South Africa: time to talk terroir

Terroir needs to be at the top of South Africa’s agenda according to one of the country’s leading Pinot Noir producers, Anthony Hamilton Russell, owner of Hamilton Russell Vineyards in Walker Bay. “South Africa needs to sort out its terroir message in order for it to be taken seriously as a fine wine producing country. It will help us promote our fine wine offering. The importance of terroir very much exists in South Africa, it just hasn’t been communicated properly yet,” Hamilton Russell told the drinks business at Cape Wine last month.

“Terroir is fundamental to the Pinots I produce. The stony, clay-rich soil in Hemel-en-Aarde helps us to get closer in style to Burgundy than any other New World country,” he said, admitting that it has been “tough” being a South African fine wine producer and trying to convince the world of the worth of the country’s top wines: “I’m proud everyone has persevered. If we were American our wines would be on allocation."

South Africa's premiere Pinot Noir region, Hemel-en-Aarde

Paul Cluver, managing director of Elgin-based Paul Cluver Wines, agrees that South Africa’s top end wines offer “outstanding” value. “You’d never find the same quality/price ratio in France or the US. We’re just suffering from a bit of an image problem. People are not willing to pay more than around £20 for South African wine at the moment. We need to shift our focus to our premium offering and market ourselves better,” Cluver said.

Hamilton Russell’s Walker Bay neighbour Peter Finlayson, owner of top Pinot producer Bouchard Finlayson, agrees that South can get closest to Burgundy in terms of tannin content. “Our best Pinots are well structured, with good tannins and good extraction. There are no vacumes in the wine business. I’m seeing a lot of newcomers to Pinot Noir trying to capitalise on the favourable returns it affords,” he said.

Finlayson believes the challenge for South Africa moving forward is to look at terroir specification. “We need to streamline our efforts and focus on making wines with a sense of place. I’d like to see the terroir approach really take hold across the Cape. I’m starting to see it happen,” he said. Thys Lombard, sales and marketing manager of Tokara meanwhile, believes the key to success in the fine wine sphere lies in pricing the wines down slightly, so they remain exceptional value.

“South African fine wines are starting to enter the market at the price they are supposed to be. We got complacent, but we’ve lost our arrogance and become critical of ourselves, which is healthy. We’ve gone back to the drawing board. It’s a good thing that our best wines are not priced too highly. We’re aiming for the top of course, but I’m happy for us to be thriving in the middle at the moment.”

Wine writer Michael Fridjhon agrees that rather than trying to dominate the top tier, South African can carve out a niche at £10-£20. “I’m not sure the future of South African fine wine lies with icon wines. The £10-20 bracket is where we should be ploughing our furrows."

Hedonism Wines

Tomorrow a temple of fine wine opens in London. The Russian-owned Hedonism Wines in Mayfair boasts various vintages of all of the five first growths, along with Domaine de la Romanée-Conti, Super Tuscans Sassicaia and Ornellaia, Screaming Eagle, Pétrus, Le Pin and many other of the finest wines available to humanity.

Run by Alistair Viner, Harrods' ex head wine buyer, the most expensive single bottle on sale is Château d'Yquem 1811 at an eye-watering £100,000.  I was lucky enough to be invited to the press launch on Monday night. Descending into the cavernous basement, on catching sight of the giant large format bottles on display, from Domaine de Chevalier Blanc 2000 to Château Pichon Baron Longueville 2005, I felt like Alice in Wonderland after she'd imbibed the 'Drink Me' shrinking potion. Hedonism is more Ferrari showroom than fine wine mecca.   

Turning a corner, I stumble across a Surrealist cave filled with sinister hands, from Mickey Mouse gloves to lobster claws gripping the bottles in a scene straight out of a Salvador Dalí and André Breton film, with a little Labyrinth and David Lynch thrown in for good measure. Taking another turn into the unknown, I enter what looks like a forest filled with wine bottles taken captive in the corkscrew-like twisted branches.

