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26 January 2022

Tier 1 Burgundy: Great wines, great value!

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Posted in: Wine Investment

Tagged: Burgundy

Last week, we highlighted the timeless appeal of Burgundy’s Iconic producers. Now, we turn our attention to the Tier 1 category, which could form a leading source of growth in the year ahead.

Iconic producers drove the Burgundy rally in 2021, but we see reasons why other producers outside this small group of Iconic names could lead the next phase of the still strong market. Our Tier 1 producers deliver excellent wines that generate strong demand. We believe they could take on a greater importance in a Burgundy allocation in the year ahead.    

 

Tier 1 value

It is no secret that great Burgundy wine does not come cheap, especially after soaring prices over the past year. However, many Tier 1 wines still offer excellent relative value heading into the 2020 EP.

A look at the performance of Cult Wine Investment’s EP selections from recent years illustrates this point. Since their release last year, the 2019 vintage Iconic wines have posted an astronomic 68.1% growth rate, dwarfing the still impressive 31.21% from the Tier 1 2019 vintage. But performance from previous vintages is much more even, as these older wines have traded in the market through different backdrops. Consequently, we think the relative performance of Tier 1 wines, both the new 2020s and back vintages, could catch up to their Iconic peers.

 

The 2019 anomaly

CW Investment’s EP wines CAGR by producer category

Source: Liv-ex as of 31 December 2021. CAGR = Compound annual growth rate.
Past performance does not guarantee future results.

 

The relative value on offer becomes even clearer when we look at individual wines. The chart below highlights a selection of wines from the same vineyard with significant spreads between the price for an Iconic wine and Tier 1 wine. While we use the 2014 vintage as an example, a similar trend is found across most vintages.

Although the global fame of Iconic producers means these wines will always command a premium, we believe their massive outperformance over the past year stretched this premium versus Tier 1 to its limits. The best wines from Tier 1 producers’ wines should deliver healthy outperformance going forward as this gap closes.

 

Different prices for great quality

Price differential between Iconic and Tier 1 producers’ 2014 wines

Source: Price data from Liv-ex as of 24 January 2022. Analysis by Cult Wine Investment.

 

Here, we highlight three standout Tier 1 Burgundy producers along with some of their top 2020 wines that we view as strong candidates to deliver alpha to a Burgundy allocation.

Domaine Perrot-Minot

Although its history stretches back more than 130 years, Perrot-Minot is one of the hottest addresses in the Cote d’Or. The current enthusiasm stems from the work of Christophe Perrot-Minot, who practices organic farming and keeps intervention to a minimum in order to express the unique qualities of the domaine’s vineyards, which contain a high selection of old vines across 19 appellations.

Perrot-Minot wines typically offer excellent value for money. This means that even if prices come higher this year, Perrot-Minot’s line-up still contains long-term appreciation potential.

1 Mazoyères-Chambertin Grand Cru

  • Average all-vintage 5-year price growth – 39% (Wine Searcher)
  • 2020 score – 95-97 points (Neal Martin, Vinous)

2 Chambertin Grand Cru

  • Average all-vintage 5-year price growth – 136% (Wine Searcher)
  • 2020 score – 95-97 points (Neal Martin, Vinous)

3 Chambertin Clos-de-Bèze Grand Cru

  • Average all-vintage 5-year price growth – 127% (Wine Searcher)
  • 2020 score – 95-97 points (Neal Martin, Vinous)

4 Chapelle-Chambertin Grand Cru

    • Average all-vintage 5-year price growth – 41% (Wine Searcher)
    • 2020 score – 95-97 points (Neal Martin, Vinous)

Maison Joseph Drouhin

One of our favourite producers, Drouhin delivers excellence at all levels from grand cru through village wines. Liv-ex reported Drouhin had the fourth largest number of individual wines traded on its platform in 2021, a clear sign of the demand across its full range. Demand will surely remain fierce for Drouhin wines as the fantastic new 2020s are released in the coming weeks.

1 Chambertin Clos-de-Bèze Grand Cru

  • Average all-vintage 5-year price growth – 22% (Wine Searcher)
  • 2020 score – 94-96 points (William Kelley, Wine Advocate)

2 Charmes-Chambertin Grand Cru

    • Average all-vintage 5-year price growth – 19% (Wine Searcher)
    • 2020 score – 91-93 points (William Kelley, Wine Advocate)

3 Chambolle-Musigny Premier Cru Les Amoureuses

    • Average all-vintage 5-year price growth – 28% (Wine Searcher)
    • 2020 score – 94-96 points (William Kelley, Wine Advocate)

4 Corton-Charlemagne Grand Cru

    • Average all-vintage 5-year price growth – 22% (Wine Searcher)
    • 2020 score – 93-95 points (William Kelley, Wine Advocate)

Olivier Bernstein

Here we have one of the best examples of Burgundy’s micro-négociants - talented winemakers who don’t own their own vineyards and instead buy grapes from a network of growers in prime locations. Unlike the traditional négociant system where buyers have little influence in the vineyard, micro-négociants like Bernstein manage the whole process from the vineyard until bottling.

Bernstein’s exceptional results mean his wines have quickly won over critics and Burgundy fans since he set up his label in 2007. Although the strong demand alongside tiny quantities means secondary market prices are already trending higher, Bernstein’s reputation is still on the rise. We see plenty more room for prices to grow further as they remain well below those for Iconic producers. A fantastic set of 2020 wines should also help Bernstein’s image.

Andrea Marino

I loved the wines. Even better than the 2019s, which are great.

Andrea Marino, Cult Wines Burgundy Buyer

1 Mazis-Chambertin Grand Cru

    • Average all-vintage 5-year price growth - 57% (Wine Searcher)
    • 2020 score – 93-95 points (Neal Martin, Vinous)

2 Chambertin Grand Cru

    • Average all-vintage 5-year price growth - 110% (Wine Searcher)
    • 2020 score – 92-94 points (Neal Martin, Vinous)

3 Bonnes-Mares Grand Cru

    • Average all-vintage 5-year price growth - 87% (Wine Searcher)
    • 2020 score – 91-93 points (Neal Martin, Vinous)

4 Charmes-Chambertin

    • Average all-vintage 5-year price growth - 79% (Wine Searcher)
    • 2020 score – 91-93 points (Neal Martin, Vinous)

Full List of Cult Wine Investment’s Tier 1 producers

Alain Hudelot Noellat

Anne Gros

Bernard Dugat Py

Bernstein

Bizot

Bonneau Martray

Cecile Tremblay

Claude Dugat

Clos De Tart

Fourrier

Domaine de La Vougeraie

Roulot

Denis Mortet

Etienne Sauzet

Eugenie

Francois Lamarche

Georges Mugneret Gibourg

Ghislaine Barthod

Groffier

Henri Gouges

Hubert Lignier

Domaine des Lambrays

Jean Grivot

Jean Jacques Confuron

Joseph Drouhin

Joseph Faiveley

Lucien Le Moine

Marquis d'Angerville

Meo Camuzet

Perrot Minot

Pierre Yves Colin Morey

Sylvie Esmonin

Trapet (Louis)