Wine Investment Friday's

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 look at an overextended corner of the market – top tier second wines:

Second Flight – 2010


Initially a cut price way to sample the DNA of the Grand Vin, the last decade has seen the market for second wines warp into an exorbitant brand centric bubble. Is it worth it and is there profit left in this run?


Beneath the Label

Screaming Eagle is the pinnacle of Napa. Whether you are a wine nut, or a casual participant, the estates glamour and success is common knowledge. Second Flight production is the labels second wine makes for a great lens to explore this sub market.

Critic Score: 93 Points – Wine advocate / 92 points – Parker
The critic score is certainly not going to reach our objective thresholds when considering outright quality.

Region Rating: Napa – 95T
A superb year, the premier wine from the estate scored a perfect 100 thanks to a faultless climate. 

Drinking Window: 2018-2033
Cabernet dominate blends always contain the structure to age comfortably for a decade or two. 

Production Volume: 800 cases
Like Burgundy, the production volumes at the top estates in Napa are microscopic, seeing demand far outstrip supply. 

Summary:
The Second Flight has a number of vectors that catch the eye. 2010 is a well thought of vintage, a long predicted trading life and the small production volumes are all very attractive. However the critic score cannot be overlooked. 93/92 is low, especially considering second wines from equivalent Bordeaux counterparts score in the high 90’s with ease. Furthermore, Parker comments in his notes that this wine contains a different blend to Screaming Eagle. Does this reduce the likeness between the two wines, is the buyer going to receive the same insight into the top wine? 


“The introduction of the second wine is designed to keep Screaming Eagle at its mythical level”

Wine Advocate


Money Matters

Brand Power: 88/100, rank 25th in JF Tobias Brand Power Metric
Typically second wines ride on the coat tails of the premier wine. As a result they are better known and often more widely tasted by audiences than their quality tier would suggest.

Liquidity: 40%
This is another faltering moment for this wine. At over £3,500 per 6 pack, this is an extremely expensive wine for the quality in the bottle and conscientious buyers know this. 

Inter-Trade Price Volatility: n/a
With such small production volumes it is perhaps unsurprising that this wine has only traded twice through the exchange. As such price transparency is low and volatility likely. 

Price History: 

Summary:
The vectors here unfortunately raise some tough observations. The financial traits of this wine are in the most part akin to rare Burgundies. Low visibility, potentially volatile price action and a big brand backing. However unlike rare Burgundies where these risks are mitigated by the outright quality of the wine. This wine is lacking in fundamental quality in the bottle. Consequently, the only aspect that is conceivably propping up this wines large price tag is brand power. With the trends of the wine world always swirling this feels a little tenuous for a £3,500 case.


Position for Profit

The second wine phenomena has been a wild part of the market over the past decade. Initially spiked by the Asian markets desire to sample the brand without the cost, prices have pushed far beyond the quality in the bottle. Now that estates have recognised this they release the wines at high prices eating into possible gains arising from buying the cases young. When this is combined with the availability of critic scores and pricing information it is hard to believe there is still a willing buyer out there for cases like this. My suggestion would be that second wines are seriously over priced and a correction in the market is well needed. Buying into a brand should absolutely be part of an investment strategy but it cannot be the lynch pin. This is not to say all second wines should be ignored, but some simple assessment of the price to points ratio and cross referencing will highlight to any potential buyer the suitability of a wine. 

The Author

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Jake Leighton