On the face of it, top Burgundy wine has suffered this year, overtaken in the autumn by Italy and Champagne as the second most traded region after Bordeaux. A closer look at the figures, however, reveals an altogether different story.
Burgundy is still the top performer in terms of value – in fact, prices have reached dizzying heights on the secondary market. The Burgundy 150 is up 2.1%, the best performing sub-index of the Liv-ex Fine Wine 1000 this year, and since December 2003 prices have risen by a whopping 200%.
However, the dazzling success of Burgundy’s top brand, Domaine de la Romanée-Conti (DRC), in recent Hong Kong auctions has raised a pertinent question: will Burgundy follow in Bordeaux’s footsteps and experience a crazed bull market that ends in tears… and not the kind you find on your wine glass?
Buy Haut-Brion or buy DRC?
It’s a tricky question for current investors. Average prices for a case of Haut-Brion and even Lafite are now cheaper than seven wines of the Burgundy 150. As for DRC and its six labels that dominate the Burgundy sub-index, you can get three cases of Haut-Brion for the price of one.
These sky-high prices for top Burgundies have a ‘trickledown effect’ of pushing consumers down the next rung of the price ladder towards brands such as Armand Rousseau or Leroy. Collectors fear this may end up pricing Europeans out of the market for Burgundy wine, leading to an Asia-led Lafite-like bubble.
However, Will Hargrove of DRC’s UK agent Corney & Barrow claims that prices in the secondary market are misleading. “Away from the secondary market, prices haven’t changed as much as people like to think,” he says.
It’s certainly true that, in recent years and despite some devastatingly low yield harvests, the Burgundians have always raised their prices moderately and sustainably. DRC has never been cheap, but release prices are still affordable and returns can be vast.
Keeping the Burgundy fine wine market stable
The close control Burgundian wine producers have on the supply-demand dynamics of their wine will be the key deciding factor as to Burgundy’s ultimate fate.
While Bordeaux emerges slightly tainted from its brush with big business and Asian millionaires are snapping up its land, Burgundy’s rustic vineyards continue to represent the bucolic romance of traditional winemaking.
According to Napoleonic inheritance laws drawn up after the revolution, land was divided equally amongst heirs leading to the tiny fragmented parcels that make up the patchwork-like Burgundy terroir. Spread across hillsides and ridges, some of the vineyards are as small as a couple of rows of vines, and each produce grapes that differ wildly in character.
The miniscule supply of these superb quality wines is what drives demand – a key feature that Bordeaux wines lack. Coupled with relentlessly tight control over distribution – they prefer drinkers to investors, and Hargrove says they wouldn’t hesitate in putting a stop to ‘buy and flip’ clients looking for short-term profit – we believe Burgundy will be able to take refuge in the value of rarity and protect itself from off-the-chart price escalations a la Lafite.
The consensus as per Capital Vintners
Due to the variable nature of Burgundy’s vintages, we recommend selecting investment-grade wines first by producer – the most reliable of whom are DRC, Comte de Vogue, Leroy, Armand Rousseau and Henri Jayer – and then by appellation and vintage. A quick browse of our website’s extensive wine list will give you a taste of what is available from this great winemaking region.
Any further queries will be happily answered by our dedicated sales team.