WineFi Weekly #22

How will an interest rate cut impact the wine market?
A fine wine market update.
📅 August 19th 2024

What’s New?

Record Demand For ‘The Burgundy Collection’

In previous newsletters, we mentioned how we were partnering with our friends over at Haatch and Founders Capital, to offer our latest syndicate to their respective client bases.

The results have been outstanding, with dozens of new syndicate members joining us via these channels. We look forward to working together on future syndicate deals moving forwards.

Platform Update

We (nearly) have labels!

WineFi investors will soon be able to add labels to wines held within their accounts. This feature is useful for two reasons:

1. Many of our clients have existing wine collections held elsewhere, as well as with WineFi, and want to be able to segment and track them all within one unified interface.

2. Many of our existing clients have also invested in one of our wine syndicates (e.g. The Champagne Collection, The Burgundy Collection) and want to have their co-investment holdings separate from their private holdings.

3. It gives clients the ability to categorise their holdings as they choose (e.g. to drink, to invest, etc).

We will be rolling out this update shortly, so stay tuned.

Darksquare Capital x WineFi

We are really excited to launch our partnership with Darksquare Capital to offer expertly curated fine wine investment opportunities to their customers 🍷 

Darksquare use the power of crowdfunding to achieve the minimum threshold to offer their customers access to high-value products not typically listed on any stock market, or offered by your bank alongside an ISA.

The reason in many cases is that such products have large minimum investments (often £100,000+) and tend to be reserved for sophisticated investors who 'know where to look'.

That said, there are many individuals who have a good understanding of these 'exotic' products and the associated risks - the only obstacle is access.

We will be partnering with Darksquare to offer their customer base a diversified portfolio of expertly curated fine wine. Darksquare are specifically interested in offering their customer-base access to a product that is representative of the fine wine market in general, as opposed to a specific region (e.g. Champagne, Burgundy).

Assuming feedback is positive, this model may be one we launch more widely.

What’s Happening In Wine?

This week, Bordeaux maintained its leading position in the market, closing with a 30.5% share of traded value, unchanged from last week's share. Château Lafite Rothschild (across various vintages) dominated the region's trade, contributing 29.2% of Bordeaux’s total. Château Haut-Brion and Château Margaux followed with 11.4% and 9.4%, respectively.

While Burgundy's trade share declined from 25.4% last week to 21.3% this week, Domaine de la Romanée-Conti experienced a rise in activity, with a 35.5% increase in value traded compared to the previous week. As noted in our recent Market Update on the DRC index, despite falling prices, both the number of trades and the volume traded for DRC have increased year-on-year.

Piedmont saw its trade share nearly double to 6.2% this week. Gaja’s Sori San Lorenzo Barbaresco 2016 was among the top-traded wines by value, alongside active trading in several vintages of Giacomo Conterno’s Barolo Monfortino Riserva.

The USA recorded the most significant gains this week, with its trade share rising from 2.9% to 11.2%. This increase was driven largely by high-value trades of California wines from Screaming Eagle, Dominus, and Opus One.

Spain’s trade share by value saw a slight decrease compared to last week. Dominio de Pingus overtook Vega Sicilia as the country’s top-traded producer, with multiple vintages of Flor de Pingus changing hands.

_{Source: Liv-ex}

An insight into La Place

La Place de Bordeaux is a historic and influential wine distribution network based in Bordeaux, France, responsible for selling some of the world's most prestigious wines.

It involves a system where châteaux (wine producers) sell their wines, often "en primeur" (as futures), through a network of négociants (merchants) and courtiers (brokers), who distribute these wines globally. While originally focused on Bordeaux wines, La Place has expanded to include top wines from other regions and countries, maintaining the exclusivity and high value of these wines in the global market.

La Place de Bordeaux is currently navigating a complex situation within the fine wine trade. While a lackluster En Primeur campaign has cast doubts on the sustainability of the system, producers from outside Bordeaux are still choosing to release their wines through La Place.

In a noteworthy July interview, Philippe Tapié, CEO of négociant Haut Médoc Sélection and chairman of Bordeaux Négoce, called for a reset of the system. He emphasized two key aspects of a successful En Primeur campaign: its unique role in Bordeaux’s wine distribution, providing access to the origin of the product, and the economic incentive for buyers to profit 24 to 36 months later.

This latter aspect was largely absent from the recent campaign, leading Tapié to warn that if credibility isn’t restored next year, the system could fail. Despite these concerns, producers like Ernst Loosen and Schloss Johannisberg plan to release new wines through La Place during September’s Beyond Bordeaux releases, drawn by the system’s unmatched global distribution network.

However, as Tapié pointed out, Bordeaux isn’t about creating brands but optimizing them, with La Place increasingly relying on producers outside the region to sustain itself. The upcoming September releases face challenges, particularly for new wines trying to gain traction in a market that favors established, mature Bordeaux.

For brands like Opus One and Masseto, the challenge will be convincing merchants to invest in new vintages over mature wines nearing their peak drinking windows, thereby maintaining the economic value that has historically driven La Place’s success.

_{Source: Liv-ex}

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