Wednesday, August 18, 2010

Fake Lafite--70% !

The Lafite Puzzle
by ANDY XIE
Updated Time: August 17, 2010

China's impact on the luxury French wine market has been enormous. The French fine wine index (Liv-100 index) is up by roughly 37% from a year ago, 24% year-to-date, and its upward momentum remains strong.

Not many asset classes have hit new highs above their mid-2008 levels. In addition to fine French wine, gold and China's residential property sector reached new highs in 2009. But I can't recall any others. And among the three, French fine wines seem to have performed best.

There is little doubt that Chinese buyers, not Wall Street traders, are the force behind this positive trajectory for French fine wine. Bordeaux wine producers are all talking about China and Chinese buyers seem to dominate the en premieur for the 2009 vintage available from next year. In fact Chinese mainland buyers are increasingly pricing out buyers from Japan, Taiwan and Hong Kong in the quest for 'first growth' wines.

French wine is, of course, different from a Louis Vuitton bag. When you drink a bottle of wine, it is gone. You can store it as an investment, but the process is complicated and costly.

For most Chinese, investment is actually a secondary consideration. Drinking it now is more important. Yet this seems inconsistent with the dominant Chinese preference for accumulation. So the question is, why so much demand from China?

Like Japan in the 1980s, an important factor seems to be the need to lubricate business relationships. This phenomenon plays out across the world during rapid economic development. Successful economic development may require a little intoxication - when one sinks a lot of money into an under-developed economy, it needs courage.

The business drinking culture has been changing in China. Like elsewhere, liquor consumption (like baijiu) has been declining out of health concerns. So the need for alcohol in business entertainment has produced a unique Chinese phenomenon: massive demand for Chateau Lafite wine. Lafite is one of the five first growth wines from Bordeaux. France classified Bordeaux wines into first to fifth growth in 1855 for its World Expo. At that time four chateaux - Lafite, Latour, Haut Brion, and Margaux - were classified as first growth. In 1975 Mouton also qualified. The chateaux in some of the Bordeaux areas like Pomerol and St. Emilion do not participate in this classification system and have started their own, with some of their wines even more expensive than the five first growth wines. Nevertheless, the first growth label travels well, especially to a new market like China.

Among the first growth wines, Lafite has taken on a life of its own, rising much quicker than the fine wine market as a whole, and other first growth wines in particular. For example, 2000 vintage Lafite has appreciated by about 550% in pound sterling since 2005, compared to 180% for the market as a whole. The most comparable wine to Lafite is Latour, and the price of its same vintage has risen roughly in line with the overall market. The price differentials between Lafite and other vintages of first growth wines are not as dramatic as for the 2000 vintage, but they are still large. Something special has happened to Lafite these past few years. That something is China.

Essentially, Lafite has become the unofficial Chinese wine for business entertainment. There are theories as to why, the most popular being that the Chinese translation is easy to say and sounds nice. I am not sure this is the best explanation. Drinking at business events in China is not really sophisticated; it is more about getting tipsy quickly. Guests are expected to be impressed by the price of expensive wine, and not the taste.

Is the Lafite phenomenon a bubble? As Greenspan has said, one can never be sure if a bubble exists until it bursts. It is possible that Chinese drinkers appreciate something in Lafite that other drinkers never did. Hence, as Chinese become richer and spend more on wines, Lafite benefits from this source of demand more than others. So the Lafite phenomenon may actually be a price revaluation, rather than a bubble.

An alternative scenario could be that other first growth wines will get the Lafite treatment over time. Chinese demand for Lafite is due to lack of knowledge about alternatives, so when Chinese drinkers become more sophisticated, the demand for other first growth wines will probably increase. This could be a rising tide that will gradually lift other fine wines.

The second scenario is possible, and it has to do with the French system for wine production and the laws that make it impossible for the great wine chateaux in Bordeaux to increase production. Bordeaux wine producers have to go for quality and high price rather than quantity. Hence, when a new source of demand comes, the price always goes up.

Indeed, the Lafite price is now so high that it has led to a large counterfeit industry. Some analysts estimate that 70% of the Lafite consumed in China is fake. I have personally experienced this on a few occasions, although the people who served me fake Lafite were unaware of its questionable provenance because they paid the same high price fetched by the genuine article. I could tell that the fake was good wine too, probably a good second growth poured into a Lafite bottle. Forgers have targeted the legendary 1982 vintage in particular. Many wealthy Chinese have bought large stocks of 1982 Lafite and the odds are most of it is fake. There are so few bottles of the real vintage left that it is highly unlikely to find several cases of the real thing.

When the Chinese economy matures in ten or 15 years and business entertainment declines in importance, Lafite prices may come under pressure. At this point demand will be mostly for self enjoyment and hence, more price sensitive. Japan has already gone through such a cycle.

