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:

Troplong Mondot, 2011


Looking to understand why investing in cases below £1,000 requires a higher level of stringency. Also suggesting some reasons for why right bank wines of this range are particularly tricky to trade successfully.


Beneath the Label: 

This St. Emilion estate is yet another beneficiary of having been aided by the original flying winemaker, Michel Rolland. Every Chateau to have been counselled by Michel in the ’00’s is better for it. Troplong transitioned from the mainstream thanks to some top Parker scores, the estates style matching the critics love of bombastic wines.

Critic Score: 95 Points – Wine Advocate
A mediocre score. Accomplished for the vintage but by no means standout when considered vertically.

Region Rating: St. Emilion – 91T
The vintage was no where near the same standard as the previous two blockbusters (09 and 10). A cold and wet season, two descriptors you do not want in a harvest report. 

Drinking Window: 2020 – 2034
Colder vintages do not impart the natural components necessary for big age.

Production Volume: 10,000 cases
An above average total for a right bank estate where typically volumes are down due to far smaller plots. 

Summary:
Clearly this is a wine that falls short across a number of key vectors. The critic score is beneath the quality threshold of 97. The vintage itself is lacking and unlikely to be memorable in years to come. The wine does have some ageing capacity, but with 10,000 cases and what is likely to be a lack lustre demand, this is unlikely to become a factor. I am sure this would be a lovely wine to drink but for investment it simply does not qualify.


“In good years the wines are thick and rich, you could stand a spoon up in them”

Perrotti-Brown


Money Matters:

Brand Power: 72/100, rank 78th in JF Tobias Brand Power Metric
Troplong Mondot is not a well known wine brand around the world. In fact apart from the right banks ultra top tier, the estates tend to carry far less appeal and notoriety around the world. One clear driver for this is not entirely clear but a factor to consider nonetheless.

Liquidity: 35%
This is a quirk of right bank Bdx, if you want to sell at best price you are going to have to be patient. The pool of buyers are small and as such merchants are reluctant to take on these “sticky cases” at full price. 

Inter-Trade Price Volatility: 4.6%
This wine does not suffer from large volatility but compared with the left bank wines there are so few trades, especially considering this wine has been trading for 10 years. 

Price History: 

Summary:
The take home message here is of a total lack of demand. The wine has traded so infrequently and nearly always beneath the market price. The lack of status and extended exit timelines combine to make for a wine that really lacks in excitement and potential. It should be noted that this is the case across nearly all mid tier right bank wines. It is something to be acutely aware of and goes someway to explaining why even the 100 point iterations from the various Chateau always fall short of their left bank counterparts. 


Position for Profit: 

It is clear that this particular vintage does not stand up to scrutiny for an investment. However this case should act as a lesson for both the perils of right bank wines and of holding lower value wines. 
In relation to right bank wines, it is evident that even with top scores you are never going to experience the same blue chip feel as those from the left. The liquidity is lower, suffering from a lack of demand from both retail and trade which also serves to create a price ceiling. If you are set on placing a right bank in the collection you would be far better off consolidating funds into buying just one of the top tier, Le Pin, Petrus or alike. Rather than an array of the mid tier which simply lack potential. 
Furthermore, this leads to a more general point on the  dangers of carry cost impact when holding mid price wines. Wines beneath the £1,000 threshold need to have significant upside potential. Otherwise the cost of storage and insurance negatively impacts any percentage gains in a considerable and inhibitory way. In much the same way that we repeat the mantra of buying cases of true quality, this extends to frequency. It is far better to buy one superb case, than to carry 5 or 6 mid level cases. It is perhaps one of the most common mistakes made by the modern wine investor, avoid this trap.

The Author

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Jake Leighton