My colleague at Bordeaux Index, Italian wine buyer Oliver Sharp, has written eloquently in the forthcoming print edition of Club Oenologique [published on March 23] on the topic of Italy’s most desirable names. Reading the piece, I was struck by how it highlighted the same challenge that Italian wine faces in the investment sphere: you would never talk of Bordeaux and Burgundy in the same sentence, yet the majority of investment discussion puts all Italian wines in the same boat.
This grouping very much serves to obscure what are ultimately entirely different investment dynamics between regions and even sub-regions: even a division into Tuscany and Piedmont is too simplistic in context. To understand the country most clearly, the best delineation probably falls as follows: Key Super-Tuscan; Other Tuscan; Piedmont; Other. Certainly this is how we consider the performance potential and dynamics in our portfolio management.
Take Piedmont. In 2017, a number of key traditionally styled Piedmont producers – Conterno, Rinaldi, Giacosa, Mascarello – almost doubled in price (the price of the top 2004 from each producer rose by 93%, 74%, 102% and 94% respectively), albeit potentially without that much wine actually having changed hands, given the small production figures involved. Performance of Tuscan wines – Key Super-Tuscan or Other Tuscan – was uninteresting during the same period.
Yet those same Key Super-Tuscan wines have in many cases been some of the best performers across the entire wine market across the past two to three years (key vintages of Sassicaia and Solaia are up by 30%-50% for example); during that period, activity in not just Piedmont and Other, but also Other Tuscan has been mixed and does not merit attention.
The reason is that the wines could barely be more different, not just in their profile but in their supply-and-demand dynamics. And to make a simple comparison even between Bordeaux and Super-Tuscans, and Burgundy and Piedmont, would likely confuse rather than help.
Piedmont is an interesting place to start: it has similar rarity to Burgundy or the Rhône, but understanding of the wines is probably the lowest of any investment-suited wine region. It still lacks broad interest from an Asian buyer base and even high-net-worth collectors from Europe and the US are sometimes discouraged from sustained collecting by finding the wines difficult to comprehend in tasting experiences.
That the wines merit the attention of collectors is neither beyond doubt nor the subject of our focus here. The price movements in 2017 for traditional producers – so, not Gaja for example, which has traded differently – were seemingly driven by a realisation that the wines were too good and rare for their current pricing level. But they did not ultimately reflect a whole new (Asian, for example) buyer pool for the region – and for this reason, prices haven’t moved much in the years since, and volumes traded remain surprisingly limited.
Ultimately, investment interest is most pronounced on new release (where there can be value opportunities, but not that widespread) and then for aged stock where increasing rarity must ultimately drive prices up over time. The 1980s and 1990 (before a string of poor vintages) would fall into the latter category; the mid 1990s and early 2000s not quite yet.
Super-Tuscans – most particularly the key names of Sassicaia, Ornellaia, Solaia and Tignanello – had until recently been considered one of the classic examples of gradual supply-demand shifts in the wine market driving prices up (Champagne is the other oft-cited one). Both regions can see their wines consumed surprisingly soon after release, meaning stock becomes hard to find before too long. This has all changed since 2018, however, with price performance of 30%-50% across key names and vintages, including those recently released.
Super-Tuscans will not be as interesting from an investment perspective as they have been
A neat reason provided for these movements has been Italian wines being exempt from US trade tariffs (recently suspended). This has no doubt been a factor, but has clearly not benefited other Italian regions in the same way. It rather seems a combination of this but also increased consumption (a wider collector base, perhaps uninspired by prices of Bordeaux Super-Seconds) and greater investment interest. There are certainly similarities to be drawn with Champagne’s move towards much higher investment focus in the early part of the past decade.
It’s too early to comment on whether this transformation is complete – something which would likely see more mature vintages (say more than five years post-release) become most interesting, or whether things are still in flux. We do have a view that Super-Tuscans will not be as interesting, from an investment perspective, over the next two to three years as they have been in the past two or three.
Other Tuscan wines generally refers to a combination of Chianti and less prominent blends or single varietals (which may or may not be described as Super-Tuscans). These have not been without interest from an investment perspective – Soldera, Masseto, Fontodi, Castello di Ama – but do not have the same level of market demand even where production is much lower.
In some ways, where they have seen performance is akin to the movement among Piedmont’s traditional producers, where the market has recognised the intrinsic quality and perhaps rarity is underpriced, but that has not driven sustained demand. The investment potential for these wines is probably best seen as relating to maturity and rarity.
Other as a category is much more esoteric, with wines such as Quintarelli and Dal Forno’s Amarone. It is of very limited significance in terms of trading volumes, and the lack of predictability around changes in its market dynamics means investment interest tends to be mainly in the group of collectors who keep a close eye on value but ultimately aim to drink.
What would a classic Italian investment portfolio (or component of a broader portfolio) look like taking into account the above and our market outlook? It would likely be weighted towards Key Super-Tuscan, with a minority portion of top Piedmont (traditional or modern producers) and perhaps a sprinkling of Other Tuscan. The most interesting movements over the coming years may arise from further market reassessments of intrinsic value. So, if Bordeaux and Burgundy see significant gains – as we believe they may – many Italian wines, across all segments, may again look cheap.
Matthew O’ Connell is head of investment at Bordeaux Index