and high return is rarity.  For the past four years, an increasing amount of the distribution energy and top quality wines have gone to Asia. As a result, the USA and European markets are starved, while we are beginning to see a surplus supply in Asia. With dismal vintages in 2013, investors and collectors will find themselves with cash reserves that would have gone to futures, in a market depleted of high quality product.  As a result, we expect to see extremely strong prices realized in secondary markets.

Our research shows that despite the recent craze in Burgundy buying, there are initial signs of some collectors turning back to Bordeaux, and they will soon be allocating more resources there.  Many collectors have grown wary of the meager Burgundy supply, the education required to be a smart Burgundy buyer as well as the skyrocketing prices attached, and in response are turning back to Bordeaux.  Historically, the fine & rare wine market has waxed and waned between favouring Burgundy and Bordeaux.  Most recently, we had Bordeaux peaks in 1998, 2002 and 2008.  Accordingly, Burgundy prices spiked in 2001, 2003, and are about to experience peak prices from spring through fall of 2014 before we expect them to flatten out for a few years.

Siobhan Turner DWS, Senior Consultant for Chai Consulting, Europe

 

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