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Some Important Snippets from the Wine Market Journal

In an era of on-going uncertainty – inflation, commodity crunch, geopolitics, climate change – alternative investments such as wine continue to hold steady as a store of value.

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March 4, 2022

After a scorching year, the wine market entered 2022 with fiery momentum across every major wine index. With the advent of the new year, we pondered whether or not the wine auction market could sustain its momentum, and whether or not bidders would continue to compete for wines at unprecedented prices.

Based on early data in Q1 2022, The Wine Market Journal is excited to report our findings based on 9 live and 28 internet auctions through mid-February.

Broad Market Indices 
The Wine Market Journal’s broad market indices each jumped approximately 4% in the first six weeks of the quarter. Our Blue-Chip WMJ150 index grew 4.09% and our TOP500 trailing slightly with a 3.93% uptick.

The rate of growth for our broad market indices has not kept pace with what we observed in the final quarter of 2021. There are, however, an abundance of auctions yet to be held in Q1 with plenty of time and opportunities for the market to gain momentum.

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Climate Change and the Wines You Drink

https://cnaluxury.channelnewsasia.com/experiences/wine-champagne-pinot-noir-riesling-climate-change-14894918

In case you haven’t noticed, champagne prices have dropped about 10% across the board. The only ones that have held are Krug and other collectibles. More vintages as well coming online. Champagne collection is seeing an uptrend among HNWIs recently.

For everyday drinking, I’m also looking forward to more Spätburgunder / Pinot Noir from Germany. Keep safe and healthy all!

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Climate Change and Wine

I just got back from Victoria, Australia and the sad truth is that if global temperatures rise by 3 deg Celsius, there will no wine industry in Australia to speak of. Until such time, let us all be responsible with our Earth warming habits and read what the Australian are doing in the face of climate change.

https://theconversation.com/a-warning-for-wine-lovers-climate-change-is-messing-with-your-favourite-tipples-timing-112865

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Wine – Stable Liquid

My portfolio of wines has grown in value but that says little about volatility and the ensuing heartaches and headaches as my clients see their beloved portfolios gyrate. However wine, when matched against a quite volatile 2018 equity market (esp. in the 2H), is a bedrock of stability and consistent returns. And what about against gold?

The liquid is not tied to economic cycles other than euro movements. Prices are tied to supply primarily, as the years go by bottles are drunk. Demand spikes when the wine matures. Of course, these benefits come with a long lock-in period and illiquidity.

 

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Best Pinot Noirs Outside Burgundy

I came across this article from Decanter recently : https://www.decanter.com/premium/best-pinot-noir-wines-outside-burgundy-296918/

And how fortunate we are in Singapore with such a dizzying array of wines. The list seems to suggest that Aussie and Kiwi pinot noirs are most likely to please. Marlborough would be my top choice.

Pinot noirs are the ultimate food friendly red. Maybe bested at times only by Beaujolais. New world pinots would like be more red fruit and red pepper than oak and earth. Pair with ‘lighter’ red meats such as pork, duck and veal dishes.

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Californian Wine Suffers Under Trump

http://www.bbc.com/news/business-43560477

I came across this article and what caught my eye was the image of (smug?) Xi Jinping holding a glass of choice red:

Chinese President Xi Jinping

The picture speaks a thousand words to the content and just highlights how much the gravity of world trade is shifting to the Asia-Pacific … to the Chinese consumer. Hong Kong, by virtue of geography, remains the gateway to this growth and it would be impossible for Singapore to carve out any niche in this area unfortunately. Some battles we just can’t win.

Industry ferment: US wine industry crushed over tariffs

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What is your choice of tipple?

I came across an interesting article in the BBC which talked about how different alcoholic drinks shaped one’s mood. Summarised, it is:

The anonymous online survey, which recruited respondents via newspaper and magazine adverts and social media, found:


  • Red wine appeared to make people more lethargic than white wine

     


  • Respondents were most likely to report feeling relaxed when drinking red wine or beer

     


  • More than 40% said drinking spirits made them feel sexy

     


  • Over half said drinking spirits also gave them energy and confidence

     


  • But around a third said they felt aggressive when drinking spirits

     


  • Drinking spirits was more likely than all other drink types to be associated with feelings of aggression, illness, restlessness and tearfulness

     


  • Men were significantly more likely than women to associate feelings of aggression with all types of alcohol, particularly heavier drinkers

     

All in all, my experience with countless drinkers – old, young, rich, poor, tall, short, female or male – does seem to corroborate with the result that wine and beer do make people more relaxed. However, in my opinion, no difference to the calming effect of red or white wine. Interesting, I’ve had someone tell me before that sweet wine is pretty erotic.. hmm..

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The Billionaire Trying to Make the World’s Best Pinot Noir

http://www.bbc.com/news/business-40496904

Tech entrepreneur TJ Rodgers made billions of dollars founding silicon chip maker Cypress Semiconductors, now he has turned his sights to wine-making, and is on a quest to make the best Pinot Noir in the New World.
A collapse in the roof of a gigantic tunnel being driven into a hillside sounds like a pretty dramatic event.

But the entrepreneur TJ Rodgers is calm as he recalls what happened.

“It’s not like you see in the movies with rocks flying, and stuff like that.

“It will kill you but it’s kind of a slow motion thing, and you can walk [away] and stay in front of it,” he explains.

He is speaking inside one of three giant caves that house his winery high in the Santa Cruz mountains in California.

The construction of the facility was a monumental task, taking years and requiring advice from experts in digging tunnels under the Austrian Alps.

Occasional cave-ins were just one of many challenges.

