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The Ausone Layer

Something is rotten in the state of Ausone. APM asked a local trader for a price last week and he told us that “Ausone is toxic”. Now, whenever sentiment is that bad against a company and its share price is plumetting, you ask yourself two questions: is the company going bust? Or is this a situation to keep an eye on with a view to cheap acquisition?

So, what’s the back story? Ausone has a pedigree second to none. The chateau has been producing wine for longer than anyone else in Bordeaux, and it is blessed with what is commonly considered the most enviable terroir in the whole region. “The steep, hillside terroir with its grades of 15% to 20% is clay with limestone, and limestone over asteria limestone in the soil. This is what gives the wine of Chateau Ausone its intense mineral character.” I’m not surprised. That’s a lot of limestone!

Notwithstanding, for a great many years Ausone was considered not merely alongside the First Growths of the Left Bank, but as equivalent until very recent history to the mighty Petrus. Le Pin is a mere parvenu in comparison with Ausone, having produced its first wine in 1979. Ausone is “the wine connoisseur’s wine”, and so on. It should be on your bucket list.

As we know, the more recent fortunes of Petrus and Le Pin have been tied somewhat inexorably to the status of Robert Parker, whose rave reviews have propelled their prices to stratospheric heights. Undeniably, scarcity also plays a part in this. Le Pin’s annual production is between 400-600 cases, similar to someone like Domaine de la Romanee Conti, whose prices, incidentally, are around 5 times higher. That’s right. You don’t get much change out of £100,000 for a case of any vintage of DRC.

Petrus, meanwhile, produces around 2,500 cases a year, which although more than Le Pin is still dwarfed by the 15-20,000 cases produced by most First Growths. This becomes very important when you consider that fine wine is not only a drink, but also a “collectible”.

Collectors of “passion items” do so in the knowledge that not many other people own them. You might have to wait 30 years or so before supply of a high production fine wine starts to really taper off, at which point pricing becomes much more akin to such as prevails in the fine art market. This effect becomes noticeable much sooner in smaller production producers, like Petrus, and obviously Le Pin and DRC.

So, where does all this put Ausone? Ausone might have a pedigree to equal the best, but does it have scores to match? Since it is unarguably Robert Parker who has drawn the world’s attention to Le Pin, and although JF and Jackie K famously enjoyed Petrus, Robert Parker Jr’s interest has done it no harm at all either, so I think we can happily use his scoring system as a point of comparison.

Going back to the last great vintage of the 80s, the 1989, the average scores are as follows:

Petrus – 95 pts.

Lafite – 94.7 pts.

Ausone – 93.7 pts.

Le Pin – 93.2 pts.

Nothing the matter with Ausone there then. But it’s worth remembering that Ausone was revamped towards the end of the 90s, so how do scores look since 1999?

Ausone – 97 pts.

Lafite – 96.7 pts.

Petrus – 95.5 pts.

Le Pin – 94.6 pts.

Ausone, then, has indisputable pedigree, and quality. If you now factor into the equation that it produces only 1,500 cases per year, you have to wonder what on earth is going on in the market place right now. How can this wine be a pariah?

Let’s have a look at the price differential of three comparable 100 pointers from two great vintages.

We are seeing here the price comparison in absolute terms. The Petrus and Le Pin are around £25,000, the Ausone barely £11,000. Note the hike in the price of Le Pin. This resulted from the Parker upgrade from 95-98 to 100. If you were in any doubt about the Parker influence, there it is again.

Now let’s look at the comparison from slightly lesser vintages, but where Ausone still scored well. The 2001 vintage in Pomerol scored 90 points, as did the 2003 in St Emilion, so we have equivalent vintages. Ausone scores 100 points, Petrus 95, and Le Pin 98. 100 point scorers typically trade at a generous premium. Not the Ausone 2003!

Now we see something very interesting happening. From the initial rally through to 2009 Ausone is right in the game, however it doesn’t participate in the second phase up to mid-2011, and clearly underperforms quite badly in the correction, whilst the Petrus and Le Pin hold their own. Why might this have been?

