🍇Investing in Bordeaux Wine🍷

Spotlight on: Bordeaux

For those unfamiliar with the concept, it may come as a surprise to learn that people have been investing in the wine of Bordeaux for hundreds of years.

As early as 1787, American statesman Thomas Jefferson noted in his diary that a premium was being charged for Bordeaux wines from the more mature 1783 vintage versus the more recent 1786. 

The lesson here – that fine wine improves with age, and will therefore be worth more in the future than it is today – remains the central pillar of wine investing.

Since Jefferson’s time, investing in wine has become an increasingly mainstream pursuit for investors seeking uncorrelated, attractive risk-adjusted returns. In the graph below you can find the performance of the Acker Fine Wine Index Bordeaux. 

 
This trend shows no sign of slowing, with HSBC reporting in 2023 that 96% of UK wealth managers expect allocations to fine wine to increase.

For many years, Bordeaux was the ‘only’ truly investment-grade region. Even as other regions like Burgundy, Champagne and Tuscany have emerged, Bordeaux retains a 30-40% share of secondary market trading volumes.

History of Bordeaux

As perhaps the single most prestigious wine region, the history of wine-making in Bordeaux stretches back nearly 2,000 years.

Following Julius Caesar’s conquest of what was then Gaul, vines were planted to keep Roman legionary and native alike well-supplied.

As the Roman Empire expanded, what is now Bordeaux had easy access to an important shipping route to new colonies in Britannia – thanks to the favourable position of the Gironde estuary. 

Following the collapse of the Roman Empire, wine continued to be made – but almost entirely with ‘domestic’ consumption in mind.

In the 12th Century, the marriage of Henry Plantagenet (later King Henry II of England) to Eleneaor of Aquitaine meant Bordeaux passing into English hands. 

Unable to grow vines themselves, it did not take long for Britons to rediscover their love for what was quickly termed ‘claret’ – an English bastardisation of a Latin term used to describe ‘clear’ (e.g. light red or yellow) wines.

Even during the medieval period, export volumes from Bordeaux to the UK are astonishing. At the turn of the 14th century, a single Bordelais Town – Libourne – was exporting 11,000 tons of wine to London a year. The same area provided 1,152,000 bottles for the wedding of Edward II.

Trade disruption caused by the near constant wars between France and England in the centuries that followed meant that other export markets were sought. 

In the seventeenth century, the arrival of Dutch engineers led to the draining of the marshland around the Médoc, and the planting of vines to make the sugary, sweet wine that appealed to Dutch palates – of which Chateau d’Yquem is the shining example. That meant that, in turn, Bordeaux wines flowed out through Dutch trade routes and across the world.

As tensions with France cooled following the Napoleonic Wars, the British Empire followed suit.

The enduring appeal of Bordeaux is much due to marketing. Savvy estate owners – notably those of Chateau Haut-Brion – realised the importance of developing a brand centuries before the term was in common use. 

Amusingly, English diarist Samuel Pepys wrote on April 10, 1663 that he had ‘drank a sort of French wine called Ho Bryen that hath a good and most particular taste I never met with’. Realising the value of differentiating themselves, other Chateaux quickly built brands of their own.

Bordeaux's status as the premier wine region globally was enhanced in 1855, when Napoleon III ordered the wines of France to be ranked according to a classification system. The intention behind this was to ensure that only the finest were presented to a global audience at the 1855 Exposition Universelle de Paris.

The classification of the finest wines of Bordeaux wines into five separate categories, with four (later five) ‘First Growths’ – Premier Grand Crus – at the top and ‘Fifth Growths’ at the bottom, immediately inflated the prestige of those lucky enough to be included.

Interestingly, in what would be a harbinger for the emergence of wine as an asset class, the ‘price’ of the individual wines played a key factor in the selection criteria.

To this day, the first growths – Chateaux Latour, Lafite, Haut-Brion, Mouton and Margaux – remain amongst the most beloved by drinkers, collectors and investors, alike.

The Impact of Age

For those that have sampled a glass or two of aged Bordeaux,

Historically, a good investment strategy has to be ‘buy young’ and sell when the wine has matured into its drinking window. 

The En Primeur system, pioneered by and most associated with Bordeaux, involves buying wines shortly before they are bottled – almost like ‘wine futures’. Iconic vintages (e.g. 2005) also continue to carry appeal amongst collectors.