The Earliest Harvest Ever
Pointing out something quite obvious
Hello wine lovers,
En Primeur 2022 started with a ˗ˏˋbang´ˎ˗ Or more like, with a 30% increase in prices. Will other châteaux follow suit? Will there be an appetite from collectors for this 2022 vintage?
I’ll share my financial thoughts on this vintage and what I am planning to add to the Saturnalia Model Portfolio, built using the Saturnalia wine investment platform. You can read the background of this project here:
Portfolio Performance
The Saturnalia Model Portfolio (ex-cash) retracted by -2.5% in April 2023. The Liv-ex 100 also retracted by -0.5% during the same period. In relative terms, the portfolio underperformed the index by 2.0%.
What happened in the fine wine market?
Generally speaking, all names in the portfolio took a beating in April, with a few marginal exceptions.
The market is softening again.
Is it driven by demand-supply offers? A few new offers have encountered scepticism on prices.
Has the fine wine market caught on to the macroeconomic drivers? Unexpected persistent inflation seems to be pushing the central banks to raise interest rates yet again in June 2023.
Or is it, that the fine wine market is holding its breath ahead of the releases of Bordeaux En Primeur 2022?
One thing is for sure: wine collectors can afford to be picky.
En Primeur 2022…
Angélus and Cheval Blanc were the two high-profile châteaux among the early releases in the market. They set the pace for the EP season and these are the key takeaways:
Critics scored the vintage, generally speaking, behind 2019 and 2020 but ahead of 2018 and 2021
2022 EP isn’t cheap and the first releases point at an average 20-30% increase on 2021 EP
The 2022 release price comes at a premium to the previous vintage latest prices
The Wine Critics.
Critics unanimously agree that this is not just a good vintage, but a great one. I can concisely summarise the majority of the wine critics' reviews I have read so far into three key points:
Overall, the vintage is exceptional, exhibiting high quality in leading appellations. However, there is significant variation between top-tier and lesser wines.
The vintage presents paradoxes, as it combines excessive heat and drought to produce remarkable freshness. This paradoxical outcome was made possible by the implementation of transformative practices in vineyard management and winemaking in recent years. These adaptations were aimed at addressing climate change and emphasising the expression of terroir. The vintage posed technical challenges and favoured vineyards with old vines and the best terroirs.
Canopy management primarily involved careful and sparse de-leafing. Some winemakers reported applying a "sunscreen" made from naturally existing clay or talc on the leaves and berries at specific intervals during the hottest periods.
During the later stages of the harvest, the focus was on sorting to eliminate dried, shrivelled, over-ripe, and under-ripe berries, often caused by vine blockage. The process was demanding, resulting in significantly reduced yields. Additionally, the prevailing winemaking technique agreed upon in 2022 was super-gentle extraction. This included chilling down grapes before fermentation, cooler fermentation temperatures, and reduced pumping-over.
When considering purchasing the 2022 vintage en primeur, caution is advised due to varying alcohol levels. Balancing acidity is crucial, particularly in high-alcohol wines. Lisa Perrotti-Brown highlights that the limestone plateau of Saint-Émilion and areas with limestone off this plateau were standouts in the vintage. Wines produced in these regions showcased a shimmering quality, lower pH levels, higher acidity, and a pronounced sense of freshness and energy.
Many wine critics have focused on the pH levels of the wines. While the average pH of Bordeaux Grand Cru Classé wines can vary depending on the specific vintage and wine characteristics, Bordeaux wines generally exhibit pH levels ranging from 3.4 to 3.8. As always, Wine Folly comes to the rescue to provide an explanation.
Source: Wine Folly
Due to these factors, the vintage has received better scores on average than initially anticipated.
You can find a table on Livex that lists scores from well-known wine critics. Saturnalia also offers a score on their platform. This score uses an average rating from reputable wine critics to train their artificial intelligence (AI) to evaluate vineyard position, weather data, and all available trends obtained through satellite information. Importantly, this evaluation process does not involve any actual tasting.
The Initial Release Prices.
And due to the prevailing narrative surrounding quality, it comes as no surprise that the 2022 EP (en primeur) is not going to be inexpensive. Initial releases indicate a price increase of around 20-30%, with Angélus showing an even higher increase of approximately 45%.