I have heard several explanations, from poor marketing to the fact that “it just didn’t catch on in China”, some of which I am sure contain a kernel of truth. Let’s look at the price action a bit more closely. The following chart details the performance of the 2003 and 2005 against the Liv-ex 100, rebased.

This reminds me of that song by The Specials: “You’ve done too much, Much too young.” Perhaps the sheer degree of outperformance against the rest of the market has been the cause of the subsequent trouble. Once the slide began, investors, speculators, buyers of whatever hue, were watching a falling knife, and over time, the name became discredited. This argument stacks up if you look at how the Petrus and Le Pin performed against the same index during that period, again rebased:

Petrus seems to have performed in line, then at the time of the correction was likely “bailed out” by a combination of pedigree and scarcity. Le Pin was likely bailed out by scarcity, but even it didn’t achieve the same euphoria in the early run as the Ausone ’03.

This is Ausone ’03 against Le Pin ’01 rebased:

or the Ausone ’05 against Le Pin ’01 rebased:

So, as they say on “A Question of Sport”: what happened next?

In a stock market context, it can take a while for a discredited company to regain its former glory, but at the same time, the best returns are made by buying companies which the market thinks are bad, but which are not as bad as they seem. If you know something no-one else does, or which everyone is ignoring, you are likely on to something.

Ausone has not become a bum producer over the last 5 years. Its heritage is still very much intact. Hear what Robert Parker has to say about the 2012 vintage:

“One can’t say enough about the amazing job that Alain Vauthier and his daughter have done at this historic property on the decomposed limestone slopes of St. Emilion. Not surprisingly, the 2012 Ausone is one of the candidates for the wine of the vintage.”

Obviously we at APM have no idea exactly when current opinion will change towards Ausone, but since fine wine investment is for the long haul anyway, we would very strongly argue in favour of including Ausone in the portfolio, particularly when sentiment is currently so much against.

Best buys: Ausone 2003 and Ausone 2008.

All Things Nice and Fine Wine Investment Services

All Things Nice has now expanded to offer Fine Wine Investment Services to the discerning Indian consumer. To facilitate and amplify this arm of our portfolio, we have partnered with London based experts Amphora Portfolio Management. To know more about Fine Wine Investments and how it works please email us at finewine@allthingsnice.in.

Discounted perfection

Investment offer: Montrose 2010

  • Arguably currently the top Super-Second estate
  • 2010 recently ungraded to 100 points
  • 100 point value not yet reflected in the price
  • Offered at a 17.5% discount to the 100 point ‘09 (currently £2000/12)
  • 1990 currently trading at £5000. Also 100 points
  • Our offer at £1650 is the best price in the market

There is no doubt that the Chateau basking in the full glow of current adulation is Montrose. In recent years the Super-Second on everyone’s lips was Pontet Canet, with its bio-dynamic approach to viticulture and its pair pf perfect wines in 2009 and 2010.

Pontet Canet, though, had relatively humble recent origins (it was the wine served in railway carriages on the SNCF as recently as 1990), whereas Montrose boasts a fine pedigree. It was racking up 100 points in 1990, along with Petrus and Margaux. This is why Pontet Canet still has some catching up to do in terms of pricing.

Now Montrose has done some catching up of its own, since Robert Parker has recently upgraded its 2010 vintage from 99 to a perfect 100 (and don’t underestimate the value of that point). Amongst the Super-Seconds, therefore, the only two to have been awarded maximums in both 2009 and 2010 are Montrose and Pontet Canet.

It has long been rumoured that the 2003 Montrose, had achieved rave reviews in blind tastings, would be elevated to a perfect 100. In certain quarters there was therefore disappointment to see it upgraded from 97 to a mere 99, still a fabulous accolade, and well worthy of its recent investment outperformance.

We have examined the 2003, 2009, and 2010 for relative value by way of our proprietary algorithm. For 100 point perfection the 5.10 scored by the 2010 puts it at a marked discount to both PC 2009 (4.73) and PC 2010 (4.88).

19 cases available @ £1650 per dozen

Cases offered OWC in bond. Price excludes mgmt. fee. Subject to remaining unsold. E&OE.