A market is efficient when informed consumers make rational choices. An efficient market motivates producers to improve quality and control costs and this cycle leads to great brands that last.

The French wine market was like that, but I am afraid that Chinese demand is decreasing the market efficiency and may bring down great brands over time. When winemakers see prices resulting from propaganda, not quality, they will focus on marketing and decrease their investment in improving quality. It would be a tragedy if Chinese demand, by bringing easy money, brings down a French legacy that has lasted for five centuries.

Wednesday, March 31, 2010

Wine's Liquid Assets Outperform Russell 3000

Wine's Liquid Assets Outperform Russell 3000
CONSUMER, WINE, STOCK MARKET, INVESTMENT, FOOD AND BEVERAGE
Reuters


Investing in wine, not just top Bordeaux but even cheap varieties, can be good for your total portfolio and is especially useful during a financial crisis, according to two Swiss economists.

"Wine in a portfolio has produced higher returns and lower risks than the Russell 3000 equity index ... Especially in times of economic downturns" they said in a report in the American Association of Wine Economists.

The study comes as leading auction houses reported sales of fine wines totaling more than $12 million in the last two weeks. Economists Philippe Masset, of Lausanne Hotel School, and Jean-Philippe Weisskopf, of the University of Fribourg, both in Switzerland, looked at auction prices from The Chicago Wine Company from January 1996 through January 2009.

"In a nutshell, our findings show that the inclusion of wine in a portfolio and, especially more prestigious wines, increases the portfolio's returns while reducing its risk, particularly during the financial crisis," they explained. "This is true for all model-portfolios both during bull and bear periods."

Masset and Weisskopf accumulated data from 144 auctions with a turnover exceeding $237 million and covered a period that included two significant economic booms and downturns.

They also constructed several indices using the repeat-sale regression method, an approach used by the economists who created the S&P/Case-Shiller Home Price Indices that are used to track and forecast home prices in the United States.

Masset and Weisskopf created a General Wine Index (GWI) and other indices that tracked different price categories as well as ones that followed five major wine regions.

The GWI and the Russell 3000, which measures the performance of 3,000 publicly held U.S. companies, rose between 1996 and 1998. But while the Russell 3000 declined between 2001 and 2003, when the Internet bubble burst, the GWI steadily rose.

"Neither the terrorist attacks in New York, nor the burst of the Internet bubble, nor the boycott of French goods after the Iraq invasion have had much effect on wine prices," the pair said.

From 2005 to 2008, the GWI doubled. Since mid-2008, it has fallen 17 percent as a result of the global financial crisis. The Russell 3000 index lost 47 percent in the same period.

The economists also found that wine had a more positive effect, with a lower amount of risk, on investment portfolios than stocks.

Wines selling below $200 a bottle saw a steady increase over the 13-year period and yielded a return of 120 percent, while those selling for under $100 a bottle generated a 170 percent return.

Wines selling for more than $200 and especially those over $400 a bottle, such as Chateau Petrus or Chateau Haut-Brion, had a three-to-four-fold price increase. These wines also suffered the most declines during the financial crisis, losing about 25 percent. Wines under $200 a bottle lost between 5 percent and 10 percent during that time.

Different wine regions followed the upward trend of the GWI, but as in real estate location played a role. For the time period, U.S. wines showed a positive return of only 63 percent, while Italy had 125 percent.

Bordeaux and Burgundy, by comparison, yielded returns of nearly 200 percent, while wines from the Rhone Valley yielded almost 300 percent.

The pair also created model portfolios mimicking the broad categories of investors from conservative to aggressive and found that allotting 20 percent of a portfolio to wine had a positive effect on performance.
# Slideshow: The Biggest Beer-Drinking States
Copyright 2010 Reuters. Click for restrictions.

URL: http://www.cnbc.com/id/36097598/
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© 2010 CNBC.com

Saturday, January 24, 2009

Market Correction

Where Are We Now and Where Do We Go From Here?

Rob Landnsess

Its clear now that fine wine is not immune from market forces of this magnitude, though holders of the best will do just fine in the long term. Here are some thoughts on the current economic crisis in relation to the rare/fine wine market.

Robert Parker's recent bulletin board post goes as follows:

'The wine market is already going through a serious correction...the first major one since the early 70s...keep in mind top end wine has generally been recession proof over the last three decades..but that is changing dramatically....auction sales are beginning to show less interest and lower prices...retailers are buying very little...wholesalers are feeling the squeeze as their inventories go unsold...importers are reluctant to purchase new stocks...and of course this is just beginning to snowball....the wine trade is hoping the big holiday season buying by consumers will mitigate the carnage...but it will not....this crisis will only get worse over the near term...especially in the USA as we are in limbo politically until the end of January....it will be great to see lower wine prices..but there will be plenty of casualties...small, high quality wineries, retailers, importers with little liquidity, will likely crash and burn....and the result could be less and less competition as we see more and more consolidation(and that will be horrible)...I am just finishing my year end huge report on most of the top north coast California wineries....as wonderful as many of their wines are...who is going to being paying $60 and up for chardonnay....$75 and up for pinot noir...$150 and up for cabernet?....that market segment is shrinking dramatically...of course no one predicted the global crisis..and no one can predict when things turn around...but IMHO the next 8-12 months look dreadful for the wine business...and also one of my favorite distractions.....high end restaurants...just so you realize...this is my personal opinion...and of course..I am the quintessentially glass half full personality....'

