What has hints of red fruits, leather, tobacco, and tulips? Why, the wine investment market!
Elin McCoy reports from Hong Kong that a fund there will lend up to $641,000 (USD) for investing in wine–providing the investments are in the bank’s select list of 50 top names. She also reports that a new fund at Pacific Asset Management seeks to invest over $150 million in wine (it’s raising $30 million initially). There’s talk there of other funds diversifying into wine; some European wine investment funds have opened offices.
More money, chasing wines and returns while dodging counterfeits, smacks of tulip mania and the greater fool theory. When will some financial wizard develop a way to short wine?
One aspect of the wine market that defies tulip mania is the fact that even as more money appears to be rolling in, top Bordeaux prices are falling: the Liv-Ex Fine Wine 50 Index that tracks the last ten vintages of physical (not en primeur) Bordeaux first growths is down 18% in the past quarter. Interest in red Burgundy is up, as is interest in non-first growth Bordeaux. Breadth of wines is probably healthier than all the money funneling into a small group of wines and a broader index of wines is up 13% over the past year, but with declines in the past quarter. And a recent Hong Kong sale saw only 84% of lots sold. So maybe there is some sanity.
Hopefully, if it crashes, whoever is left holding the proverbial bag will have a corkscrew. And real, not counterfeit, wines.
I joked yesterday on Twitter that no blog post seems complete today without mentioning either China or Lafite! So indulge me in one more post about the wine flavor of the month/year/decade….
News is out today that Lafite (DBR – Domaines Baron Rothschild) has left their Chinese importer and distributor, Summergate, after seven years. Jim Boyce in Beijing talked with Ian Ford, an American and founding partner of Summergate. Ford says that they rebuffed Lafite’s offer to buy a stake of the company. Thus Lafite will be shifting their distribution to ASC wines (which is 70% owned by Suntory).
But the crazier story about wine in China is the one involving the building a Scottish castle, typhoons, explosives, and 600 tons of chicken poop. These are all part of various vineyard developments occurring in the Shandong province, which lies on the eastern coast. The Daily Mail (!) visits the location and files a fascinating story with many pictures. Lafite is among the players, developing a 50-acre vineyard (with 350 acres in reserve) in with the state-owned CITIC. (To make the terroir just right, the Daily Mail writes that “explosives are being used to smooth out the broad vine terraces.”) Be sure to see Jim Boyce’s local take on whether or not the site is as “grand cru” as some have claimed!
Image 1: reduced size crop of image by Lou Linwel/Sinopix
Image 2: reduced size crop of image by Janis Miglavs
Jim Boyce, a Canadian residing in Beijing and the author of the Grape Wall of China blog, tweeted this the other day:
exhausted after 3 bottles of Lafite but that’s a typical Beijing night (note: 7-UP > Sprite as a mixer) #ihaveagreatwalltosellyou
Given that Chinese drinkers are reputed for mixing soda with even expensive wines, I asked him if he was bring serious. He replied:
I’ve been in Beijing 6 years, had lots of wine, never seen anyone mix it w Sprite/Coke. But journos love wine/sprite as a lead…
If you’ve been in China recently, what’s your experience in witnessing the first growth with Coke phenomenon? Is this an overblown story that needs to be put to bed?
Incidentally, it’s not Lafite, but my youngest brother wrote me that when he was in Spain earlier this year, he saw some of them there young folks mixing Rioja and Coke, a concoction known as a Calimocho (aka kalimotxo).