All the best,
All Things Nice

WINE MARKET SHOWING ‘POSITIVE SIGNS’ AMID DOLLAR STRENGTH
The fine wine market is showing some indications of revival after price declines from its peak in 2011, helped by a strengthening dollar, according to Miles Davis, partner at Wine Asset Managers LLP in London. Read more…

Fine wine, Currencies and the Indian Investor

Fine wine, currencies and the Indian investor

You will not hear much commentary about currencies in discussions about the fine wine markets, but it is an incredibly important aspect both from an investment and consumption perspective. The market is denominated in Sterling, simply because the major merchants from 300 years ago operated out of the UK, and it has retained its place ever since.

Earlier this year, one of the reasons being touted for the relative lack of stock building by Asian merchants was that prices had risen quite sharply in USD terms over the prior 12 months. Indeed they had. As you can see from the second chart above, the GBP/USD rate moved from 1.50 to 1.70 over exactly 12 months to 30th June 2014.

Just when the broader market might have been supported by ongoing buying from Asia, the currency markets were doing their best to reduce the likelihood of that happening.

Since the summer, however, a combination of the expiry of the quantitative easing programme in the US, and a perception that the US economy is growing faster than its UK counterpart, has reversed the trend. The rate is now back to 1.57 and as can be seen from the top chart, is back to its 5 year average. We might therefore expect demand to pick up from Asian and other USD denominated buyers.

A recent trawl through our Hong Kong contacts reveals that this is precisely what is happening. We were asked yesterday if such “animal spirits” as had returned to the HK market were on show also back in the UK. (The answer is: yes, to a degree.)

The merchant fraternity in Hong Kong tell us that throughout this period, end-user demand has remained solid. They themselves had earlier over-estimated likely demand, so they had substantial stock positions already. The currency move meant that they had simply drawn down on stock, rather than continue to maintain high levels.

One merchant told us yesterday: “I am in desperate need of inventory.” So it is this re-stocking process which will drive the next leg, boosted by the currency move.

Since around 2005 the Asian buyer has been an increasingly important player in the fine wine game. Fine wine is a luxury good, and when developing economies expand and throw off billionaires a proportion of the wealth finds its way into Western luxury branded goods. Although the rate of accumulation has tapered off over the last couple of years (for reasons as diverse as the Eurozone crisis, the slowdown in China, and a series of clumsy En Primeur campaigns), there is no reason to believe that it lacks the power to become significant again.

Indian investors might see that the INR has had a good couple of months against Sterling. Our own soundings from trips to Mumbai suggest that the majority of people believe that the INR is in structural decline against Sterling. If that is true, then the current strength represents an improved entry point for INR investors, whilst a long term devaluation against Sterling means that a fine wine investment represents a very good currency hedge.

Fine Wine Investment Services


Fine Wine Investment Services
You will not hear much commentary about currencies in discussions about the fine wine markets, but it is an incredibly important aspect both from an investment and consumption perspective. The market is denominated in Sterling, simply because the major merchants from 300 years ago operated out of the UK, and it has retained its place ever since.

In the first half of 2014, one of the reasons being touted for the relative lack of buying coming out of Asia was that prices had risen quite sharply in USD terms over the prior 12 months. Indeed they had. As you can see from the chart below, the rate moved from 1.50 to 1.70 over exactly 12 months to 30th June 2014. This was making Sterling denominated investments much more expensive in local currency terms.

Since the summer, however, a combination of the expiry of the quantitative easing programme in the US, and a perception that the US economy is growing faster than its UK counterpart, has reversed the trend. The rate is now back to 1.50 and as can be seen from the second chart, is back to previous support lines. In theory, therefore, demand should be picking up from Asian and other USD denominated buyers.
A recent trawl through our Hong Kong contacts reveals that this is precisely what is happening. We were asked yesterday if such “animal spirits” as had returned to the HK market we on show also back in the UK. (The answer is: yes, to a degree.)

