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Wine Sales Up, Winery Profits Down

Sep 21, 2020 11:09:49 AM / by Charles Agutter posted in Fine Wine Investing

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As prices have become increasingly attractive in recent months, consumers are beginning to splash out on more expensive wines once again because there isn't much else to spend money on.

 
The pandemic has turned the the US wine market on its head as consumers embrace new buying habits.

While US wine sales overall are up, 57 percent of US wineries who responded to an executive survey say their own sales are down.

How is this possible? Big wineries are taking more market share at the expense of small wineries. This was one of many nuggets of information from the Wine Industry Financial Symposium, held online this week.

The executive survey conducted by Sonoma State University is an annual highlight of the symposium as it gives a snapshot of what individual wineries are facing, which cannot always be gleaned by looking at overall numbers.

For example, let's talk about prices, with help from Danny Brager, who now runs an independent consulting business after a long career at Nielsen. Consumers in retail stores are paying more for wine: the average price is $11.38 compared to $10.68. Moreover, the fastest-growing categories in retail stores are above $15, with wines between $20 and $25 particularly hot.

In wines ordered direct from wineries, however, the opposite is true: consumers are ordering a lot more wines this way, but they're ordering cheaper wines. In Napa Valley, the average price of a bottle ordered direct in the last five months is about $56, $10 less than a year ago, Brager said. And direct sales of wines over $150 have plummeted.

Moreover, the smallest wineries, fewer than 5000 cases, have struggled the most in selling wines directly to consumers, though these are the wineries that tend to be most reliant on doing so.

Despite, or because of, being surrounded by wines, Californians order fully 28 percent of all wine shipped directly from wineries. But since the pandemic started, the fastest growth of online wine ordering has been from three East Coast states: Maryland, Massachusetts and Pennsylvania.

A relevant topic with the uncertainty of the 2020 harvest is how much juice wineries have in inventory. The good news is that 35 percent of wineries in the executive survey said they are "long" on wine; i.e., they have more in stock than they can currently sell.

Brager said that the hottest varieties in terms of sales growth are Sauvignon Blanc, red blends (in the US, this generally means sweetish concoctions, not field blends), Pinot Noir, Cabernet Sauvignon and rosé. The growth in red blends isn't the sign of a pandemic sweet tooth that it might seem, however, because sales of Moscato and Riesling, which rose in the early days of the pandemic, have since fallen. Brager also said that while New Zealand dominated Sauvignon Blanc sales growth before the pandemic, California Sauvignon Blancs have done just as well during it. 

Sparkling wine remains hot, and not just Prosecco.

"Champagne is having a great day in the (retail stores)," Brager said. "Domestic sparkling is growing quite strongly too. And people aren't shying away from higher-priced wines right now. People can't spend on trips, can't spend on sporting events, can't spend on entertainment. For insulated consumers who still have a job, they do have money to spend, and they do want to celebrate, albeit in a different way."

Wineries have noticed, as 28 percent said in the executive survey that they will be "betting resources" on sparkling wines in the next year, above any other category; intriguingly, 6.5 percent said cannabis.

Americans go big

In fact, Americans on average have actually had more disposable income during the pandemic, according to Kaumil Gajrawala, an equities analyst at Credit Suisse. Gajrawala said the early stimulus checks and additional unemployment insurance payments helped, and pointed out that sales of luxury home goods like Peloton cycles and $10,000 couches from Restoration Hardware are way up.

Gajrawala said a lot of big brands in beer and spirits that were losing market share before the pandemic have reversed that. Don Julio Tequila, for example, has more than doubled its sales, despite a large sales base to start with and a fairly high price point.

However, as restaurants reopen, they may not be able to take advantage of the large markups on wine they once used to balance the books.

"After months of buying wines at retail, consumers are more educated about prices than ever before," said Mel Dick, president of the wine division of Southern Glazer's Wine & Spirits, the largest wine distributor in the US. Dick called 2020 a "buyer's market" for wine.

Dick also said that wineries that own their own vineyards are in the best position if they need to reduce prices because they can create a second, cheaper, label using the same grapes without damaging their flagship brand.

The symposium concluded with Ben Dollard, president for the Americas of Treasury Wine Estates, introducing some of Treasury's plans for its wine business. Dollard played a video by Snoop Dogg, who is helping promote the 19 Crimes brand that is popular with younger men.

Dollard also revealed that Treasury will be releasing in China a BV wine from Bordeaux, because its BV wines have been selling well there.

BV stands for Beaulieu Vineyard, which is an actual vineyard in Rutherford in Napa Valley. So a Napa Valley brand, owned since 2016 by an Australian publicly traded company, will buy bulk grapes from Bordeaux to sell French wine in China.