At the beginning of 2023, the Bordeaux industry witnessed these remarkable achievements, alongside limited production volumes resulting from the extensive sorting process. This sparked optimistic discussions about pricing. However, the current situation has undergone a change as concerns regarding high-interest rates and global economic uncertainty have solidified. These factors have dampened overall sentiment, with Bordeaux wine merchants realising that they may face challenges in selling a vintage that doesn't resonate well with the final consumer.
Furthermore, Liv-ex has reported that the next generation of buyers, who are accustomed to transparency and readily available information, are growing skeptical of the En Primeur process, as they perceive reduced upside and potential opportunity costs.
In reality, purchasing wines en primeur, or in futures, is advantageous only when it allows buyers to secure highly sought-after wines before their release to the market and at a lower price compared to their future release price—similar to buying a house off-plan.
However, we are aware that scarcity is not a significant issue in Bordeaux. Additionally, regarding the second point, an intriguing chart created by Liv-ex demonstrates how the investment value of buying en primeur has diminished (and even turned negative!) over the past decade.
And a more granular view, on who’s taking all the margins:
Playing devil's advocate, it is true that this technically challenging vintage came with its own costs, which have undoubtedly rewarded those who possess the expertise, human capital, and financial resources to execute with precision. Controlling vinification temperatures, employing the gentlest extraction techniques, vinifying wines by parcel, and other similar practices do not come without a significant price tag.
One could argue that these costs represent the new normal for producing exceptional, age-worthy wines in an evolving Bordeaux climate that is progressively becoming warmer.
Price Analysis.
Now, diving deeper and taking a closer look at financial analysis of this En Primeur season along three axis:
Release Prices
Gain/Loss since release and, generally, price levels of previous vintages
Critics score
Take a look at Angélus and Cheval Blanc:
And Cheval Blanc:
For both wines, particularly Angélus, the release price surpasses the latest market price of all previous vintages, including the highly acclaimed 2019 vintage. What does this imply for wine collectors?
It signifies a risky investment. From my perspective, the potential downside in financial terms outweighs the upside.
Will I buy any EP 2022?
William Kelley writes in The Wine Advocate:
Consumers who purchased 2009s and 2010s, which were more expensive en primeur than they are today, will surely remember that it is not always necessary to purchase great Bordeaux as futures. Many of the wines reviewed in this report come very warmly recommended, but it will be up to readers to decide when it makes most sense to buy them.
Considering the current prices, along with the perceived desperation among wine merchants who are being less selective in their offers, as well as the high inflation environment, it may not be advisable to purchase en primeur. It could be worth waiting a couple of years to see what these wines have to offer.
Aside from these general considerations, one particular château that has captured my attention is Beausejour (Duffau-Lagarrosse). I already own their 2019 vintage in the Saturnalia portfolio. Not only did the wine receive top reviews from all critics, but it also achieved a promising pH level of just 3.50. In previous years, the exceptional quality of the site may have been overshadowed by an excessive use of new oak. Additionally, a significant portion of the estate's Cabernet Franc was typically excluded from the final blend. However, Joséphine Duffau Lagarrosse has initiated a transformation by incorporating a substantial 31% of Cabernet Franc in this vintage's blend. Depending on their release price, I might consider adding a case or two to my collection.
Nonetheless, if I missed a bargain, please let me know in the comments or by replying to this email 😉 Have you bought any bargains yet?
Thanks for being here! I hope you found the article rife with useful information to navigate this EP season.
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Sara Danese
Useful Resources for Bordeaux En Primeur 2022
Lisa Perrotti-Brown, the founder of TWI, decided to make her coverage of Bordeaux En Primeur 2022 free for all 🤩 — 2022 Primeurs Early Releases and 2022 Primeurs
Colin Hay on The Drinks Business — Bordeaux 2022: ‘a miraculous and truly exceptional vintage’
Antonio Galloni on Vinous ($) — 2022 Bordeaux En Primeur: Balance Imbalance
Jane Anson ($) — En Primeur 2022: All Notes and Scoring System
William Kelley on Wine Advocate ($) — No Smoke Without Fire – En Primeur 2022
Liv-ex (free if you share e-mail address) — Critic scores, the latest Bordeaux En Primeur 2022 scores & Key prices for Bordeaux En Primeur 2022
Bordoverview (free)
I came late to the party, but this thread is worth a read (take 🍿) — Bordeaux 2022, Wine Talk
Disclaimer
My investment thesis, risk appetite, and time frames are strictly my own and are significantly different from that of my readership. As such, the investments covered in this publication and in this article are not to be considered investment advice nor do they represent an offer to buy or sell securities or services, and should be regarded as information only.