Cult Wines Annual Results
- Global revenues grew by 54% to £52m.
- Assets under management increased to £90m.
- International revenue grew 64% led by Asia.
- UK revenue up 40% year-on-year despite Brexit uncertainty.
- New partnerships with banks and wealth managers scale investor base.
- Strong investor appetite for Champagne and Burgundy.
Quarter Three Market Overview
- ‘Burgundy 150’ continued to lead the gain within Liv-ex 1000.
- Bordeaux trade share declined further in August to 57.3%.
- ‘Champagne 50‘ rose 5.1% and became the second-best performing region.
- ‘Liv-ex Bordeaux 500‘ closed 0.3% down at 322 in August.
- Italy and Rhone saw their trade shares gradually increased by 3% and 1.9% despite indices finished flat in August.
- ‘California 50’ launched and ‘Rest of the world’ gained 3.1% YTD.
Growth generated by UK and international network
Cult Wines’ annual revenues grew 54% to £52m over the last 12 months. Its fast-expanding international client base contributed 53% to total revenues, overtaking the domestic market for the first time. The company saw strong UK sales growth of more than 40%, reaching a total of £24.5m.
Asia leads global growth with further regional expansion
Asia was the fastest-growing region with revenues increasing 84% to more than £20m. Growth in the region was broad-based, with significant double- and treble-digit revenue increases in China, Singapore, Thailand, Indonesia, Malaysia and the Philippines. To spearhead continued growth in South East Asia, Cult Wines opened a new office in Singapore in October 2018.
Cult Wines’ portfolio returns outperform Liv-ex1
Achieving consistently strong investment performance has been central to Cult Wines’ growth and its average portfolio returns once again outperformed the industry benchmark; in the year ending 31 August the Cult Wines Index returned 6.35%, outperforming the Liv-ex 100 recognised benchmark, which returned 2.37% over the same period.
New partnerships with banks and wealth managers
Cult Wines grew its network of partnerships with leading global and regional banks, private wealth managers and investment advisers. Over the past 12 months the company agreed 20 new partnerships with leading institutions. Revenue from partnerships for the financial year reached more than £10m.
Demand for Champagne and Burgundy while Rhone emerges as one to watch
Over the past year Cult Wines saw sales of investment grade Champagne increase ten-fold, and Burgundy by 70%. Despite reports of a difficult en primeur campaign, Bordeaux sales were up 36% for the year, with the 2017 vintage accounting for £10m, a third of total Bordeaux sales.
Looking forward, early indications from the 2018 harvest in both Bordeaux and Burgundy suggest that this vintage will be both high quality and a bumper year in total production – a potentially winning combination for en primeur buyers in 2019.
1Liv-ex The Liv-ex indices track the prices of the most traded fine wines on the market, providing an industry benchmark for fine wine investment.
Cult Wines Performance Introduction
Portfolio based investment grade wine is one of the most established alternative assets available to investors looking for tax-efficient, asset backed diversification and capital growth opportunities.
Over 10 years, Cult Wines has become the global leader in providing analytically based, fine wine investment advice, both discretionally, and non-discretionally, utilising algorithmically based models across historic and projected data. This, combined with over 150-man years’ experience in the fine wine markets has driven our Asset Under Management (AUM) £90 million for our client base across the globe. During 2017, our index returned 10.32% and since 2009 123.59%.
With low interest rates, inflation concerns, low returns from traditional financial assets and an uncertain economic outlook, many investors are looking ways to enhance portfolio yield, diversify and gain consistent capital appreciation.
Quarter Three Trade Overview
Overall, the Liv-ex 1000 hit a record high at 360 in September as strong fundamentals and increased market activity in Burgundy and Champagne carried the broader index into positive territory. For example, Burgundy 150 continues to be the best-performing sub-region in the Liv-ex 1000, gaining 12% in Q3 and 23.9% Year-to-Date. With a few releases of highly-scored Italian wines, Italy 100 registered a steady quarterly gain of 5.9%. Champagne 50 rallied 5.1%, reaching new all-time highs, supported by strong performance of highly scored Champagne wines, in particular iconic vintages where supply is low, such as Salon, Mesnil 2002.