Since around 2005 the Asian buyer has been an increasingly important player in the fine wine game. Fine wine is a luxury good, and when developing economies expand and throw off billionaires a proportion of the wealth finds its way into Western luxury branded goods. Although the rate of accumulation has tapered off over the last couple of years (for reasons as diverse as the Eurozone crisis, the slowdown in China, and a series of clumsy En Primeur campaigns), there is no reason to believe either that it has disappeared, or that it does not have the power to become significant again.

Indian investors might see that the INR has had a good couple of months against Sterling. Our own soundings from trips to Mumbai suggest that the majority of people believe that the INR is in structural decline against Sterling. If that is true, then the current strength represents an improved entry point for INR investors, whilst a potential longer term devaluation against Sterling means that a fine wine investment represents a very good currency hedge.

The Bulls Are Back In Town

The Bulls are back in townYou may have noticed a rather encouraging amount of positive press about the wine market’s prospects in 2015: “ Bordeaux ’05 Wines Lead Biggest GainersSo are we at All Things Nice feeling equally bullish? Actually yes. In fact, enthusiastically so – we think this is a particularly propitious moment to consider a foray into the market.You are excused for wondering if you have heard this message before, because you probably have. At the end of 2011 and 2012, for example. And yes, one of the best known stock market aphorisms is “it’s different this time”. Some commentators think it NEVER is. Actually, it ALWAYS is. If it weren’t always different, investing would be a piece of cake. And as we all know, it ain’t.

 

So what you may have heard at the end of 2011 and 2012 was that it was a good time to invest in fine wine. Nice thought. Sadly wrong. And it is worth examining why the message was wrong then, but might be right now.

At the end of 2011 the buy call was predicated on the fact that prices had declined so much in the correction. By end 2012 there was the additional “benefit” of a year’s extra consolidation. Unfortunately both calls ignored a really important issue: what was going on in China. They also ignored things like merchants’ stock levels, exchange rates, and the Eurozone.

All investment decisions are about an analysis of background risk. If you can know more than the market, all well and good, but those occasions are rare indeed. Absent that, you have to try and work out WHY it’s different this time, and then decide if it matters.

At the end of 2011 and 2012 markets worldwide hadn’t absorbed the impact of the Eurozone crisis, nor of the economic slowdown in China. Merchants, in Asia especially, were sitting on oceans of stock. Even had the Chateaux offered coherent En Primeur pricing for the 2011 and 2012 vintages, it may not have helped.

So, where are we now? We would argue that the extra two years’ consolidation has shaken out a great deal of the loose stock. Merchants’ stock levels are now very much lower. To meet any underlying demand they now have to pick up stock. The market’s reaction to the 2005 upgrades has thrown up rises unseen since the bull phase.

The slowdown in China has now been thoroughly absorbed. We are getting used to the fact that 7.5% growth for an economy that big is perfectly satisfactory, thank you. The country is spawning billionaires by the dozen, and whilst it is now much more difficult to cross a government official’s palm with claret, the appetite for consumption has far from abated.

The US buyer has returned to the market, stimulated by buoyant economic growth and a much more attractive exchange rate against Sterling, in which fine wine is priced.

And finally, what can we expect from this year’s En Primeur campaign? Well, the 2014 vintage, whilst not legendary, is certainly a cut above all those since 2010. The merchants have sent an open letter to the producers advising them to be more realistic about pricing. Our understanding is that they can ill afford another flop, and indeed since their costs are in a weak Euro they have the opportunity to address previous years’ mistakes.

History suggests that when conditions are right, the fine wine market is a great place to make investment returns. We would suggest that the risk is currently greater being underinvested. There are bargains out there, and we recommend taking advantage of them.


Bordeaux ’05 Wines Lead Biggest Gainers on Liv-Ex Market
(Bloomberg) — Top Bordeaux wines from the 2005 vintage, currently being reviewed by critics 10 years after the harvest, were among the biggest gainers on the Liv-ex wine market last month and accounted for almost 20 percent of trading. Read more…

Bordeaux 500 ‘moving in right direction’
There are reasons to be cheerful studying the Liv-ex Bordeaux 500 since July, and it’s not all down to Robert Parker. Read more..