While there is pain in the short run I think this is actually great for the consumer. It's a (CNTRL ALT DLT) reboot of a bubble that has been witnessed in many sectors. Right now there is more great wine on the market than ever before and there will be further discounts and deals across the board. Like real estate, those who don't have a gun to their head will not sell and I believe the prices of new world cult labels who have never dropped prices will face a grim reality. It was only a year ago that those lists were impossible to join and now the flood gates have opened--you used to be lucky to receive 3 bottles but those limits are gone. I love Harlan Estate but when I saw the prices on the 2005 mailer I thought, wow, this is unsustainable. $500 for a bottle of Harlan, I think I may buy Bordeaux or Burgundy instead. Or a newcomer with less flash in marketing but a good bang for the buck. Unlike Bordeaux with its price fluctuations and tiered system, California prices have only inched up in the last two decades. One could argue that limited vintage variation is at play as well as a grey market that pumped up incentive to raise prices for mailers...but could 2009-2010 be the period when those assessments will be scrapped? Bottom line is that it is a different world and if you have gotten to big for your britches, this market may just whip you into shape. The massive waiting lists may save the big cult wines as people drop off. I wonder, however, what happens when those waiting lists thin out as people toss their mailers.

Francois Mauss of the French GJE (Grand Jury European) has a good point, also from the erobertparker buelletin board:

' we are the ones who did accept for so many years to pay wines like if it was a kind of gold, no ? We were the ladder : the producers just had to climb.'

It is indeed true that consumers were more than happy to climb the ladder and those in the business struggled to keep up with the demand of new releases--seemingly limitless demand especially from emerging markets. Some of that demand is still in play even if the prices have dropped. Inquiries on Lafite and Opus One, cliche as they may be, are still coming in from Hong Kong, though the competition on pricing is fierce.

There will be great deals for consumers with cash in the next year. One of the bright spots for investment may be some of the older vintages of Bordeaux and Burgundy that will come to market. This may be aided by pension funds in London when they will start to sell-- an injection of supply. Imports will drop as retailers and importers try to sell through their stocks. The extreme high end of European wine will always find buyers, maybe not at the same price jump but a drop is clearly expected. What will definitely suffer is mid tier wines, I see them collecting dust on shelves. The high end will drop in price but eventually be snapped up once the market senses a bargain--and there will be one for those with cash on hand. The value wines on the low end will do well if they have brand recognition and good QPR for the average wine drinker--think Mondavi.

Rob Rosania, a noted collector, posts the following:

'For drinkers, its all about what we are willing to pay for the experience of drinking the wine. Clearly, as everyone FEELS like they have more money, they are willing to pay more for experiences, and vice-versa. For drinkers that have the ability to buy, as well as the stomach to buy (people are afraid of their own shadow right now), this PERIOD (not predicting any bottom here) will prove to be the greatest opportunity to get impeccable provenance wines (clearly the business focuses on the provenance much more now than it ever did before) at incredible DRINKING prices.'

I agree with this sentiment, regardless of price point this will be a boon to drinker/collectors. The hyper inflated wines will deflate and then its time to jump in if you can. There are already screaming deals on private collections with much more to come. Provenance is getting better now with a wider availability and that supply will jump. Those not buying but instead are dipping into their own collections to ride out the turmoil will want to restock when things start to turn around. The bounce back will take a while but it will be strong. There are quite a few people out there who still will retain wealth though they feel poor every time they tune into the news now. When perception of wealth recovers watch demand soar.

Parker:

'10 years from now, the prices of 2005 will be dramatically higher than ever before..'

I think most people would agree with this sentiment. It will be a buyers market for a while but recovery will shift prices upward again and what seems expensive now will seem like a bargain.

From Wine Market Journal's assesment report:


'
Despite good results in three Hong Kong auctions, the wine auction market still reacted downwardly in concert with the global financial crisis. All indices dropped significantly with, quite interestingly, our DRC index showing the largest decline of all. Also of interest is the performance of our California Cult Cabernet index, which fell the least of all seven. Our broad-market index of Top 500 wines by trade activity and dollar volume depicts that balanced portfolios took less of a hit than any of the major individual sectors other than blue-chip California Cult Cabernets.

