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Liquid Insights: The Dominance of DRC

Liquid Insights: The Dominance of DRC
October 27, 2021
Bradley Calleja

The Domaine

Tucked in the sleepy French village of Vose-Romannée sits the world’s most esteemed wine estate. Sprawled across a countryside that spans less than two square miles grows a limited quantity of Pinot Noir grapes that will be hand-picked, fermented, bottled, and sold for prices that will make headlines and move markets. This quaint, unassuming town is the unofficial headquarters of the world’s finest vino- it’s the home of Romenée Conti and its spread of iconic vineyards. 

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The Flagship

De la Romanée Conti, abbreviated DRC, is the most renowned vineyard of the Romanée Conti property. The land was initially acquired by the Abbey of Saint-Vivant in 1232 but it was not until the 18th century that the value of the land was first recognized. The estate became the focal point of a bitter bidding war between Madame de Pompadour, the mistress of Louis XV of France, and the Prince of Conti, Louis François. The Prince would win the battle but neither of the aristocrats would win the war as the land was ultimately seized and auctioned off during the French Revolution. After changing hands throughout the early 19th century, Jacques-Marie Duvault-Blochet took control of the estate in 1869 and after acquiring the adjacent fields, started the formation of what is now the Domaine De la Romanée Conti. Today, the Domaine is recognized as a UNESCO Heritage Site, stamping a formal designation and further vindication on the important role the estate plays within the global wine market.

The soil offers a unique combination of iron-rich limestone that sits on a base of clay and carbonite-loaded marl. This distinct earthy mixture combined with a temperate climate provides the perfect foundation for vines that produce arguably the most difficult fruit to grow: Pinot Noir. The dark-red grape is wrapped in notoriously thin skin that makes them sensitive to minor temperature fluctuations and excess sunlight. The limited protection barrier also invites unwanted fungus, mold, and mildew that has little difficulty ruining entire vines in a matter of days. Combine this with naturally low yields, a limited harvest period, and command for cooler temperatures and you have the world’s most frustratingly finicky fruit.

Romanée Conti is the star that shines the brightest within the village of Vosne-Romanée. The vineyard spans less than 4.5 acres and produces between 300-500 cases of wine each year. The production totals are microscopic, even for producers of rare Burgundy, and command full attention on both public markets and auction houses. Consistency plays an important role in ensuring production levels remain steady and the majority of vines growing Romanée Conti grapes were planted before 1970. 

Overhead Map of Vose-Romanée & Surrounding Vineyards

The Other Vineyards

Surrounding the Romanée-Conti vines are other exclusive vineyards owned by the acclaimed estate. The grand cru vineyard La Taché covers 15 acres and sits directly south of Romanée Conti. Richebourg is produced in a small plot north of Romanée Conti and rolls out approximately 1,000 bottles each year. Three other vineyards, Romanée-St-Vivant, Grands Échezeaux, and Échezeaux each produced between 1,000-1,500 cases each year and command prices between $2,000-$3,000 depending on the vintage. Some of the world’s most renowned white wines are also produced in the region under the label ‘Montrachet’. The vineyard is less than 2 acres in size and grows exclusively Chardonnay. With an annual production of 250 cases, prices consistently exceed $10,000. 

So What Does it Taste Like?

I have, unfortunately, never experienced the privilege of indulging in a glass of Romanée Conti. The only varietal from the region I have managed to sample was 2015 Louis Jadot Clos Saint-Jacques, which is produced a stone’s throw north of the Romanée-Conti vines but sells for about 500% less than the name brand producers. The flavor profiles of the legendary Burgundy curated in Vosne-Romanée are known to be filled with an array of dark red fruits surrounded by unmistakable hints of spices, earth, and mineral. Certain wines, such as Richebourg, also carry traces of vanilla or oak that is absorbed during the aging process. 

The Financials

No wine sets records quite like Romanée Conti. In 2018, Sotheby's sold a bottle from the 1945 vintage for $558,000. The sale not only shattered original estimates, which closed at $32,000, but also shattered the previous record for any single bottle of wine sold at auction by over $100,000. The competition over 1945 DRC continued as another bottle closed minutes later with a final price of $496,000. The auction reshaped the wine leaderboard and cemented DRC as the king of collectible wines. The Romanée Conti estate only produced 600 bottles of the 1945 vintage, its lowest production total since the wine became a global commodity in the 20th century. The vintage also marked the last year before the winemaker pulled its vines and replaced them in 1947. So how has DRC performed as an investment? In 2021, five different vintages struck new highs according to Liv-Ex with additional appreciation expected. The Liv-Ex Burgundy 150, which tracks a variety of wines produced in Vosne-Romanée, has added 18.08% in the last year and climbed 82.87% since 2016. Overall, wine is continuing to develop as an asset class. While it is easy to highlight strong returns when the wine market is seeing appreciation in the 18-25% range, it is equally as important to review the sectors performance during downturns. In 2020, from January 1-March 31, the S&P 500 dropped -23%. Even alternative assets and commodities were battered as the S&P Global Luxury Index slipped -24%. Fine wine weathered the storm though, as the Liv-Ex Fine Wine 1000 fell -4% and recovered its losses by late spring. The index also outperformed during the 2008 financial crisis when the S&P plummeted -38.5%. Fine wine held serve and trickled less than -1% lower.

The power of fine wine investing might be found in something different than returns though. Finding an alternative asset that is truly uncorrelated to the market can seem impossible. Assets such as real estate or crypto are often touted as uncorrelated sectors but data shows they consistently trend in line with traditional stock and bond markets. Over the last five year, the Fine Wine index has carried a 0.12 correlation to the S&P 500. For reference, a correlation of 1 means the asset class moves identically to the market while a correlation of -1 means the sector moves exactly in the opposite direction. Investors looking for an asset class that shows limited correlation should track assets that are as close to zero as possible. The correlation of cryptocurrencies such as Bitcoin is more than double that of fine wine while real estate is six times more correlated to the market than the drinkable asset. This combination of consistent performance combined with limited correlation has helped transform wine into a favorite aomg investors looking to truly diversify their portfolio.

The Offering

Vint will be launching the Domaine De la Romanée Conti Collection as their 11th offering. The collection includes eight bottles at a $137,000 market cap for an average cost per bottle of $17,125. The collection includes three bottles of 2010 Domaine de la Romanee-Conti, Romanee Conti and a five bottles of a variety of Romanée Conti wines from 2016. The assortment includes one bottle of Domaine De la Romanée Conti, two bottles of La Tache, and a single bottle of both Romanee-Saint-Vivant, and Corton. Each of these four wines are grown within a short walk of one another but offer unique investment opportunities due to different price points and historic appreciation. With an estimated sale range between 2023-2026, the offering provides relatively strong liquidity compared to the traditional wine market. While solid appreciation could be realized in the next five year, with 76-year-old Domaine De la Romanée Conti breaking records at the auction house who know, maybe Vint will hold onto this offering a little bit longer.

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Disclaimer: You understand that by reading Altan Insights, you are not receiving financial advice. No content published here constitutes a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. You further understand that the author(s) are not advising you personally concerning the nature, potential, value or suitability of any particular security, transaction, or investment strategy. You alone are solely responsible for determining whether an investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal financial situation. Please speak with a financial advisor to understand if the risks inherent in trading are appropriate for you. Trade at your own risk. 

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