Wine Investment Friday

This newsletter is designed to bridge the gap between trade and the investor. Each week we aim to help investors better understand the nuances of why some cases appreciate and some standstill. We will unpick the characteristics that construct financial potential to help your money work smarter.


This week we are analysing a case of:

Palmer – 2000


Looking at why vintage reputation is so important when picking a wine for a long term hold. Also attempting to understand the overpowering effect it has in the latter years of a wines life cycle. 


Beneath the Label: 

The owners of Chateau Palmer have firmly cemented their position at the top end of the Bordeaux spectrum. A respected estate producing top tier wines. However crucially for this newsletter, Palmer is not a first growth and the lofty scores and prices have not always been a feature. 

Critic Score: 94 Points – Wine Advocate
A low score for an investment wine that would not warrant further investigation.

Region Rating: Margaux – 94T
Unlike the other appellations, Margaux did not enjoy climatic perfection, but 94T still represents a strong score. 

Drinking Window: 2019-2045
The style of Palmer has always been muscular and age-worthy, no surprises here. 

Production Volume:  8-10,000 cases
The case count is below average for the region but by no means scarce. 

Summary:
A wine where the key quality vectors appear to suggest this is not an obvious option to invest in. Both now and on release, it appears a relatively average iteration from an estate that can do better. The only notable point is when looking horiztonally at the vintage as a whole. 2000 outperforms the preceding and subsequent 3 vintages by an average of 6 points, quite a spread. So we can recognise this to have been a real high watermark for the era, but would that have been enough to invest? 


“It does not occupy the glass in the same way as the 2005 or the imperious 2010 but it does have long term potential”.

Martin


Money Matters:

Brand Power: 82/100, rank 43rd in JF Tobias Brand Power Metric
A well-known wine around the world, it has a stable consumer base which props up liquidity. 

Liquidity: 70%
The wine enjoys good levels of liquidity thanks to a slightly more approachable pricing array.

Inter-Trade Price Volatility: 5.01%
A super stable wine whose price transparency through the bulk of its life has been excellent. The latter years this has spread slightly as the price has jumped and general liquidity has shrunk but on the whole, remains very promising. 

Price History: 

Summary:
This section shows this wine to be both predictable and surprising in equal measure. The predictable elements are the liquidity, the lack of volatility and the relatively positive brand power, these are classic Bordeaux blue-chip traits. The surprising element comes simply from the price trajectory. As we discussed this is not a standout wine from a quality perspective, but it did have a very strong vintage reputation. Now of course there are factors like inflation and the general growth of the market to atrribute to the trajectory. However as we will look at in the next section, this tide does not raise all ships. 


Position for Profit: 

This wine has a number of mature vintages that demonstrate brilliantly the power of a vintage reputation. Wines from the same era, with identical quality vectors yet staggeringly different prices. From this, we could reasonably assume that as time passes the focus shifts to the vintage, with the other vectors diluting in significance. 

Palmer 1982 / 92 points – £3,900
Palmer 1986 / 92 points – £2,363
Palmer 2000 / 94 points – £3,600
Palmer 2002 / 94 points – £1,900

Even when you compare these wines to the stand out iterations of the modern era the price spread remains significant. It does beg the question, should you be hoovering up the modern greats to tuck away and forget for a decade or two? 

Palmer 2009 /  98 points – £2,800
Palmer 2010 / 96 points – £2,970
Palmer 2016 / 98+ points – £2,650

I think the answer is a resounding yes. When buyers are purchasing these old wines they are buying the vintage, the part of history that says this was a high watermark. The points become secondary and the experience is about owning and exclaiming to fellow collectors, “I have an “82 or a 2000”. The response will inevitably be, “great vintage that”, not “what points did it score”.  

The Author

Avatar

Jake Leighton