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:

Château Pavie 2010

Explaining what creates a great investment wine and how it interacts with the market. Ultimately showing you the role this case could play in your portfolio. 


Beneath the Label: 

Château Pavie is a 1er Grand Cru Classé A and has long been considered one of the top estates of the right bank. This reputation has been bolstered by a no expense spared approach by owner Gerard Perse, who since the turn of the century has invested over 15 million Euros.

Critic Score: 100 Points – Robert Parker, The Wine Advocate
One of only 10 Châteaux to achieve this magic number in 2010. 

Region Rating: Saint-Émillion 94T
The 2010 vintage is undoubtedly one of the modern greats even when compared to the dazzling 2009. However, the point of note here is the “T”, indicating a tannic, slow-developing wine.

Drinking Window: 2025+
This date is a construct of both the cooler, protracted growing climate and the Château’s stylistic aim to build a wine that will last forever.

Production Volume: 12,000 to 15,000 cases
At 50 hectares, Pavie is one of the largest of right-bank estates.

Summary:
The focal point of this wine is the speed at which it will move along its developmental timeline. Unlike last weeks’ Cos d’Estournel 2009, this wine requires time in bottle to mature. Due to this inaccessibility in youth, the overall consumption is low subsequently not impacting the supply and demand dynamic As price is ultimately driven by underlying supply and demand dynamics, if a wine is too taut and unapproachable, the overall volume will not be tightening from consumption, no matter how high the critic score is. 


“Pavie owner Gerard Perse tore out an already state of the art cellar to ensure Pavie is the most modern winemaking facility in all of Bordeaux”


Money Matters:

Does the Pavie 2010 make sense and will it make you money?

Brand Power: 90/100, rank 20th in JF Tobias Brand Power Metric
Positioned in the top quartile globally and 7th in all of Bordeaux, its popularity comes from a wonderfully odd nuance, the accessibility of the word, “Pavie”. Even the most ineloquent won’t embarrass themselves ordering a bottle in an expensive restaurant ensuring a wider drinking audience and overall exposure. 

Liquidity: 85%
This measure encapsulates global market demand and a score of this level is very favourable. Bolstered in part by savvy drinkers globally finding relative value in Pavie’s price to points ratio.

Inter-Trade Price Volatility: 4.64%
Across the past year, a score below 5% indicates real stability. Steady and small price fluctuations are a hallmark of highly scored, well regarded Bordeaux. 

Summary:
Pavie is synonymous with high-quality Bordeaux production and is always relevant in the discussion surrounding absolute quality. The volatility and liquidity levels make this case a reliable performer. Price movements are steady and underpinned by demand, thanks to the power of the brand around the world. Consider this a Bluechip stock. 


Position for Profit: 

This case is a low-risk, long term play, a banker. This wine incurs low risk but has a very high propensity for profit in the future.

The above chart shows the first half of one of the main trends in Bordeaux wines, the two stages of price performance. Initial trading after bottling is frenetic, as market hype helps drive trading. Typically lasting 3-5 years, collectors and investors soak-up as much volume into their portfolios as possible, after which the price plateaus as can be seen in the graph above. A tannic wine such as Pavie needs time to mature and as a result, it is out of press and nor being consumed which logically slows trading.

However once ready, the fervour created from pulling corks rekindles trading and kickstarts consumption driving the price on once more. Subsequently, merchants and collectors will be drawn to the advantageous price to points ratio looking to catch the second price move. By way of comparison, 12 bottles of the 98 point 2010Lafite Rothschild already demands over £7,000, whilst the perfect-scoring 2010 Pavie will costs less than half at £3100

A good way to envisage potential performance is to look at a comparative vintage further into its drinking window, for Pavie this is 2000. The central traits are mirrored, a 100 points from a legendary modern vintage – a case of 12 now commands £4990

The cherry on top is that all this potential for gain is held with very little downside risk from your bluechip stock. 


To enquire about this opportunity please email jake@jftwines.com


The Author

Avatar

Jake Leighton