Bordeaux 2014 En Primeur Trip

Bordeaux 2014 En Primeur Trip

So the dust has settled on our three day sojourn to Bordeaux for the en primeur tastings, and with the benefit of a couple of weeks to digest all we experienced over in the capital of wine, we thought we would report to you our conclusions, both in terms of the wines themselves and the market conditions.

We were fortunate enough to be invited to taste in some of the greatest properties in all of Bordeaux (organised courtesy of our host Thibaut of Crus et Domaines de France), including Chateaux Margaux, Lafite Rothschild, Le Pin (a real treat, and the most coveted invitation of all!), Ducru Beaucaillou, La Mission Haut-Brion, La Conseillante, Pavie, Pichon Lalande and Leoville Poyferre. We also attended the Union de Grands Crus (UGC) tastings of St. Emilion, Pomerol, Pauillac, St. Julien, and Sauternes/Barsac. And all in three days!

The first thing we should point out is that the legendary rudeness and inhospitable nature of the vignerons of Bordeaux is, thankfully, an absolute fallacy! The welcome at each and every property was wonderful (save one, which will remain unnamed!), and we couldn’t have been made more comfortable. We met many of the key players in the Bordeaux wine world, including chateaux owners, consultants and the key negociants and they were all wonderful. Whether this is a function of awareness that companies like ours play an increasingly important role in the health of the market for Bordeaux wines, or whether it is simply a change in the approach to marketing their wares in general, it was most welcome.

The wines were generally of a high standard – certainly the best since 2010 – with, in our view, St Julien, Paulliac, and the sweet wines of Sauternes and Barsac providing the highlights. At this stage of a wine’s development you are not judging them on how they drink now, or even in two years. Rather, you are trying to discern if the ingredients for improvement and longevity are apparent. So, you look to see if the balance of acidity and tannic structure is in place, and whether the alcohol levels mesh with this balance. You also look to see if the primary flavours – the blackcurrants, red fruit and plums, for example – are well delineated and provide an inkling of future evolution, and whether the freshness and approachability of a wine can be extrapolated to mean the wines will drink well for a lengthy window. And this is where the ‘wisdom of

crowds’ becomes important in wine tasting, as it is incredibly difficult to taste (conservatively) 250 wines over a three day period and draw hard and fast conclusions as one man, or even as a small group. What tends to happen is that individual tasters draw their own conclusions on how approachable a wine is, how well balanced it is, and what potential glory it holds, and then look to discuss their ideas with peer groups to see if there is consensus. This process enables ideas to be exchanged, and for wider conclusions to be drawn. For example, we all thought that St. Julien’s wines, including Ducru Beaucaillou, Leoville Las Cases, Gruaud Larose and Beychevelle were particularly noteworthy, as were the wines of St Estephe such as Cos and Calon Segur. And, lo and behold, we weren’t alone! The vast majority of other wine professionals we encountered, from all over the world (Dutch, Japanese, Chinese, American) seemed to be of the same opinion. So, patterns emerge and the story of the 2014 en primeur tastings evolves a narrative.

Now, to the business side of things.
How will the campaign be viewed by market participants, and how will the chateaux price this vitally important vintage? There seems to be a view that the 2013 release price is the benchmark to consider, and while this has some merit, it is not the only possible guide. The closest stylistic match to 2014 is the 2008 vintage – indeed, although not participating in the en primeur system anymore, Chateau Latour went on record as saying their 2014 is very much in the mould of the 2008. Traditional en primeur logic would dictate that 2014 SHOULD release at around a 20% discount to current 2008 prices. As Mouton currently sits around the £3200 mark for a bonded case, a reasonable release price might therefore be in the range of £2400.

This price should be low enough to attract the attention of many market participants (ourselves included) and generate excitement around the en primeur campaign for the first time in half a decade.

We can only hope that the short-sightedness of the pricing in the previous five campaigns is remedied, and that the stilled heart of the Bordeaux wine industry receives some much needed CPR to get the system invigorated once more.