The location was so remote that it was impossible for concrete to be driven in without it setting first. Instead, they had to drive in a concrete-making plant which they assembled on site.

And the reason for all this intense effort? “Our mission statement is to make the best Pinot Noir [wine] in the New World,” says Mr Rodgers.

He is certainly not someone to do anything by halves. He founded the huge silicon chip maker Cypress Semiconductors in 1982, and subsequently built it into an enterprise worth billions of dollars.

The silicon chips that Cypress makes are found in millions of mobile phones and many other devices. Chips are also found on the bottles produced at the winery, which is called Clos de la Tech.

TJ Rodgers, who recently stood down from Cypress, first became interested in wine in his youth. Pinot Noir proved to be his favourite, in particular that made in Burgundy.

He wanted to know more, so he travelled to France, visiting vineyard after vineyard in Burgundy.

Despite the bemused responses from some vineyard owners, Mr Rodgers says he learnt a lot from his time in Franc

Back in California, his interest blossomed into a passion. He set about trying to make wine himself, and he enlisted the help of his wife, Valeta Massey, who now spends much of her time on wine-making.

Mr Rodgers first experimented with a vineyard at his home. Later, after the purchase of the site in the Santa Cruz mountains, the venture became more ambitious.

The plan was to aim for the highest possible quality. The best way to do that, Mr Rodgers decided, was to copy the wine-making process used in Burgundy in the 1830s.

This meant using techniques such as foot-crushing the grapes, and being as gentle as possible with the wine at every stage.

Pumps are avoided. Instead, the facility is a “gravity winery”, explains Mr Rodgers. The three enormous caves are arranged one above the other, so after fermentation in the topmost cave the wine flows through pipes downhill into barrels in the second cave for the next stages of the process.

Despite the emphasis on traditional methods, technology also plays a role. For example, many real-time measurements are taken during fermentation, and special devices are used to measure moisture levels in the field, helping to ensure the crops get exactly the right amount of water.

But Mr Rodgers is quick to add that modern techniques are only used where appropriate: “the technology is not to supplant the old process, the old guys were pretty smart.”

TJ Rodgers is far from the only wealthy individual to try his hand at pushing the boundaries of wine-making in California. But are ventures like his little more than the wine-making equivalent of vanity publishing?

Not necessarily, says Aaron Pott, a wine-maker and consultant who has worked at the top end of the industry in France and California. With the right vineyard, and skilled staff, he says, it is perfectly possible to make excellent wine.

Mr Pott adds it would also be a mistake to assume that only ancient vines can produce good output. “Great wine can be made from young vineyards,” he says.

But while it may be feasible to make high quality wine, making money in the process is more difficult, according to both Mr Rodgers and Mr Pott.

For one thing, there is the high cost of setting up facilities like those built by Mr Rodgers and other wealthy people in California. Quite apart from the cost of the land and buildings, the equipment can be expensive.

Take, for instance, the French oak barrels used at Clos de la Tech – these cost $1,000 (£774; 876 euros) each.

Then there is the question of yield. The downside of aiming for high quality, says Mr Rodgers, is that output will be small.

“Our yield up here is one tonne per acre. If you go to a commercial farm in Napa you see five tonnes per acre, and if you go to Modesto you see 12 tonnes per acre. Ok so right there, the war’s over with regard to economics. Your wine’s going to be expensive,” he explains.

Nevertheless, although economics may present a challenge, benefits can flow from what Mr Rodgers and others like him are doing, says Mr Pott.

Whilst in some ways it may make it harder for smaller concerns like his own to compete, Mr Pott believes that the emergence of wealthy wine-makers in California has helped “to raise the bar” of quality – and that ultimately is a good thing for the industry.

TJ Rodgers and Valeta Massey say they have enjoyed their venture immensely, and that they have learnt a lot about wine in the process.

Perhaps the biggest lesson for them has been the prime importance of the starting point – the grape.

“The French have a phrase – ‘the wine is made in the field’.

“The wine has a certain potential defined by the grapes in the field and… the best you can do is take 100 per cent grapes and make 100 per cent wine. And all wine making is downhill from there,” he says.

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The Most (Delicious) Liquid of Alternative Investments

A constant rule that keeps coming up in the Chartered Alternative Investments Analyst (CAIA) exams is that alternative investments tend to possess an illiquidity premium. I guess that applies, in scientific terms, to everything else except to wine as an investment class. And what’s more, even your investment loses all of its value, you can still drink it and convince yourself it is indeed worth its original value. How’s that for principal protection!

Anyway, it has been a long slog over the past year and a half doing the CAIA exam with no finance background and scrapping through mathematics in my school days. A shout out to my mentor who encouraged me in what he called “a most worthwhile investment”, “just as easy as CFA lah” and “if it ain’t painful, then it ain’t worth doing”.

It was painful.

And worth it.

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Disruption? Keep Calm and Drink Wine

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So on 22 Mar 2017, being one of the few rare free days that I have, I attend the Business Times’ Leaders’ Forum on Disruption and Transformation. Simply because I badly needed to do some non-wine networking and I was interested to find out what ideas could be generated for a small-timer like me.

So the theme of the day really was about digital disruption and transformation. The implication is continuous life-long learning and skilling. For me the biggest take-away was to always think about value-add, leveraging on technology and never be afraid to be humble and learn.

How about this thought for wine collectors – all your wine bottles tagged with RFID chips that contain detailed information about each bottle. One wave of the RFID wand and stock-taking is done. The results are sent to a cloud and synchronised with a customised mobile app, no more manual input. The app futher syncs with CellarTracker / Wine Market Journal and wine values are also updated.

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