All indices were down between 10.7% and 22.7%, leaving wine lovers with liquidity a terrific opportunity to buy the finest wines at prices not seen for two years or more. It will be interesting to watch how the market responds in Q1 2009, as the first quarter in many years produces especially strong results.

The broad market details, Q4 Final versus Q3 Final, are as follows:
  • Our general market index of blue-chip wines, the WMJ Top 150, declined 403 points or 19.8% to a level comparable to Q4 2006;
  • Our other general market index of Top 500 Market Value wines showed a more middling drop of 221 points, or 15.6%;
  • Our First-Growth Bordeaux index fell an astonishing 21.7%, down 543 points to a level approaching that of Q1 2007;
  • Our Bordeaux Super-Seconds index also shows a steep drop of 19.5% by descending 303 points to a level between that of Q3 and Q4 2006;
  • Our DRC index showed a most substantial dip of all, down 503 points, or 22.7% - the greatest vintages of DRC haven’t been this affordable since Q1 2007;
  • Vintage Port, the index that historically moves the least, declined an impressive 219 points, or 19.2% to a level not seen since Q3 2002;
  • Our final index, monitoring California’s most collectable Cult Cabernets, dropped a modest 127 points, or 10.7%, to a level not seen since Q2 2006.'
So where is this all leading? I think its a safe bet that those with tons of stock and not enough cash to survive will be burned out in 2009/2010, flooding the market with prices not seen in a very long time. I pity wine funds that bought a year or two ago who now face remptions. The next two years will be a time to buy if you can, and not sell unless you have no choice. Some clever people no doubt will take advantage of this correction and invest heavily on the best names and vintages when the market floods. They will be in a great position to sell at 'alpha' margins later on. No one predicted the unprescedented recession we are in, no one knows for sure when the bottom will be reached, but there is an argument to be made that a contrarian view will reward those who can bare the risk. This same contrarian view made short sellers a fortune in the last year, I think it will reward the patient buyers in 2009/2010. 5 to 10 years from now log into a wine chat room or bulletin board and you will hear collectors wishing they could take a time machine...

What to buy in the next 2 years? Take a page from Decanter which just posted the most widely traded wines from LivEx:

Chateau Lafite-Rothschild
Chateau Latour
Chateau Margaux
Chateau Mouton Rothschild
Chateau Haut-Brion
Carruades de Lafite
Chateau Petrus
Chateau Cheval Blanc
Chateau La Mission Haut-Brion
Domaine de la Romanee-Conti

Unless they are complete bargains, look to older vintages. There is less availability and they didn't jump as high as the recent vintages, 2005 being a prime example.








Friday, September 12, 2008

IPNC Recap

Rob Landsness

It was a jam packed weekend at the end of July featuring some of the top wine makers and Pinot Noir lovers from around the country. Actually, make that from around the world. Domonic Lafon (Domaine Lafon), Ted Lemon (Littorai), Jim Clendenen (ABC), Jasper Morris (Burgundy expert and author), Allen Meadows (Burghound) and many other luminaries were in attendance.

The first night we settled into a wine dinner put on by Michel Lafarge of the Burgundy domaine in his family's name, and Ted Lemon of Littorai. I am a little biased because I had the good fortune to work for Ted during 2003, but needless to say his wines stole the show. The restaurant, Genoa, was a bleak interior but incredible food. In fact there are only a few other restaurants in the Northwest that can crank out food like that. It was a blast and humorous that Ted poured a 2000 Chardonnay he claimed to have not liked too much, it was the wine of the night of course. The Lafarge wines were discrete and even a bit austere. Michel the winemaker was a joy to listen to with his thick accent and passionate embrace of biodynamics.

The following days were a mix of lectures on biodynamic and organic farming as well as dozens of tastings and visits to vineyards. The underlying theme of sustainability was found throughout and there were some great stories.

Stephen Brookes from Decanter has some great thoughts from his blog, I will share below:

" It’s hard to define sustainability, other than being as nice as possible to the part of the planet you are farming, and taking into account along the way the needs of the planet as a whole and your employees in particular.

It was Dominique Lafon from Meursault who said that his Damascus moment came in 1989 when he forbad his daughter to walk in the vineyards because everyone was spraying that day.

‘I realised this was a crazy way to look after our land and our health, and I immediately set about reducing our dependency on chemical products and moving towards organic, and later biodynamic, viticulture.’

That was a point echoed by Ted Lemon of Littorai: ‘I’ve been farming vineyards since 1982 and soon came to realise that conventional farming, with pesticides and fertilisers, simply didn’t work. I thought organic farming just replaced one set of conventions with another and wanted something more radical. Biodynamics presented me with a challenge that I wanted to try. I haven’t looked back.’

