WineLeaks #16 - Value for Burgundy
WineLeaks #16 - Value for Burgundy
"The reality seems to me that consumers, importers and journalists alike find the appellation hierarchy a convenient crutch"
Goodmorning wine lovers,
I created a new work-in-progress directory of all the investment cases we discuss, which I hope you’ll find useful.
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The Market Take
📅 Week 43
Markets in a Minute
Inflation (CPI) 12-M to September:
US +8.20% / UK +8.80% / Euro +10.00%Interest Rates (Bank Rates):
US +3.25% / UK +2.25% / Euro +2.00% S&P 500 $SPX (5D):
+3.63%Crude Oil WTI (5D):
+2.64%Gold (5D):
-1.05% CBOE Volatility Index VIX (5D):
-12.39%US$ Index DXY (5D):
-0.99%▪️What happened in the markets last week?
The UK has a new PM — Rishi Sunak and all is well again (in the markets). For now, at least.
In the US, GDP growth figures for the third quarter of 2022 appear strong, drastically improving from anaemic results in Q1 & Q2, but likely strengthens the Fed’s resolve to combat inflation and maintain an aggressive monetary policy stance. And interestingly, the real GDP growth can be attributed to stronger net exports (exports - imports).
Other (lagging) indicators seem to completely negate the work of the Fed. In fact, despite ongoing rate hikes, designed to tighten financial conditions & anchor borrowing/lending activity, total loans & leases in bank credit and private fixed investment continue to hit new all-time highs.
Also, the stock market is experiencing the strongest rally of the 2022 bear market, led by the Dow Jones Industrial Average, despite negative reactions to Q3 corporate earnings. Some analysts have started to gain optimism that this could be the final +0.75% rate hike, with the perception that the Federal Reserve could raise by +0.50% in December 2022, followed by +0.25% in January 2023, the perceived path of monetary policy is becoming less aggressive.
In Asia, Hong Kong’s economy recorded its worst contraction in more than two years as the financial hub’s recovery was stymied by weak global demand, China’s continued Covid curbs and a slow reopening from years of pandemic isolation. In the mainland, Chinese stocks have faced relentless selling pressure through most of the year, with investors increasingly concerned about three issues in particular, namely that China’s reopening might take longer than expected, China’s social priorities may take precedence over the economy and Beijing’s emphasis on security. China itself is gloomily preparing for the biggest shopping festival of the year, known as Double 11 or Single’s Day.
The Wine Market Update
Note: I am sharing the year-to-date (2022) figures are Liv-ex hasn’t released the monthly returns.
Livex 50 (YTD):
+3.9%Livex 100 (YTD):
+8.1%Livex 1000 (YTD):
+14.1%What happened in the fine wine markets last week?
1️⃣ Did you miss Champagne Day?! Six Atmosphere’s Tom Hewson reported on the latest new releases of Champagne.
Among those is the Rare Rosé 2012. You may remember in the Champagne Investing piece we co-authored, Tom mentioned that “scores for Rare have been fairly Euro-centric, and that an upturn in reputation in the USA would probably send these prices considerably higher”.
Specifically on the Rare Rosé 2012 he comments: “An extremely fine release which nimbly navigates the lines between seriousness and accessibility, giving us (perhaps) a hint of what the straight Rare 2012 may offer.”
Next, we are expecting the 2012 Taittinger Comtes de Champagne, which received a 97 from Essi Avellan MW and a 95+ from William Kelley.
2️⃣ And LVMH’s Champagne maisons were also the drivers of LVMH's strong Wine & Spirits Q3 performance, which enjoyed excellent momentum and increased pressure on supplies. Growth was particularly strong in Europe and Japan but, more importantly, in the US. Jean Jacques Guiony, Chief Financial Officer of the group warned in the Q3 press conference: “We still had bottles available to satisfy the demand for Q3 — which won’t necessarily be the case for Q4.”
LVMH counts Dom Pérignon, Krug and Ruinart in their portfolio, along with Moët & Chandon, Mercier and Veuve Clicquot. Watch out bubbleheads!
3️⃣ Burgundy is back on top, up 27.6% for 2022 so far. Back in May, Liv-ex analysed the most over- and under-priced Grand Crus. Note the top most expensive crus (Romanée-Conti, La Tâche, Musigny and La Romanée) have been excluded to avoid a skewing of the results. The average grand cru costs around £5,000 / 12-bottle case. This falls to £4,000 when the four most expensive appellations are excluded.