So, will we get the defibrillator or another nail in the coffin? We await the answer in the coming weeks with huge interest…


Hong Kong wine dealers raise a toast to falling euro and mainland China market recovery
Hong Kong’s wine trade is on the rebound, as businesses toast the falling euro and recovery of the mainland Chinese market. Read more…

Poor en primeur campaigns favour the fittest
Poor recent en primeur campaigns, particularly the failed release of 2013 Bordeaux, is a necessary shake-out that favours the strongest properties, according to one chateau director. Read more..

Wine Dinner at Neel, Beer Tasting At Woodside Inn And Chef Conrad For All Things Nice

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Hi,

Our concept is simple, we are here to celebrate and share fine drink and gourmet food with you through educational, social and decadent experiences.

We have within our portfolio a niche list of defined services that enable us to do just that. This month we’ve got a great wine as a recommendation for you and also an exciting offer on Riedel glasses in addition to a recipe from Chef Conrad of Pali Village Cafe.

As always if you require any of our services or if you simply want to catch up for a drink or two, give us a shout.

Wishing You All Things Nice

We decided to do something controversial and crush the myth that Indian food and wine do not compliment each other. Director de Cuisine Rahul Akerkar and MasterChef Mukthar Qureshi of Neel – Tote by the Turf combined forces with our very own Sommelier Nikhil Agarwal to put together a perfect 4 course wine dinner of Awadhi cuisine and a selection of eight international and Indian wines.

It’s no surprise that the dinner sold out almost immediately. The guest list comprised of members of the ATN community and food and wine writers. Rahul and Nikhil talked about the flavours of the food and the wine, elaborated on the concept of the dinner and interacted with guests at their tables. It was clear that the concept was a success, everyone savoured the flavours of the food and appreciated the way the wine complimented the courses.

The wines were served in Riedel – the world’s finest glassware, only enhancing the wine tasting experience.

Take a look at the menu here

All Things Nice & Woodside Inn Andheri come together every month to showcase international beers. This time, we featured the Viru Lager from Estonia, Fuller’s London Pride, Schneider Weisse from Germany, Murphy’s Irish Stout, Liefmans Fruitesse and Duvel from Belgium. Nikhil compared and contrasted the beers and took patrons through the art of beer tasting. This event is always fun with interesting people coming together for the love of beer; you leave with new friends every time! Come for our next beer tasting at Woodside, Andheri on the 9th of August 2012.

All Things Nice Private Tastings

With the weather all wet and unpredictable, we’re sure you are looking for ideas to entertain your guests at home. Host your party and kick-start it with an exciting single malt, beer, cognac or wine appreciation session.

It’s quick, interesting and stimulates the party mood for sure. The two hour session in your own home will be hosted by Nikhil Agarwal, Sommelier & Director of All Things Nice. We come with our own wines, beers or spirits, glasses and staff so you can sit back, relax and impress your friends. Get in touch with us for your next ‘night in’. Take it a step further and let our own guest Chef to cook for you!

Woodstock Estate Shiraz, McLaren Vale 2009 Australia

We recommend you stock up on our pick of the month – the Woodstock McLaren Vale Shiraz 2009 Australia. We love the this stylish and vibrant Shiraz which shows bursts of blackcurrants, spice and subtle hints of dark chocolate. The palate is full and rich in flavour, lush dark berries coat the mouth while savoury tannins provide an alluring texture that lingers. A food friendly wine and a classic example of McLaren Vale Shiraz in the glass. You must try it!

Got Something Nice to Share?

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call +91 99203 75444

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A set of Riedel glasses with Woodstock Shiraz

Buy a six bottle case of the Woodstock McLaren Vale Shiraz 2009, and we will throw in the perfect glasses to drink it with. Over the past 50 years, Reidel – the Austrian clan of master glassmakers has done more to enhance the wine drinker’s pleasure than almost any winemaking dynasty. They are the pioneers of inventing the first functional wine glass that was shaped to be designed for the character of the wine.

Order six bottles of the Woodstock Shiraz and get a pair of Riedel Syrah glasses free! Offer valid till stocks last. Limited period offer, call 9920375444 today to order.

Our guest Chef of the month Conrad D’Souza of Pali Village Cafe has put together a recipe just for the All Things Nice community. Try it and send us some pictures, we will feature you in our next newsletter! Click here to see the recipe.