Nigel Greening, the ebullient owner of Felton Road in Central Otago, went further. ‘There’s no alternative to sustainability. We apply it to our whole farm, so that our naturally reared chickens complete the cycle by sustaining us with their eggs at lunchtime. We waste nothing. Our solids are composted, our lees distilled, and our liquid sold in bottles at a high price.

'But I feel awed in the presence of Dominique Lafon and Frédéric Lafarge from Volnay. The French have terroir and Richebourg; out in New Zealand we have dirt and Block 3.’

He needn’t have been so modest. Over lunch, Lafon told me he had truly admired that Block 3 wine. He also said he hated having to comment on his own wines, as the growers had been invited to do during the seminar. ‘I can talk with pleasure about Lafarge’s Volnay but as I am never happy with my own wines, I don’t know what to say about them.’

By noon we were invited to head for the alfresco lunch area. I cast envious eyes on the neighbouring table, which was crammed with bottles of the kind of wine even pampered journalists rarely get to drink. Jasper Morris MW, the honorary Burgundian who had interviewed Lafon at the sustainability seminar, acted as intermediary."

The event finished for us in style. A time-honored and much-loved tradition of the IPNC, wild salmon is prepared northwest style on alder stakes over a huge custom-built fire pit. A veritable ocean of wine from all over the globe accompanied by an extravagant outdoor buffet designed by the guest chefs. The 2008 extravagant outdoor buffet was designed by Mark Hosack (Hudson's), Jason Owens and David Kreifels (Simpatica Dining Hall), Jason Stoller Smith (The Dundee Bistro), Benjamin Dyer (Viande Meats & Sausage), Roger Sprague and Company (Depoe Bay Chamber of Commerce), and Charles Drabkin and Traci Edlin (Edmonds Community College). After dinner, music and dancing in the lantern-lit Oak Grove capped off an amazing weekend. Those lucky enough to be near Jim Clendenen's table enjoyed some spectacular wines. The Burghound was also in full effect.

Looking forward to next year's event!

Monday, June 23, 2008

2005 Burgundy Dinner

Rob Landsness

Last month a group of Burgundy connoisseurs gathered at Michael Mina's Westin St. Francis flagship restaurant. Our host was none other than Raj Parr, Wine Director of the Mina Group and a partner at Elixir Fund.

It was a single bottle dinner featuring some of the most highly regarded, and scored, Burgundies from 2005. I think all of the lucky diners would agree that these wines shared a certain style and that is they are all massive, long distance runners. Those lucky enough to have any of the wines we tasted should tuck them away for a long time. Many were closed down even after many hours of aeration in decanter. First I will present the menu, followed by the lineup of wines.

Pork Short Rib and Foie Gras Terrine
-- Blenheim Apricot Coulis, Pickled Ramps, 'Wild Man' Mixed Greens

Carmelized Sunchoke Gratin
-- Castelmagno Cheese, Black Winter Truffles, Sunny Side up Hen Egg

Braised Monkfish Tail
-- Spring Pole Beans, Oven-Roasted Tomatoes, Ligurian Olive Jus

Poussin 'Coq Au Vin'
-- Applewood Smoked Bacon, Baby Carrots, Egg Noodles

Japanese Wagyu Rib Eye and Short Rib
--Green and White Asparagus, Fingerling Potatoes, Peppercress

Brescianella Stagionata
-- Porcini Syrup, Thyme Gelee, Walnut Bread

Strawberry Shortcake
-- Whipped Yogurt, Angel Food Cake, Garden Basil


This menu was executed flawlessly by the Mina team and the service was also completely seamless---seen and noticed only when you needed something. They simply 'get it' when it comes to fine dining...

Now for the wines...

The following lineup was poured, 3 at a time, then more, and some observations to follow:

ALL 2005 Vintage

Claude Dugat 'Charmes Chambertin'

Joseph Roty 'Mazy-Chambertin'

Denis Mortet 'Clos Vougeot'
-----------------------------------

Comte de Vogue 'Musigny' Vielles Vignes

JF Mugnier 'Bonnes Mares'

De Montille 'Corton-Pouget'
-----------------------------------

Georges Jayer 'Echezeaux'

Mogneard-Mugneret 'Grands Echezeaux'

Anne Gros 'Richebourg'

Dujac 'Romanee St. Vivant'

Domaine De La Romanee Conti 'La Tache'

Bouchard 'La Romanee'
-----------------------------------

The first three wines were extremely masculine in style. The nose on the Dugat Charmes was very expressive, and all three shared the similarity of dark brooding Pinot, with lots of leather and pepper framing black fruit. Still they seemed to show only a glimmer of their future evolution, and this was a theme throughout the tasting.

