France is the country you associate with wine. And, not surprisingly, they’re the country with the second highest wine consumption. By comparison, Australia is all the way down at number 10 – no dry July needed for us!
The care, precision and sheer love they have for the beverage resonates around the world. Put simply, there’s no such thing as “French culture” without wine.
But does that make it a good investment?
The French wine region
France’s wine-producing regions are the most famous in the world, with two million hectares of the nation’s remarkable landscape dedicated to vineyards. French wine-making conditions are so diverse that over 3,000 different types of wine are produced each year.
Each region has a distinct flavour profile that resonates throughout the wine industry. This is thanks to the range of temperatures and climates you can find throughout France. Up north in Champagne, you’ve got a cool environment perfect for sparkling wines. Down south toward the Mediterranean, you start building up a sweat (especially during summer). And in the middle – think a region like Burgundy – you get the best of both worlds.
This is what makes French vintages unique – each region has its own production practices, its own classification systems, and its own distinguished history.
Caption: Sourced from Vinodiversity
Put it all together and it’s easy to see why the world’s most valuable vintages are constantly produced in France.
There are many different French wine regions, but from an investor’s perspective, there are three standouts:
- Burgundy
- Bordeaux
- Rhone
Burgundy is renowned for its cold winters, hot summers and constant sunshine. This is great for warding off frost damage and encouraging growth even in the cooler weather. Hilly sub-regions like the Cote de Nuits produce some of the most distinct red wines in the world, due to their topography and high position above sea level.
Caption: Sourced from Wine-searcher, image overlooking a vineyard in Cote de Nuits
Bordeaux is internationally respected as a red wine haven and is France’s largest wine-growing region. Vintages from here are almost always a blend of Cab Sauv, Merlot and Cab Franc grape varieties, resulting in a rich, delightful drink.
Finally, Rhone is a region that sits alongside the famed Rhone River. The wines from this gorgeous valley are typically produced from smoky Syrah grapes and Grenache blends.
Caption: Sourced from Decanter
The French wine market
It doesn’t get more prestigious than the French wine market. The nation was almost single-handedly responsible for transforming wine into a highly professional alternative market.
Look at it this way – Liv-ex publishes nine different regional indices. Five of these are dedicated to French provinces.
Like most wine markets, Burgundy, Bordeaux and Rhone (the major French regions) have had a rough time of late.
Caption: Bordeaux has fallen more than 12% in the past 12 months, a fairly significant drop. However, even with market conditions struggling, the index is still up 3.3% over the past half-decade.
Caption: This century, Burgundy has been the best-performing region (besides Champagne) in France, even with its heavy losses over the past 12 months.
Caption: The Rhone region has had a year to forget – after reaching peak market values in mid-2022, prices have fallen back to below 2019 levels.
Although the short-term data looks a little scary, when we zoom out we get to see the real picture. And it tells us that over a long enough timeframe – French vintages are the real deal.
Caption: Sourced from Acker Wines
Between 2007 and 2023, wines in the Burgundy region outperformed the Nasdaq, posting absurd returns of over 400%. Annualised, that works out to 27% per year. It doesn’t get much better than that.
Bordeaux, perhaps the most esteemed wine region in the world, has been excellent from an investor’s standpoint too. Liv-ex’s Bordeaux 500 index puts its 20-year returns at 227%, or 11% every year.
Caption: Sourced from Liv-ex
After exploding out of the blocks in its first ~10 years of data, the Bordeaux 500 has slowed of late, recording most returns over the past decade. However, with trading volume increasing toward the end of 2023 and supply constraints reducing wine production from 2021-23, the market is poised for a turnaround.
Caption: 2023 regional share of weekly trading volume sourced from Liv-ex
Over the past two decades, Rhone has been another solid performer.
Caption: Sourced from Liv-ex
The Rhone 100 index from Liv-ex has grown about 90% in 20 years demonstrating solid annual growth of 4.5%. However, the current market downturn is warping these figures. Investors who can hold through the current bearish cycle are more likely to enjoy returns of 9-10%, which was the case between 2004 and 2022.
What are Grand and Premier Cru (First and Second Growth)?
What’s interesting about French wines is that each region has a distinct classification guide. For example, both Bordeaux and Burgundy are broken down into First Growths (Grand Cru in Burgundy, Premier Cru in Bordeaux) and Second Growths (Premier Cru in Burgundy, Deuxieme Cru for Bordeaux). However, Bordeaux continues until fifth growths, whereas Burgundy has two different classifications for “lesser” vintages (Village and Bourgogne appellation system).
Premier Cru loosely translates to “First Growth” in English. In Bordeaux, this is the best reputation a winery can have. In Burgundy, however, the best classification is called Grand Cru, with Premier Cru referring to the second-best.
Caption: Sourced from Wines with Attitude
The top classification (Premier or Grand Cru) is the most prestigious rating a vineyard can receive. There are thousands of wine producers in France, yet only 33 in Burgundy and just 5 in Bordeaux have achieved top status. Such vineyards are respected for their “goldilocks” harvesting environment that consistently produces delicate and complex reds.