Stopping to drink in the curious mise-en-scène, I hear a squeak and watch one of the bottles move of its own accord. It's all very Lord of the Rings – I half expect Frodo Baggins to come bounding in barefoot. Though most of the liquid treasures remain unaffordable to mere mortals, Hedonism is worth a visit for the experience alone. With so many iconic bottles on show – their lusted after labels naked and exposed – it's a wine lover's delight. Go forth and drool...

Fine wine more solid than FTSE 100

While the FTSE 100 has been delivering poor returns in the past five years, fine wine investment is booming. The Wine Investment Fund has posted double digit returns over five years of 10.04% compared to 0.03% returns in the FTSE 100 over the same period. However, the market has taken some hits during the economic crisis, with the investment falling 15% in 2011.

Andrew della Casa, director of The Wine Investment Fund, told the Daily Telegraph that this fall is a correction from a 76% increase since the end of 2008. He predicted that by the end of 2012, the Liv-ex Fine Wine 100 index will finish 10% above its 2011 year-end level.

"So far this year it has risen 3%. Now may be the most advantageous time to buy into the fine wine market since January 2009,” he said. Last week, the Liv-ex Fine Wine 50 reached a 13-week high.

Lafite '08 down 45% as fine wine prices fall

The value of Lafite 2008 is down 45% on last year, as 2011 fine wine prices showed their most dramatic slide since 2008. As reported on the drinks business, according to Liv-ex, prices of the 100 top-traded wines fell by an average 22.5% between June and December last year – the steepest fall since the beginning of the recession nearly four years ago. Lafite ‘08 peaked in January 2011 at £14,043 a case, but was trading this month at £8,108, while Lafite 2009 has dropped 28% in value in the last six months, from £13,831 a case in July 2011 to £9,800 in December 2011.

Year to date prices for Lafite 2008 were already down 26% last August with the wine proving the worst performer in terms of price of the last 10 physical vintages from the estate. This is in stark contrast to October 2010, when the price of Lafite ’08 shot up by 20% overnight after it was announced bottles would be marked with the Chinese symbol for the number 8, regarded as lucky in China.

Meanwhile, the Live-ex Claret Chip, consisting of Bordeaux first growths from top vintages going back to the mid-‘80s was down 26% in the second half of 2011. The second wines of the first growths have also performed poorly, with Château Margaux’s Pavillon Rouge 2008 down by nearly 50%. Carruades de Lafite 2008 fared better, but still lost 29% of its case price. Though Carruades 2005 is holding up well, selling for £3,672 in June 2011 and £3,054 last month.

Bucking the trend are top second growths like Leoville-Las-Cases and Cos d’Estournel, which have maintained their value and outperformed the falling market. Outside first growth claret the picture is slightly rosier, with Burgundy’s Domaine de la Romanee Conti, Chateau d’Yquem and Super Tuscan Sassicaia the strongest brands in 2011.

Why the change? According to WineSociete China, China’s leading organisation for wine education, it can be put down to China’s money supply. In 2009, Chinese banks made almost 10 trillion yuan in new loans, expanding the country’s loan portfolio by a third. In 2010 they lent almost 8 trillion yuan, roughly twice as much as in 2008. Trillions of yuan, formerly locked up in bank reserves, flowed into the economy, leading Chinese consumers to put their rapidly depreciating currency into hard assets like fine wine.

Last year, money supply growth and lending in China fell sharply as Beijing put the brakes on asset and consumer price inflation. As lending has declined, so have sources of credit for many of China's local and privately owned enterprises. In an attempt to generate liquidity, fine wines are quietly being offered for sale by many Chinese collectors.

Dan Buckle of Mount Langi Ghiran

Wine and the City chats to Dan Buckle, chief winemaker of Mount Langi Ghiran in Australia's Victoria region, about the changes he's made at Langi since joining in 2003, the rain-soaked 2011 vintage and Australia's struggle to be taken seriously as a premium wine producer.

Simon Staples, Berry Bros

Wine and the City chats to Simon Staples, fine wine sales director for Berry Bros & Rudd, at the Royal Horticultural Halls in London about the Bordeaux 2010 en primeur campaign, through the roof pricing, interest from Asia, and whether the Bordeaux bubble is about to burst.