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.