With no surprise, Champagne has started to show positive signs as new consumers develop new tastes and traditional consumers plan ahead for Christmas and New Year festivities. As a result, Champagne’s market share rose sharply from 2.5% to 14.2 % in early September. Dom Perignon 2009 and Louis Roederer, Cristal 2008 were among the most traded Champagne wines in Q3. Moreover, Champagne 50 – which tracks the performance of the most recently physical vintages for 12 Champagnes - rallied 5.1% this quarter.
The latest record highs for both Rhone 100 and Italy 100 suggests that many investors have sparked into action as conversations develop beyond Bordeaux, the value on offer, particularly in Rhone, is discerning. Specifically, wines from these regions that are worth mentioning include Clos Papes, Chateauneuf Du Pape 2016 and Roger Sabon, Chateauneuf Du Pape Secret 2016, both of which were among the list of Liv-ex’s most traded wines in Q3. The price of Roger Sabon, Chateauneuf Du Pape Secret 2016 increased to £1,249 per 12x75, representing a 15% jump in August.
US dominated the headlines in the fine wine market this quarter. In mid-August, Liv-ex created a brand-new index the California 50, which tracks the last 10 physical vintages of the five most actively traded Californian wines including Screaming Eagle, Opus One, Dominus, Harlan Estate and Ridge Monte Bello.
More importantly, the California 50 has made steady gains since 2003 and returned 15.8% in the last 12 months as interest for U.S. wines develops at a healthy pace.
Quarter Three Performance
CW main index, which had a sluggish start in July, closed this quarter 0.86% up. By region, Burgundy has seen both its value and trading activity increase in early September after spending much of the August in negative territory. Despite US’s under performance in the third quarter, California was still in the spotlight with the release of the highly-scored Opus One 2015; currently up 6.5% since release last month. CW’s Bordeaux index was broadly flat in Q3, mainly attributed by a stronger sterling.
Burgundy experienced a rough start in July with some major market movers in the region hitting their lowest since release, but CW’s Burgundy index recovered quickly in early September and closed the quarter 6.94% up. The 2005 vintage of Georges Roumier, Bonnes Mares, one of CW’s biggest riser in 2018, was up 206.67% year-to-date.
Moreover, two vintages of Domaine Leroy, Vosne- Romanee Genaivrieres, namely the 2013 and 2014, jumped up the list of CW’s top-performing wines in 2018, having risen sharply in Q3, also helped by heavy trading across many wines produced by Domaine Leroy over the past few months.
Second to Burgundy, Champagne has been the second-best performing region for CW, ending the quarter on a positive note, registering some of CW’s biggest market movers such Salon, Mesnil 2002 and Louis Roederer, Cristal 2002, which have hit record highs in September. Investors will note that CW’s Champagne index has risen for a 3rd successive quarter.
As suggested by the chart, the interest in Champagne could improve over the coming months by factors such as seasonality and investors who are seeking out steady gains could still benefit from increasing their exposure in this area.
CW’s Bordeaux index has registered a modest 4.49% gain since the start of 2018, as markets move to price in the continued downward trend of Bordeaux trade share and rising popularity of other underestimated and noteworthy regions, such as Rhone and Champagne.
Luckily, most second wines of Bordeaux First Growth were still found eye-catching and have returned handsomely for our clients, with Carruades de Lafite 2014 and Clarence Haut Brion 2011 continuing their upward momentum.
Overall, CW’s growth remains positive but less synchronised than last quarter. For now, Burgundy and Champagne stand out as the clearer leaders in terms of cumulative return. We also find that it’s not just Burgundy’s reds and whites that have proven popular but reds and whites from Hermitage, situated in The Rhone Valley, too.
Next to Champagne, Rhone is another region that is emerging from a low level. In 2018, Domaine Jean-Louis Chave, Hermitage 2010 has been a standout performer in the CW Rhone Index. Will Rhone be the next Burgundy?