Comte de Vogue's Musigny had an explosive nose of violets that was lovely. It was so floral and feminine, an interesting contrast to the previous flight of wines. It too showed concentration on the palate as did the next wine, the Mugnier Bonnes Mares which at least one taster remarked was one of the most 'complete' examples of the evening. The De Montille seemed almost light by comparison, with lower tannin and weight on the palate.

The final flight was a stunning lineup of wines that deserve an audience, and about 20 years to revisit them. The three 'show stoppers' to my taste were the Anne Gros Richebourg, the Dujac RSV, and the DRC La Tache. The Anne Gros Richebourg was, I think, perhaps the most open wine of the evening. It really was giving up tremendous pleasure and though it has years of development yet to come, was a favorite of the evening for most. Soaring aromatics and gorgeous on the palate were words I overheard describing that wine. It was an honor to taste the Dujac RSV in the company of Wilf Yeager, who controls the vineyard with Dujac. Needless to say, it was also a titan in need of cellarage, yet it was also enjoyable that evening. A strong personality and showing.

My final note is reserved for the La Tache. I had the highest expectations for this wine and I was not disappointed. The greatness of this wine is unquestionable. It is one of the greatest young Burgundies I have ever put to my lips and anyone lucky enough to own a bottle should hold onto it for a few decades. It is marvelous not for being an open book to read and enjoy today. One must swirl and swirl to get the nuances out of such a concentrated wine, pure potential. My notes read 'So Concentrated. Unbelievable LT.' It is a tightly wound wine that will be blossoming for 50 plus years to come. I saved it for my last sip of the evening, when it was gone I was truly sad! DRC 2005 is no joke.

Final thoughts...buy lots of 2005 Burgundy from the best producers and put them to sleep. In the meantime drink some 2006 while you wait!

Tuesday, May 27, 2008

Future Predictions on Wine

An interesting article regarding the future of wine, worth sharing we think...

Rob Landsness

An interview with Berry Brothers and Rudd:

A glimpse into the world of wine in 2058


50 years ago, it would have been unthinkable to take wine lessons 'virtually' or predict supermarket shelves would be stocked with wines from China, Brazil, India or New Mexico.

So, what will 2058 look like? We looked at future trends in fine wine (our speciality) but also in volume production - wines for under £10. Whether it's the 'Rise of China' or the 'New New World', 'Big Brand Booze', 'Floating Vines' or 'Sommelier Bees', this report aims to give you a glimpse into the world of wine in 2058.
Volume wine:
In the world of volume wine, Berrys believes there are two specific areas set for significant change by 2058:
  • Countries renowned for 'New World Wine' will alter radically as the effects of climate change are felt
  • The rise of wine 'brands' will lead to massive changes in the way wine is produced, packaged and marketed
1. The New New World - Going Up
In 1958, few people would have predicted the USA, Argentina or Chile would be capable of producing good wine. Now, nearly every other bottle of wine is made outside of Europe's Big 5 (1) wine producing regions and these countries lead the New World Wine rankings.

So, who will head the table in 2058?
Grape wall of China

Already the world's sixth largest wine producer and number four in terms of area under vine, China, Berrys predicts, will be the world's leading producer of volume wine by 2058.

Berrys believes Cabernets and Chardonnays of real promise will be made. With the right soil, low labour costs and soaring domestic demand, China is set to take the world of wine by storm. "China has the vineyards, but not the technical expertise," agrees Alun Griffiths MW, "however, if good people from wine producing countries think there is opportunity to make wine in China, they will go there and invest."
The changing climate

If global warming persists, there could be a radical shake-up of the wine world with many non-traditional wine producing countries given the chance to become real contenders.

Countries which are currently small-scale producers may become more significant. Much of Eastern Europe sits on the same latitude as some of France's top wine producing regions, so countries like Ukraine, Moldova, Croatia, Slovenia and Poland could feature more prominently, especially when they attract investment.

Berrys also believes Canada could experience a similar uplift. While most of the country is currently too cold for wine production, Southern Ontario and Southern British Columbia are already home to several large areas of vines. Currently sitting at no.32 in terms of output(2), Canada, Berrys predicts, could start to rival its American neighbour by 2058.
Disastrous droughts for Australia

In the past year or two, Australia has suffered from severe droughts with water shortages so acute that irrigation of vineyards has been temporarily banned.

Droughts devastated the 2008 crop, with spot prices of bulk Australian wine rising from AUS$0.40 in 2006 to over AUS$1 a litre in 2007. If this trend continues, supplies of inexpensive Australian wine may soon be a thing of the past.

By 2058, Berrys predicts Australia will be too hot and arid to support large areas of vine. It will no longer be renowned for volume wine and will become, instead, a niche producer, concentrating on hand-crafted, terroir-driven, fine wine.

David Berry Green commented: "Production will probably be marginalised into wetter, cooler areas such as Tasmania and there will be more focus on high quality, boutique wines."
2. Big Brand Booze

In 2006 Foster's, the biggest all-Australian wine company, started sourcing wine for their popular Lindemans brand from South Africa and Chile.