Some of the most famed Grand/Premier Cru-labelled vineyards include:
- Clos de Tart Mommessin (Burgundy)
- Gevrey–Chambertin (Burgundy)
- Haut–Brion (Bordeaux)
The best French vintages
We could literally go back to before medieval times and tick off some stellar French vintages – France has been famous for its wines for centuries…although a thousand-year-old wine might be slightly past its drink window.
Caption: Sourced from Wine Terroirs
Looking a bit closer to home (so, you know, this century), there have been several standout vintage years, where production drop offs have coincided with high-quality wines. Limited supply, high demand? Yes please.
- 2005 was a “simply superb” year for reds – particularly those produced in Burgundy and Bordeaux. The growing conditions from start to finish were sublime, with just the right amount of warmth, moisture and sun to create bottle after bottle of stunning vin. Although perfect climates meant this season once had a high supply, the vintage was nearly 20 years ago and scarcity is naturally setting in. Top performers include the Domaine de la Romanee Conti Grand Cru (worth nearly $50,000!) and the Chateau Haut-Brion blend.
- 2009 was one of the best vintages in recent memory, with conditions in Bordeaux and Burgundy drawing comparison to that famed 2005 growing season. Boasting an impressive score of 93 on Wine Spectator, reds from this vintage are heralded as soft and fruity, with well-balanced tannins and lower levels of acidity. Many believe that the longer 2009 wines are kept in storage, the more the fruity flavour will evolve. Some of the stars of the show included the Domaine du Close de Tart (Mommessin) and the Chateau L’Evangile Pomerol. If there was one downside to this season, it was the lack of acidity which resulted in a subpar year for whites in Burgundy and Bordeaux.
- 2015 is widely considered the best vintage of the 2010s, particularly in the big red-producing regions like Rhone (where it scored a whopping 99/100!) and Burgundy. This season was categorised by dry conditions in contrast with enough rain for perfect grape ripening. Put together, you end up with masterful reds like the Tollot-Beaut Corton Bressandes and opulent whites like the Chateau d’Yquem.
Case study: 2009 Domaine du Clos de Tart (Mommessin) ‘Clos de Tart Grand Cru Monopole
2009 is heralded as one of France’s best vintages of the 21st century, characterised by optimal growing conditions for top-shelf reds. The best climate was found in the sub-region of Burgundy, Cote de Nuits, home to the esteemed Clos de Tart vineyard.
The estate was founded way back in 1141 by Cistercian nuns. Wine royalty Henri Mommessin acquired it in 1932, and it was soon after deemed a Grand Cru vineyard.
Caption: Image sourced from Wine News… The Mommessin family sold the Burgundy vineyard for nearly 200 million euros in 2017.
The signature Pinot noir from this vineyard goes back close to 100 years – you can still actually buy the 1943 Clos de Tart, if you know where to look.
To make matters even more prestigious, the Clos de Tart vineyard is a monopole. That means, unlike most other estates in France, it only has one owner. There are only five such Grand Cru monopoles in all of Burgundy.
The Mommessin family ended up selling the Clos de Tart vineyard a few years later – which makes the 2009 vintage produced while they were still in charge even more distinguished.
From a critical standpoint, the 2009 Domaine du Clos de Tart was a success. Robert Parker scored it a 97/100, while Wine Advocate said “There is more than enough depth and pure pedigree to allow the 2009 to enjoy a long life in the cellar. Drink 2024-2044+.”
Put it together, and you have all the signs of a mouth-watering investment:
- Stunning growing conditions
- The regional market (Burgundy) has an excellent history of performance
- Blue-chip wine produced by the storied Mommessin family
- Clos de Tart is a Grand Cru monopole, one of just five in Burgundy
- Excellent critical reviews and lengthy drinking window
From a more analytical perspective, the 2009 Domaine du Clos de Tart ticks all the boxes too. It is already trading for well over $1,000 AUD, maintaining this price point even amid the recent market downturn.
Caption: Sourced from Winesearcher
The wine was released in 2011/12 at an RRP of approximately $690 AUD. So in the past decade, its price has already appreciated 74% (annualised ~7% per year). These are solid figures…but at first glance they might not blow you away.
But remember that 2009 had excellent growing conditions – so plenty of top-quality reds were produced this year. Naturally, scarcity is a little slower to kick in.
The Domaine du Clos de Tart has an impressive drink window stretching well beyond 2050. As the bottle starts to truly get rare over the next decade, we can expect to see even more upward price pressure.
Some investment-grade wines are a bit of a speculative, longer-term play. But the 2009 Mommessin Domaine du Clos de Tart is about as blue-chip as alternative assets come.
Summary
The wine investment scene has come a long way over the past few decades – and it never would have happened if it wasn’t for the French market.
Regions like Bordeaux and Burgundy carry some serious weight, home to the most-traded and iconic wines in the world, with a market that has outpaced the Nasdaq and rakes in annualised returns of over 10%.
When it comes to investment-grade wines, it’s hard to go past famous French vintages – like your first and second growths. And if you’re anything like the French, the hard part will be keeping your Bordeaux in the bottle.
