Burgundy 2015 Investment Report ENG-3-012017 CONTENTS INTRODUCTION 03 Burgundy 2015 VINTAGE REPORT 04 Key conclusions for the 2015 vintage 05 BURGUNDY MARKET & PRICE EXPECTATIONS 06 KEY PRODUCERS 07 BURGUNDY PERFORMANCE 08 Key performance figures 08 Liv-ex Burgundy 150 performance vs FW Indices 08 CW Burgundy Index vs Liv-ex Burgundy 150 Index 10 Burgundy 150 performance vs major FW Indices 11 Burgundy 150 vs Global equities, Oil & Gold 13 Spotlight on Domaine Leroy 2011 14 BURGUNDY MARKET LANDSCAPE 16 Supply vs Demand 16 2015 production levels 16 Global appeal 17 HOW TO BUY BURGUNDY EN PRIMEUR 18 Rules of engagement 18 Grand Cru 19 Premier Cru 20 Village 21 BURGUNDY 2015 CRITICAL ACCLAIM 23 ‘The merciful vintage’ Neal Martin Producer Diary NOTES & CONCLUSIONS 56 INTRODUCTION “There are many ways to the recognition of the truth, and Burgundy is one of them.” Isak Dinesen By its very nature Burgundy fascinates. The regions idiosyncrasies and complexities had in the past left it isolated and reserved for the cognoscenti. With the pending release of the 2015s, it is hard to recall such excitement, interest and demand amongst global the fine wine community. Neal Martin’s scores are out and there are a splattering of ratings from Stephen Tanzer (Vinous), we still await scores from Burghound but regardless of the latter, the quality of the 2015s is without question. Neal Martin remarks ‘make no mistake, 2015 is a great vintage’, whilst Steen Ohman of WineHog proclaimed ‘ I have never tasted anything like the very best 2015s’. With demand for Burgundy growing rapidly over the past few years, we believe that 2015s present investors and collectors with a great opportunity to secure a number of the most celebrated producers and their highest quality cuvees at first release. The case for purchasing Burgundy En Primeur has rarely been so compelling. A vintage that will inevitably go down as one of the true greats from the Cote d’Or, and we therefore advise our clients to participate at all levels. This is a vintage not to be missed and the following report explains exactly why. BURGUNDY 2015 Mother Nature has been far from kind to the region over the past few years. Variable conditions have offered up a host of challenges ranging from hailstorms, uncontrollable rot, the most irritating of pests and more recently a spell of frost so severe it would give all five Ice Age films a run for their money. So early reports for 2015 of an uncomplicated growing season followed by an excellent harvest reverberated around the wine market with the Burgundophiles amongst us anxiously awaiting another a potentially great vintage release. Of course, each producer has their own version of events but here is a high level summary of the conditions which define this great vintage. Introduction | +44 (0)20 8332 9386 | wineinvestment.com 3 VINTAGE REPORT Following the difficulties of previous years, the growing season for 2015 would have felt like a walk in the park. Most growers described 2015 as an ‘easy vintage’ and you could forgive them for their description as things were much quieter in the vineyard. As Neal Martin remarked ‘only those winemakers whose vines reply to the word “Chardonnay” and not “Pinot Noir” might have suffered some anxiety in 2015’. The growing season offered a mild winter and a very hot summer, some of you will recall the blistering heat wave we encountered here in the UK especially across June and July. Temperatures reached their highest levels since 2003 and conditions akin to the Atacama Desert left growers with chronic neck pains as they nervously searched the skies above. The plots boasting water retentive clay soils fared well, as did the older vines; vines with extensive root systems can overcome quite extreme variations in water and nutrient supply. Fortunately, the rain arrived in time to avoid serious damage from the drought but some vines were stressed in this period which stifled growth. The main period of rainfall was on the 12th and 13th of August, which Neal Martin suggests ‘almost saved the vintage’ as this heavy shower ‘gave the vines a much-needed shot in the arm’. More normal weather conditions in August provided respite aiding the gradual ripening process. Harvest was quick and uncomplicated. The majority of growers harvested in early September under perfect conditions. George Lignier in Morey St Denis harvested a week before the average (September) noting he was delighted with his decision and a number of growers sent their teams out in the morning to pick to take advantage of cooler conditions. The hot summer had clearly laid the foundations for a rich and giving vintage, whilst the timely rainfall in August and the cool conditions during harvest has resulted in wines not only offering a generous fruit crunch but a remarkable freshness combined with elegance and pleasant tannins that make these some of the most beautiful young wines we have ever tasted. 