Let me tell you something from my experiences judging at the Concours Mondial de Bruxelles, the world's largest wine competition – by volume, there is more horrible, undrinkable wine made in Bordeaux than anywhere else in the world. Yes, there's plenty of great wine in Bordeaux, but if you tasted the worst of Bordeaux as many wine professionals have, you would be extremely grateful for the gatekeepers (sommeliers and retail wine buyers) who don't bring these wines into the US market.

I asked Dollard where and how Treasury will get the grapes for its Australian Napan Bordeaux for China. He didn't answer with specifics but said: "The critical thing is that it hits the quality standard."

That shouldn't be hard, as no matter what goes into it, it will immediately be the best Australian Napan Bordeaux on the Chinese market, and quite possibly anywhere in the world.

 
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Ten wines you must try!

Aug 18, 2020 12:43:42 PM / by Charles Agutter posted in Fine Wine Investing

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Chateau Lafite-Rothschild, Bordeaux, France

Probably the most famous chateau in the world. The famous banking family of France has owned this vineyard since 1868. Considered the epitome of Bordeaux wine culture.

 

Romanée-Conti, Burgundy, France

One of the most expensive cult wines. The Grand Cru estate, owned by the Domaine de la Romaneé-Conti, is less than 4.5 acres. An average vintage yields around 5000 bottles.

 

Montrachet Domaine Leflaive, Burgundy, France

The vines of Le Montrachet yield the finest white wines in the world. Managed by a select group of renowned vintners, the Grand Cru vineyard measures 20 acres. The most coveted bottles come from superstars like Domaine Leflaive, which owns less than 0.25 acres of Le Montrachet.

 

Krug Clos d’Ambonnay, Champagne, France

A place of pilgrimage for Champagne lovers, House Krug was founded in 1843. Two extremely rare vineyard estate Champagnes are made here – Clos du Mesnil and Clos d’Ambonnay. The latter comes from a vineyard less than 1.7 acres in size and has been produced in 2000, 1998, 1996, and 1995.

 

Pingus, Ribeira del Duero, Spain

Danish oenologist Peter Sisseck established Dominio de Pingus in Ribera del Duero, Spain in 1995. Influential wine critic Robert Parker called the very first vintage “one of the greatest and most exciting wines I have ever tasted.” – the prices went through the roof. The vineyard estate is less than 12.5 acres. Pingus is considered the rarest and most expensive wine of Spain.

 

Scharzhofberger Riesling Trockenbeerenauslese Egon Müller, Saar, Germany

Egon Müller is Germany’s ultimate cult vintner. International collectors and connoisseurs know his Rieslings are worth every penny. Scharzhofberg wines are among the most coveted and best in the world. Only a few dozen bottles of Trockenbeerenauslese are made and sold exclusively at auctions.

 

Penfolds Grange Bin 95, South Australia

Penfolds Grange is the Australian cult wine that’s second to none. Considered the first true “Premier Cru” of the Southern hemisphere, it was designated a heritage icon by the National Trust of South Australia on its 50th anniversary in 2001.

 

Barolo Riserva Monfortino Giacomo Conterno, Piemont, Italy

Many experts say the Monfortino is Italy’s greatest red wine. This exceptional Barolo is only made in certain years, then ripened in a cask for 7 years before it is bottled. Its storage-ability is legendary.

 

Screaming Eagle Cabernet Sauvignon, Napa Valley, USA

California’s contribution to our list of cult wines hails from Oakville. The 1992 vintage received an impressive score of 99 from Robert Parker. For 1997, 2007, 2010, and 2012, the Screaming Eagle scored a perfect 100. The stellar quality and very limited production run of 5000-8000 bottles per vintage made Screaming Eagle the most expensive wine in the USA. And the price might make you scream indeed…

 

4G L’Aube De La Vigne, South Africa

Winemaker legend Giogio Dalla Cia and “Pope of Wine” Denis Dubourdieu, who tragically passed away in July 2016, are behind this relatively recent project. Their objective? To make the best and most expensive red wine in South Africa’s 350-year history of wine-making. Only 3000-4000 bottles of this rising star among cult wines are made per vintage. It found international recognition when it left several perfect 100 score superstar Bordeaux in its dust at a blind tasting event.

 
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Bordeaux 2019 – A Buyer’s Market

Aug 12, 2020 10:27:03 AM / by Charles Agutter posted in Fine Wine Investing

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The 2019 Bordeaux en primer season—disrupted by the coronavirus pandemic—is now underway, and it’s a buyer’s market for a vintage that many consider to be very good. 

The big news for serious wine investors, drinkers, and collectors is that prices of this vintage from the very best châteaux are for the first time in more than a decade being offered at substantial discounts of as much as 30% or more off release prices from a year ago. 

