The Wine Collector

WinePrices.com's wine price indexes continued to rise strongly in October based on 14 auctions worldwide, three of which were in Hong Kong. Of US$25.8 million in proceeds from these auctions, US$13.2 million or 51% was spent in Hong Kong.

The top three most actively traded fine wine indexes were up 8%-14% in October after increasing 9%-12% in September.  These indexes are up a stunning 44%-64% year to date.  Wine investors with the stomach to have invested when the economic outlook was bleak are now being amply rewarded.

See below for a table of key stats on all of the indexes and the full summary results page for trading metrics information (and archives from prior months).  Note: each index equaled 100 as of January 2005.

Observations

• Investment grade Bordeaux, which continues to experience high demand from Asia, is leading the pack in terms of returns.
• Positive year-on-year growth - The majority of indexes are now in positive territory when measured on a year-on-year basis.
• The California 100 index has shown little appreciation over the past five years (in last place based on its index value) and it's been the worst performing index year to date.  I suspect major contributing factors are the weak U.S. economy and relatively tepid international demand for the wines which comprise the California 100 index. Historically, virtually all of these wines were sold to oversubscribed mailing lists comprised largely of U.S. wine collectors and enthusiasts.  Now that wine auction demand is shifting towards Asia, the relative lack of exposure and access to California's top brands among Asian wine collectors is hurting these brands' secondary market price performance.  U.S. wines, in general, are relatively hard to find in Asia and most brands seem to be ignoring the opportunity (if the U.S.'s very minor presence at the recent Hong Kong International Wine Fair is an indication of interest).
• Vinfolio's Asian experience confirms these trends.  The first of five offers drawn from a US$3+ million cellar that we began offering yesterday through our U.S. and Hong Kong offices is already 75% sold out in 24 hours with the majority of the spending derived from Asia.

WinePrices.com's wine price indexes were up strongly in September after the normal summer slow period in global wine auction activity. The top three most actively traded fine wine indexes were up 9%-12% in September and 33%-44% year to date. Every index has double digit YTD gains and the most active indexes are within reach of turning in positive year-on-year returns.  See below for a table of some key stats and the full summary results page for all nine indexes (and archives from prior months).

WinePrices.com's most actively traded fine wine indexes were down 1%-4% in June 2009 based on global auction results (the Dow Jones Average was down 0.6%) after their 10%-17% gains in May.  See the full summary results page for all nine indexes (and archives for prior months). The California 100 index finally showed some life and the Italian and Port indexes managed to turn in positive performances.

Auction activity in July is limited and non-existent in August so look for September results for the next major opportunity to assess price levels.

WinePrices.com's most actively traded fine wine indexes were up from between 10%-17% in May 2009 based on global auction results (the Dow Jones Average was up 4.1%).  See full summary results page for all nine indexes.

What's going on?

As noted in my prior post, Asian wine buying influence continues unabated, I'm sure these prices reflect the impact of higher auction prices being paid in Hong Kong.  Of the 11 auctions held in May worldwide that we tracked, four were in Hong Kong and about 25% of the price data points derived from these auctions.  I'll be doing a separate analysis soon to try to quantify the "Hong Kong effect" although Asian buyers continue to be active in New York and London auctions.  Note that these results exclude the first mainland Chinese wine auction for reasons I will address in a separate post (the results would have been skewed upwards further).

The sharp upturn in The Conference Board's Consumer Confidence Survey during May (see press release) also seems to correlate with these May auction results.

California fine wine prices performing particularly poorly

The California 100 index has turned in the worst performance of the nine indexes since January 2005 (101.11 index versus 100.00 in January 2005).  The 2009 price recovery which has positively impacted all other indexes has largely skipped the California 100 with only a 1.2% increase YTD to May.  The lowest other index for the same YTD period is +9.1% for the Italy 25 and +31.3% is the highest for the Bordeaux First-Growth 100.

The turmoil in fine wine markets since September 2008 created a need for better tools to track wine price trends than the limited options which exist today.  Therefore, Vinfolio decided to develop a series of nine wine price indexes utilizing auction data from our WinePrices.com site (read today's press release). 

Auction data is an ideal resource as a basis for price indexes for several reasons:

1. Fine wine auctions are recognized as the industry standard for fine wine pricing trends as historical press coverage from wine publications demonstrates.
2. Auction prices (inclusive of buyer's premium) represent completed transactions, not merely asking prices.
3. Pricing data is derived from global auction activity - i.e., not solely from the UK, US, or any other single geography.  As I have written before, fine wine prices are driven by global supply and demand.

March 2009 index results indicate fine wine prices are rebounding

If one reviews the summary results page for the WinePrices.com indexes, you'll note that seven of the nine indexes have positive YTD results with the median YTD performance being a 4.1% gain whereas the median year-on-year performance is a 25.9% decline. In particular, the three indexes with the most auction activity -- the Fine Wine 100, Fine Wine 250, and the Bordeaux First Growth 100 - were up from 2.1% to 5.0% in March and from 4.1% to 7.8% YTD.

Consumer confidence climbing

As further evidence which correlates with the positive price trends, The Conference Board's Confidence Index increased almost 50% in April to 39.2 (1985=100), up from 26.9 in March (see April 28th press release The Conference Board Consumer Confidence Index Increases in April for more details).

Wine investment opportunity?

With wine prices having declined 25% in the past year and now showing consecutive monthly increases in the most frequently traded investment-grade wines, maybe it's time for collectors to resume buying and/or investing. 

In addition to our wine investment service, Vinfolio happens to be offering a new pristine 31 OWC (original wood case) parcel from a single private collector with 10 cases of 100-point Parker-rated wine available for $185,000.  Call Vinfolio if you are interested in learning more (415-946-1300.