Investing On Burgundies
Over the last five years, prices of top Burgundies on average have risen by as much as 40 per cent. Bordeaux First Growth by comparison has fallen 20 per cent. During that same period, the FTSE 100 was up 20 per cent and gold was down by nine. If you go back further, say a decade, top Burgundy is up 175 per cent versus FTSE, which is up 18 per cent and S&P, which is up 68 per cent. Evidently, Burgundy shouldn’t be overlooked as a place to invest for wine collectors.
What makes Burgundy different from Bordeaux is its extremely restricted supply, especially at the top tier. This is exacerbated by the skyrocketing demand for the region by fine wine collectors, more recently, from China. Of the world’s 20 most expensive wines (source: CW Burgundy Wine Investment Report), 15 are from Burgundy, two are from Germany and one each from Bordeaux, Napa and Rhône.
For all practical purposes, all reds from Burgundy are Pinot Noir, and whites, Chardonnay. But the simplicity of this hallowed region ends there. Here’s where it gets complicated. Burgundy—which is one-fifth the size of Bordeaux—is comprised of some 3000 individual vineyards, some with as many as a dozen different owners or producers.
The extreme fragmentation of the vineyards, the myriad of micro-climates, soil types, and the vast number of producers make it a very difficult and complex region to understand. In the past, this region was overlooked by wine collectors and speculators, particularly from Asia, precisely because it was too complicated to comprehend. That has changed, however, as collectors have caught on and become savvier.
It might be useful to compare Burgundy’s classification system to the better known Bordeaux Classification of 1855. The ranking of Bordeaux Châteaux was based solely on prices that prevailed at that time as price was then viewed as the most reliable measure of quality; during that period, Lafite, Latour, Margaux, and Haut-Brion fetched the highest prices. Up to this day, these are bestowed First Growth status (Mouton Rothschild was elevated to First Growth in 1973).
Burgundy’s classification system was drawn up in 1936 and was based on terroir. Every vineyard has its place in the hierarchy, descending from Grand Cru to Premier Cru to Village and Bourgogne, which sits at the bottom. Picture a pyramid. At the very top are 32 Grand Cru vineyards that account for a mere two per cent of Burgundy’s total production. Grand Crus are the crème de la crème and are considered the most expensive wines in the world.
Premier Cru lies beneath Grand Cru. There are 530 vineyards designated as Premier Cru. They widely vary in quality and account for roughly 18 per cent of Burgundy’s production. Below Premier Cru are “village” level wines that make up 36 per cent of production; and finally, “regional” wines, which account for the balance.
Except for a handful of village wines from Meursault, wines from the last two tiers—“village” and “regional”—are not typically considered for investment but whose prices can appreciate amidst heightened demand for Grand and Premier Crus and as wine aficionados and the general public seek out value and bargains. It is worth adding that rising quality across producers and vineyards have resulted in stronger demand for these lower tier Burgundies.
Hence a shortlist of some of Burgundy’s greatest vineyards—both Grand and Premier Crus.
For reds: Chambertin, Clos de Bèze, Musigny, Bonnes Mares, Clos de Tart, Clos de la Roche, Clos de Vougéot, La Tâche, Romanée, Romanée-Conti, Richebourg, Romanée-Saint-Vivant, Grand Échezeaux, Cros Parantoux, Les Amoureuses, Clos Saint-Jacques, and Malconsorts.
For whites: Montrachet, Chevalier-Montrachet, Bâtard- Montrachet, Bienvenues-Bâtard-Montrachet, Les Perrières, Les Charmes, and Corton-Charlemagne.
These vineyards would definitely appear in any serious Burgundy collection. One may not have to look too much further beyond these names when investing in Burgundy. But it’s not just about choosing the right vineyard. Some producers are more meticulous than others; they adopt strict vineyard management techniques and therefore produce better quality wines. Also, some own better plots within a vineyard; plots with better drainage or aspect, which result in healthier and riper grapes. The maxim for investing in real estate is “location, location, location.” For investing in Burgundies, it is “producer, producer, producer.” UK-based wine investment consultant, Cult Wines, said that there are 31 producers of red and 10 producers of white that are considered investment grade producers.
For reds, these are: Henri Jayer, DRC, Rousseau, Roumier, Leroy, Comte de Vogü., Ponsot, Liger-Belair, Méo-Camuzet, Dujac, Emmanuel Rouget, Mugnier, d’Auvenay, Anne Gros, Cathiard, Lamarche, Fourrier, Domaine des Lambrays, Groffier, Georges Noëllat, Trapet, Clos de Tart, Dugat-Py, Marquis d’Angerville, Mugneret Gibourg, d’Arlot, Dugat, Hudelot-Noëllat, Faiveley, Olivier Bernstein, and David Duband.
For whites, go with Leflaive, Coche-Dury, Ramonet, DRC, Comtes Lafon, Bonneau du Martray, d’Auvenay, Leroy, Niellon, and Jobard. I would, however, also add rising stars that have appeared on the radars of collectors such as Pierre-Yves Colin-Morey, Cécile Tremblay, and Prieuré-Roch.
So when investing, select the top vineyards made by the top producers in the list above. For instance, DRC “La Tâche,” Méo-Camuzet “Romanée-Saint- Vivant,” Rousseau “Clos de Bèze,” or Anne Gros “Richebourg.”
Finally, as with any collectible be it art, porcelain or wine, provenance is of paramount importance. It is imperative that fine wines are procured from a reputable source or, better yet, direct from domaine.
One needs to avoid purchasing bottles that may have exchanged hands several times as this would increase the risk of acquiring bottles whose conditions are less than perfect or ending up with counterfeit bottles.
Top auction houses such as Christie’s, Sotheby’s or Hart Davis Hart based out of Chicago are excellent places to purchase wine. Whenever possible, one should also source wines ex-domaine, which refers to bottles that come directly from the winery, as opposed to bottles purchased from the secondary market. Here, provenance is guaranteed. Happy investing!