Château Pontet-Canet kicked off en primer—the sale of wine futures—for the 2019 vintage on May 28, releasing it at €58 (US$65.60) a bottle, from the negociant (Bordeaux merchant)—a 31% discount from 2018. That release set the tone, with many top producers following suit. Château Mouton Rothschild, for instance, offered its wines at a nearly 31% discount to 2018 prices at €282 per bottle, ex-negociant, a similar price cut to that offered by Château Palmer, at €161 a bottle.

“If I’m a buyer in the U.K., sitting there in London, I’m buying everything at this price—it’s clearly a buyer’s vintage,” says Nick Jackson, a master of wine and owner of the consulting firm Vintage Variation. “We haven’t seen pricing like this since 2008. And the quality of this vintage is better than 2008 by all accounts.”

Still, it’s a complicated year. The situation for buyers in the U.S. is less clear cut, as Jackson alludes to, with tariffs on still wines imported from France subject to a 25% tariff. The tax was among several imposed last October on various products produced in the European Union in response to a long-running trade dispute over Airbus, based in the Netherlands. 

Consumers who buy en primeur are securing wines that they won’t receive until the wines are bottled and shipped two years later. It’s a system that’s been in place for generations, ideally designed to allow wine lovers and investors to get a better price on bottles that haven’t yet come to market.

But in recent years, that premise has been undercut by high en primeur prices, causing many consumers and participants in the wine trade to lose interest in futures and to question the system’s survival. 

 

Avoiding “Death by a Thousand Cuts”

 

There are several reasons Bordeaux producers are cutting prices, at last. The most obvious is that this year, for the first time, en primeur, typically held at the end of March and early April, was canceled. That meant wine journalists, merchants, and consumers, who typically descend on the region, didn’t get to taste the vintage, and critics couldn’t release their influential scores. 

But en primeur was facing headwinds from other corners as well, including U.S. tariffs and unrest in Hong Kong, the center of the Asian wine trade. And then there’s the fact that many in the fine-wine trade were fed up with paying high prices for futures.

 

“I would love it if [the discounts] were also about the fact that the Bordelais realized they needed a bit of a reset after a few years of some pretty firm prices,” Jackson says. 

 

 
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How to recession-proof your portfolio: restructure your investments in these uncertain times

May 18, 2020 11:59:57 AM / by Charles Agutter posted in Investing 2020

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A recession like no other, needs a playbook like no other.

What should you do to get your investment portfolio in ship shape for the volatile times ahead? 

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Fine Wine - Preserving Wealth in Uncertain Times

Apr 7, 2020 12:42:14 PM / by Charles Agutter posted in Fine Wine Investing, Investing 2020

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Sotheby’s Wine generated record $118M at auction last year

Mar 10, 2020 12:42:10 PM / by Charles Agutter posted in Fine Wine Investing, Investing 2020

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Wine and spirits auction sales exceeded $118 million at Sotheby’s Wines, up 20 percent over the last year and a record high, revealing a healthy appetite among investors.

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Can investing in Fine Wine see us through market uncertainty?

Mar 9, 2020 5:42:21 PM / by Charles Agutter posted in Fine Wine Investing, Investing 2020

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In times of uncertainty and distressed markets, diversifying your investment portfolio reduces your risk - allocating investments among various financial instruments, industries, and other categories means you're not over exposed to any one asset. 

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Re-enter the Dragon: Ding Hong Returns with the Most Successful Wine Fund Ever!

Mar 8, 2020 9:59:06 AM / by Charles Agutter posted in Investing 2020

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For those who don’t know, Ding Hong was the most successful wine fund ever, and a 2nd phase has just been confirmed.  The best performing wine fund  has been dormant for 9 years,  but its now making an  exciting come back!

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What does a fine wine taste like after 150 years?

Mar 4, 2020 12:18:09 PM / by Charles Agutter posted in Company News

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And what about a sherry that pre-dates the French Revolution? Specialist Noah May reports from a Christie’s Wine Department dinner in London at which leading collectors sampled wines spanning three centuries

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The Bordeaux Big 8

Feb 25, 2020 9:03:52 AM / by Charles Agutter posted in Fine Wine Investing

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To understand which wines have historically produced consistent and competitive growth you need look no further than the Bordeaux Big 8.
These eight finest Chateaux in Bordeaux are emblems of exceptional quality wine making and their wines tend to command the highest prices on the global wine market. They 'slow release' their vintages to manipulate supply and then drive demand. The Plateau of maturity is usually 8-30 years however spectacular vintages can be drunk 60/70 years old.
One of the best pieces of advice you can stick to as a wine investor is to buy the best that you can afford and they don't come any better than the Bordeaux Big 8. So let's take a look at them!

 

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