2015 is a vintage of exceptional quality especially for the reds and following the recent critical acclaim demand will far outstrip supply. The warm weather and problems experienced in previous campaigns has led to reduced yields. According to a number of growers, production and volumes are down around 20% with some areas such as of Northern Cote De Beaune were down by as much as 50% due to hail. Vintage Report | +44 (0)20 8332 9386 | wineinvestment.com 4 Most producers likened the 2015s to the very warm and dry years such as 2009, 2005 and 2003, although most were quick to provide few comparison to2003 further than a hot summer. Romain Taupenot who runs Taupenot-Merme described the vintage as ‘racy’ and across the board believes that lessons were learned from the 2009 vintage. The growers handled the heat a lot better in 2015, which leaves us with well balanced, fresher wines, he added. It’s fair to say that whilst the climatic conditions were favourable in ’15, it is the craftsmanship and wizardry of the winemakers which has made this vintage truly special. It it is premature to make concrete vintage comparison, however for the reds the 2005 vintage appears to be the most popular. 10 years on from the 2005s, most have shut down and there is an overwhelming feeling that 2015s are far more seductive. These are wines to be enjoyed in their youth, more charming and more playful than 2005 but also with the capacity to age long term. Some more creative vintage comparisons are as follows: In the main 2015 is also very strong year for the whites yet the style and quality is varied. Certainly not as uniform as 2014, less precise but more succulent and theoretically should drink a lot earlier. KEY CONCLUSIONS FOR THE 2015 VINTAGE 1. 2015 is a great year for the reds and a very good year for whites. 2. A vintage that suits all levels – yes as you’d expect the Grand Crus are in most cases the summit of the vintage but there are a number of examples where the Burgundy hierarchy order of play Village, Premier, Grand Cru can be modified – this is what makes this vintage so appealing. 3. Bureau Interprofessional des Vins de Bourgone (BIVB) state that 2015 harvest was down 3% on the 10 year average: i. Reds down 12% over a 5 year average. 4. Cote de Nuits has produced the standout wines with the real jewels being Vosne-Romanee and Chambolle-Musigny which suit the warmer vintages. 5. Cote de Beaune has produced very high quality, complex and stylish wines. The appelations in the Cote de Beaune have had great success but Neal Martin has been particularly complimentary about Corton suggesting that this is an area where buyers could get the best value for money. 6. Certainly a vintage to buy the village level reds as they will benefit from the charming profile of the wines. 7. Allocations are likely to be ultra-competitive and therefore investors and collectors will be required to place balanced orders. Vintage Report | +44 (0)20 8332 9386 | wineinvestment.com 5 BURGUNDY MARKET & PRICE EXPECTATIONS Prices are destined to be high such is the quality of the 2015s and those who have followed the Burgundy market closely over the past 5-7 years will recognise that the focus on Burgundy has increased significantly, The worldwide ‘burgundy’ fan base has grown exponentially and therefore the wines from this region have now taken on a whole new global standing. It’s fair to say that the current quality of wines now being produced has improved significantly over the last 15 years, and there is a much wider audience who are keen to experience the unique and rare wines of Dugat-Py or discover the next Jean-Marie Fourrier – and tell their friends all about it! Prices could potentially be the highest in real terms due to a number of factors; 1. Domestically a weak exchange means a de facto EP price rise, although given the quality of the 2015s the secondary market trading will absorb any initial pricing concerns. 2. Low Yields in 2015 combined with an undistinguishable 2016 – will inevitably lead to increased demand in 2015s and therefore an opportunity for suppliers to set higher release levels, some may compensate for projected 2016 production levels. 3. High quality product – secondary market benchmarks have moved the goalposts and 2015 price rises likely justified as a result of the quality. The prices for the producers at the very top of the game have increased exponentially over the past 10 years and this is certainly an area of the market that can provide investors with some very attractive returns, but knowing which wines and producers to focus on does require intimate knowledge of the region.