The Berrys' experts commented: "By 2058, big brand wine could be grape or blend specific, rather than from a particular country. Grapes will be gathered from all over the world and blended to suit consumers' tastes."

Berrys experts believe the rise of 'Big Brand Booze' could be accelerated by investment from spirits companies and supermarkets who, by 2058, will own most of the world's wine brands. A willingness to invest in new wine producing areas could ignite interest in many of the 'New New World' vineyards already discussed in this report.

Increasingly, consumers may recognise wine brands (and the flavours associated with them) in the same way they do spirit brands such as Smirnoff. Rather than ordering a glass of Australian Shiraz, Marlborough Sauvignon Blanc or Californian Merlot, it could be commonplace to ask for a 'Lindemans Light', 'Waitrose White' or 'Rosemount Red'.

Jasper Morris MW predicts: "In 50 years, consumers will ask for wine by the brand name or flavour and won't know, or care, where it has come from. Grapes will be genetically modified to change a wine's taste and producers will add artificial flavourings to create a style wanted by consumers."

Floating Vines

Satisfying this growing consumer demand will necessitate wholesale changes in production methods. By 2058, Berrys predicts vast industrial vineyards could house genetically-modified grape varieties resistant to disease, and genetically altered yeast will improve fermentation and help produce wines with lower alcohol levels.

An increased focus on low calorie lifestyles could entice many producers to create 'tailor-made' wines and reduce calorific and alcohol content by modifying the grapes' genetic structure.

Since vineyards typically take up huge areas of land, Berrys believes genetically modified vines could be grown hydroponically in off-shore floating vineyards.

Lightening the load

In 50 years' time, Berrys believes wine is unlikely to be sold in glass bottles. Using glass will be unrealistic as retailers and importers try to cut costs, waste, and reduce the environmental impact of wine being shipped around the globe.

The average weight of a wine bottle is 500g (3), but there have been recent moves to produce more lightweight bottles.

Berrys believes the cost and environmental impact of shipping pre-bottled wine around the world means, in the future, we're likely to see 'wine tankers' crossing our oceans. Bulk shipments of wine could arrive, before being put into plastic or reinforced cardboard containers in a bid to reduce environmental emissions and create a domestic bottling industry.

This phenomenon is being closely observed by companies like Tetrapak, who have already developed cardboard bottles for the French, Swedish and Italian markets.

"I see a far greater range of packaging on the shelves in 2058. Cartons will be the obvious choice for much of the wine and will dominate the shelves for the mass market. Variety will be greater - we're already seeing 500 ml and 1 litre options. Cartons will mean far more tailoring to consumption and branding opportunities for big brands." Ian Williamson, Tetra Pak UK
Future of fine wine:
The creation of fine wine is a world apart from volume wine production. Traditionally, France has led the way (in both performance and price) when it comes to high-end, premium vintages, but Berrys believes stiff competition from around the world could soon see the fine wine league table turned on its head.

Will China beat Bordeaux?

China is set to establish itself as a leading producer of volume wine, but Berrys believes China also has all the essential ingredients to make fine wine to rival the best of Bordeaux.

While most Chinese wines seem alien to Western palates, a new breed of Chinese winemaker, backed by foreign investment and technical advice, is already trying to change that reputation.

Berry Bros. & Rudd's experts estimate that China's current 400 wineries will mutiply more than ten-fold, with up to a quarter producing fine quality wine.

Jasper Morris MW comments: "I absolutely think China will be a fine wine player rivalling the best wines from France. It is entirely conceivable that, in such a vast country, there will be pockets of land with a terroir and micro-climate well suited to the production of top quality wines."

India's thirst for fine wine

Today, the Indian wine industry is still in its infancy; however technology exchange in winemaking and viticulture from Europe and Australasia means India is likely to challenge the supremacy of traditional winemaking countries.

Local demand (the market for wine in India has been growing at over 25% per year) and aggressive promotion from the state government means more and more ambitious Indians are turning to fine wine as a mark of social standing.

Berrys believes, if the increasing number of vineyards planted in parts of western and southern India are any indication, India will soon be taken seriously as a fine wine-growing nation.

Alun Griffiths MW predicts: "India has the potential to embrace wine in a big way and the economic muscle to dictate to producers what style of wine they should be making."

Bow down to British Bubbly

Thanks in part to warmer temperatures (2007 was the second warmest year in the UK in 356 years) more and more English land is becoming suitable for wine production.

Today, there are 1,000 vineyards in England across Kent, Hampshire, Essex and Sussex and production in 2006 was just over 3.3 million bottles. Berrys believes, the amount of English farmland devoted to wine production may rival that of France by 2058 .