Corton (in the Côte de Beaune) is the least expensive grand cru on average, followed by: Mazis-Chambertin (Côte de Nuits), Clos de la Roche (Côte de Nuits), Corton-Charlemagne (Côte de Beaune) and Charmes-Chambertin (Côte de Nuits) are close to 50% less than the average case price.
See the full list of AOCs in Burgundy.
Why is Corton Grand Cru so underpriced?
In former times, it was a highly esteemed appellation, so much so that Dr Jules Lavalle, in his seminal 1855 work, remarks, “the wines of Corton are closer to the wines of Chambertin than to any other wine of the Côte d’Or”. High praise indeed, but not one that seems to be shared today. In support of this notion, in 2008, Domaine de la Romanée-Conti leased 2.28 hectares of vineyards in Corton from the estate of the Prince de Mérode, and in 2018 it leased a further 2.91 hectares of Corton Charlemagne from Bonneau du Martray.
Corton is the Côte de Beaune's only Grand Cru appellation for red wine. “In geological terms,” writes Charles Curtis MW “the hill of Corton is an outlier—a freestanding hill, separated from the rest of the Côte by erosion”. This part of the hill faces southwest, and it is not as sunny and warm as the east-facing slopes, which is considered a disadvantage for red wine. However, during these times of global warming, things may change.
In case you missed it — William Kelley takes us on a little trip to Corton.
Talking of Corton — Hospices de Beaune to stage one of the largest offerings in History:
“The 162nd edition of the annual Hospices de Beaune wine sale on November 20 will present a total of 51 different cuvées of the 2022 vintage produced from vineyards across the Hospices’ 60-hectare holdings, now in its second year of organic conversion, making it one of the largest ever offerings in the history of the auction, says Sotheby’s in a press release.
These 51 cuvées will be divided into 802 lots: 620 barrels of red wines and 182 barrels of white wines. This year’s offering will include two new cuvées: Corton Grand Cru cuvée Les Renardes and Beaune 1er cru Clos des mouches cuvée Hugues et Louis Bétault.”
This seems like a great segway to explore some special wines in the lesser-known appellations in Burgundy.
The Lesser-Known Appellations of the Côte D'Or
William Kelley has become something of a maker-or-breaker of grower Champagnes. Among them, Ulysse Collin and Egly-Ouriet have quadrupled in price in the space of a few years, thanks to Kelley’s stellar 100-points reviews.
His approach to offering exposure to the lesser-known but worthy-of-attention winemakers is particularly interesting to savvy collectors & investors (such as us!).
On that note, since residing in Beaune, he instituted for the Wine Advocate, a regular coverage of the Côte Chalonnaise, Burgundy’s Hautes Côtes and the less-famous appellations of the Côte d’Or itself.
Many investors & collectors may have been priced out of the most famous grand crus, but they haven’t given up on the wonders that Burgundy has to offer. Here are some underpriced gems in these lesser-known appellations worthy of being hunted down.
Note: 🟥 = Pinot Noir ⬜ = Chardonnay
🟥 Henri et Gilles Buisson 2020, Corton Grand Cru Les Renardes (~£153 / bottle)
Among the plots producing predominately or exclusively red wine in Corton, Dr Jules Lavalle singled out Corton-Renardes and Clos du Roi above the rest, with Chaumes, rated slightly lower.
“Today Les Renardes and Le Clos du Roi can produce spectacular wine,” writes Charlie Curtis MW.
The Buissons have been part of Burgundy’s vine-growing fabric for over 250 years, and mainstays of Saint-Romain since it achieved appellation status just after the Second World War. In addition, they have holdings in those corners of Burgundy considered vineyard nobility: Corton and Corton Charlemagne.
It’s a hard one to find this one in the UK, but it’s available in Europe directly from the producer for €180/bottle. 2020 is one to watch out for once released. Hedonism Wines offers the lesser (and more abundant) 2019 vintage for £182 (not in bond).
Kelley warmly recommends this estate and describes the palate of this wine as “lively and seamless that's deep and elegant, with bright acids, supple tannin and a long, sapid finish.”
