Tier 1 Burgundy: Great wines, great value!

Last week, we highlighted the timeless appeal of Burgundy’s Iconic producers. Now, we turn our attention to the Tier 1 category, which could form a leading source of growth in the year ahead.

Iconic producers drove the Burgundy rally in 2021, but we see reasons why other producers outside this small group of Iconic names could lead the next phase of the still strong market. Our Tier 1 producers deliver excellent wines that generate strong demand. We believe they could take on a greater importance in a Burgundy allocation in the year ahead.    

Tier 1 value

It is no secret that great wine from the region does not come cheap, especially after soaring Burgundy prices over the past year. However, many Tier 1 wines still offer excellent relative value heading into the 2020 EP.

A look at the performance of Cult Wine Investment’s EP selections from recent years illustrates this point. Since their release last year, the 2019 vintage Iconic wines have posted an astronomic 68.1% growth rate, dwarfing the still impressive 31.21% from the Tier 1 2019 vintage. But performance from previous vintages is much more even, as these older wines have traded in the market through different backdrops. Consequently, we think the relative performance of Tier 1 wines, both the new 2020s and back vintages, could catch up to their Iconic peers.

The 2019 anomaly

CW Investment’s EP wines CAGR by producer category

Source: Liv-ex as of 31 December 2021. CAGR = Compound annual growth rate.
Past performance does not guarantee future results.

The relative value on offer becomes even clearer when we look at individual wines. The chart below highlights a selection of wines from the same vineyard with significant spreads between the price for an Iconic wine and Tier 1 wine. While we use the 2014 vintage as an example, a similar trend is found across most vintages.

Although the global fame of Iconic producers means these wines will always command a premium, we believe their massive outperformance over the past year stretched this premium versus Tier 1 to its limits. The best wines from Tier 1 producers’ wines should deliver healthy outperformance going forward as this gap closes.

Different prices for great quality

Price differential between Iconic and Tier 1 producers’ 2014 wines

Source: Price data from Liv-ex as of 24 January 2022. Analysis by Cult Wine Investment.

Here, we highlight three standout Tier 1 Burgundy producers along with some of their top 2020 wines that we view as strong candidates to deliver alpha to a Burgundy allocation.