French Champagne producers such as Louis Roederer have been looking at the chalky soil of the South Downs with interest, believing it offers them a great opportunity to produce sparkling wines similar to Champagne itself.

Recent international blind-tasting competitions even saw some English sparkling wines triumphing over the best Champagnes.

Berrys' experts commented, "If British growers get support from British drinkers and are able to compete on price they may be able to compete with Champagne."

Jonathan Ray, Wine Editor, Daily Telegraph

"By 2058 it will be quicker to count those countries that don't make wine than to count those that do. India will have embraced the grape, foreign know-how having identified the best sites for both bulk and single estate wines. In Central and South America, countries such as Mexico and Brazil will have followed the lead of Chile, Argentina and Uruguay in making great value wines of real character. Long-established, but often underrated areas such as Languedoc-Roussillon will also have found a new lease of life. At present, these two regions account for almost a third of France's total current production and I would expect quantity to fall and quality to rise as producers concentrate on biodynamic and organic practices and lower yields."

Paying Primeur

The en primeur market, where people buy cases of wine before they're even bottled, has already created strong links between the wine and the investment world. As prices continue to increase, so will the investment potential, with futures markets and hedge funds capitalising on interest in the leading châteaux.

Berrys predicts wine 'talent' scouts - agents on the ground who monitor and track the growth of particular vines - will appear, providing eagle-eyed investors with advance notice of the bestperforming vines.

World Wine Wars

Rising global demand for fine wines - both for investment and for drinking - and limited availability of First Growth wines from top châteaux means prices will continue to rise inexorably over the next 50 years until fine wine becomes the preserve of the very rich.

Berrys believes, by 2058, global bidding wars will take place for the top wines and the most soughtafter wines will become prohibitively expensive and extremely difficult to obtain.

This, combined with burgeoning interest in fine wine in Asia, South America, Central and Eastern Europe and Russia, will create a market so competitive that bidding wars for the few cases of highly-praised, limited production wines will be common and a case of wine from a great vintage could cost £10m.

Simon Staples, Fine Wine Sales Director at Berry Bros. & Rudd believes: "If values increase by 15% per annum, as they have been doing recently, a case of 2005 Ch. Lafite-Rothschild, currently available for £9,200, could be worth just shy of £10 million by 2058."

Choosing Alternatives to Cork

Berrys believes, despite all the protestations of improvement from the cork industry, it is still outrageous to accept a failure rate even as low as 2% in wine closures.

Future generations will look back on this era in amazement at the thought that, after all the technological advances made in the vineyard and cellar, we continued to finish off the process by shoving a piece of tree bark in the bottle.

More and more state-of-the-art wineries are moving to screwcap and stelvin will become the standard for the majority of the world's wines.

Alun Griffiths MW predicts: "Advances in technology will produce a product with cork's ability to allow only a little ingress of oxygen. It is inconceivable we will be using cork in 50 years' time - except for perhaps 1 or 2% of very fine wines that still require maturation."

Companies are already making glass stoppers for fine wine that plug the opening and are secured in place with an aluminium cap. Australian fine wine producer Penfolds Grange are developing a glass closure which fits perfectly flat over the bottle and neck

If glass bottles are still in use, Berrys predicts new, man-made closures will be used that replicate the function of corks without their potentially damaging side-effects.

Berrys' experts commented: "By 2058 every bottle of fine wine will have a synthetic 'smart cork' embedded with a chip hardly larger than a grain of rice. The smart cork can hold pages of information about wine, its producer and its provenance, and the chip can both send and receive information - bringing an end to fake bottles."

Faking it

An increasing problem in the world of fine wine is fake bottles. As demand and prices rise, fine wines have become an increasingly attractive target for counterfeiters.

The recent rejection of an £18,000 magnum of 1961 Ch. Pétrus from a top London restaurant is an example of the problem that counterfeiting poses for the wine industry.

With a few notable exceptions, producers have been slow to take responsibility for minimising the risk of fraud but chips embedded in bottles or corks could well be used to give consumers a greater level of assurance of authenticity.

Chips could also advise customers of a wine's style and even indicate whether it is faulty pre-purchase by recognising unwelcome aromas or flavours - talking bottles in other words.

"Waiter, there's a bee in my wine"

Berrys believes, if you order a bottle of 2005 Ch. Margaux in 2058 that is corked, it's unlikely you'll get the chance to taste it as top restaurants introduce innovative measures to ensure customers receive nothing but the best.

Recent developments in biotechnology have shown honeybees have a finely developed sense of smell. This sense of smell can be harnessed and honeybees trained to recognise particular odours, such as corked wine, and associate that smell with food.

When they detect a corked bottle, a trained honeybee will extend its proboscis. This reaction can be easily detected by software (and incorporated into a small personal device carried by a sommelier) - ensuring the corked bottle never reaches the customer.