⬜ Domaine Dureuil-Janthial 2020, Puligny-Montrachet 1er Cru Les Champs Gains
Vincent Dureuil’s wines are so good; and, while reviews in this publication (The Wine Advocate) may have expedited the inevitable, it was only a matter of time until Domaine Dureuil-Janthial became one of Burgundy's highly allocated producers. The 2020s at this address have turned out predictably brilliant.
This is what Kelley thinks of Dureuil’s work. Tim Atkins MW is also a fan.
And in fact, Vincent Dureuil is one of the leading names in Rully, but he also makes a little bit of very good wine in Puligny-Montrachet, which features very subtle flinty reduction, lees-influenced complexity with layers of aromatic new wood and zesty acidity.
2020 hasn’t been released yet, this is another one not widely available in the UK (and to a certain extent the US). Prices hover below the £100 mark. For now.
A step-up in the same appellation — the Domaine Bachelet-Monnot 2019, Bâtard-Montrachet Grand Cru. Bâtard-Montrachet is a Grand Cru appellation, located within the communes of Puligny-Montrachet and Chassagne-Montrachet.
🟥 Domaine Boris Champy 2020, Beaune 1er Cru Vignes Franches (£60/bottle)
This is an appellation in the Bourgogne Hautes Côtes de Beaune, a 1er Cru appellation called Les Vignes Franches. They are south- and southeast-facing slopes of valleys cut into the limestone plateaus at between 100-200m higher than the Côte de Beaune, which results in slightly later maturing and harvesting on average around one week later. Boris Champy believes in the future of the Hautes-Côtes, particularly thanks to their altitude in the context of global warming.
Boris Champy, originally from Champagne, is one of the newest and most interesting names in Burgundy: having worked as technical director of Napa Valley's Dominus Estate for a decade, he returned to France to take the reins at Maison Louis Latour, and then at Domaine des Lambrays. He took over completely the domaine of biodynamic farming pioneer Didier Montchovet, rebranded it and 2020 is his first vintage. Kelley hails Champy as the new reference point domaine of the Hautes-Côtes.
While one can rest assured of its quality, no historical data is available on this (for obvious reasons).
And from the Côte Chalonnaise…
Not surprisingly, the top wines of the latest Insiders' Burgundy report are outside the Côte D'Or, in the Côte Chalonnaise, from the two best-known appellations of Rully and Mercurey. Kelly explains that they were once so underrated that “they have been the victim of a vicious cycle, whereby negative consumer perceptions impose low prices, encouraging producers to privilege quantity and cash flow over quality, resulting in mediocre wines that reinforce those negative perceptions”.
⬜ Domaine Dureuil-Janthial 2020, Rully 1er Cru Meix Cadot Vieilles Vignes
The first name is the familiar one of Vincent Dureuil aka the Rully superstar. Kelley awarded this wine a 96, two points more than the Puligny-Montrachet and highest-scoring wine of his Insiders' Burgundy report, calling it a “benchmark wine”.
Domaine Bruno Lorenzon 2020, Mercurey 1er Cru 🟥 Pièce 13 (~£100/bottle) and ⬜ Pièce 15 (£73/bottle)
Kelley is smitten with Bruno Lorenzon — yet another “glitch in the appellation hierarchy’s matrix” as he refers to his and the above-mentioned Vincent Dureuil’s wines.
These wines are not merely excellent but also thought-provoking and indeed inspiring.
However, he also notes that the Anglophone press’ near-total silence concerning Lorenzon’s wines points to the reality that “consumers, importers and journalists alike find the appellation hierarchy a convenient crutch”.
You can read the full profile of Domaine Bruno Lorenzon in the Wine Advocate. Kelley believes there’s a clear step-up between the 2007 and the 2012 vintages, with incremental improvements since.
Last year, I wrote that the 2019 vintage might turn out to be the best of Bruno Lorenzon's career to date. Tasting those wines from my cellar, I see no reason to revise that claim—with the sole exception that his 2020 vintage seems liable to be even better!
Both Pièce 13 (Pinot Noir) and Pièce 15 (Chardonnay) have consistently scored 95 and above since that 2012 watershed year, so there’s little reason to stop at the most recent vintages.
I hope some of you manage to grab some of these beauties!
Best,
Sara Danese
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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 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.