Perverse as this may seem, experts are claiming a year of lower yields and less than ideal weather conditions may be exactly what the market requires.

Bordeaux should produce a much greater variety of wine styles this year as some regions were exposed to a springtime drought, others to hail and others to a late summer heat wave. Humidity in September has led to an increased risk of grey rot.

It certainly won’t be a disastrous vintage: some producers are describing their grapes as excellent. We should see wines which are more of the winery than of vineyard. The more trying weather conditions will lead to more rigorous sorting and some Chateaux running off excess juice to increase concentration.

Thankfully, for those on the sharp end of the recession, the less than stellar year should see prices fall by around 20% compared to 2010.

Despite this worrying trend at the top of the Chinese Bordeaux market, negociants are claiming all is not doom and gloom. They make the point that where prices are beginning to slide for the First Growth estate, labels lower down the pecking order of the 1855 classifications are beginning to attract more attention.

Wines like 5th growths Croizet-Bages and Pedesclaux in Pauillac, or Cantemerle in Medoc, are selling well in China. Pedesclaux, for example, is now selling for about £15 per bottle in China, where, until recently, it was only £10. Negociants are claiming that the price will rise to £20 in six months time.

Brands such as Chateaux Belgrave, another fifth growth from the Haut Medoc area, are also selling well in China and have now sold out of the 2009 and 2010 en primeur and have no back vintages.
Negociants also talk of Haut Medoc Cru Bourgeois Cambon La Pelouse as a ‘very significant’ wine in the Chinese market.

Many dealers in the China are pointing to this growth in the Chinese mid-market as a sign that the Chinese wine drinker is maturing. No longer obsessed by the big names of Lafite and Petrus, they are beginning to learn that fine wine needn’t always come with a five figure price tag. While the prices at the top end of market remain stagnant, however, there will some very nervous dealers between Bordeaux and Hong Kong.

The price of premium Bordeaux is beginning to fall after years of continuous inflation. At a recent Hong Kong auction, Chinese investors did what was once considered unthinkable: they snubbed Lafite. At the same auction the top four lots were all from Burgundy. A 12 bottle case of 1988 Romanee-Conti went for £74,000.

The firm Acker Merrall & Condit is hoping that Burgundy will pick up the slack where Bordeaux has begun to level out. They are auctioning 1300 lots, mainly from Burgundy, estimated to be worth around £8m.

The most expensive of the lots is a 12-bottle case of 1990 Henri Jayer Vosne Romanée Cros Parantoux expected to fetch around £48,000. Others include a 12-bottle case of 1990 Domaine de la Romanée Conti La Tâche, estimated at £38,000, and six bottles of 1978 Domaine Georges Roumier Musigny, estimated to sell for around £25,000.

Imports of wine into the former British colony have surged in the first nine months of this year by 57%, up to £600m. The wine is coming from France, Italy, Australia and South America but the real demand is for Bordeaux.

Since the duties on the import of wine were slashed from 40% to zero in 2008 imports have quadrupled. An entire infrastructure has sprung up around the wine trade with the appearance of wine merchants, auctioneers, distributors and storage cellars.

Hong Kong has now over taken London and New York as the pre-eminent hub of the wine trade.

It is true that the Chinese are obsessed by red Bordeaux generally and Lafite in particular. They generally show almost no interest in white wine and New World wine simply doesn’t hold the cachet the young Chinese buyer is looking for.

The next logical step for an investor looking to broaden the horizons of the Chinese would be Burgundy, as yet however it is still the Bordeaux estates driving the Chinese wine bubble.

Lafite has become the most sought after wine of China’s newly rich, eager to build impressive collections quickly and with the buying power to do so.

Lafite has the advantage of tripping easily off the Chinese tongue and its owner, Baron Eric de Rothschild should be praised for his early and decisive recognition of this burgeoning new market.

Recently, a case of Lafite 2000, a wine still far from peak maturity, sold for £21,000 or nearly £2000 a bottle. Sotheby’s Hong Kong will sell a lot of 25 cases of Lafite 1982 for £80,000 per case.

Where famous names like Pontet-Canet, Pichon-Baron, Beychevelle and Grand-Puy-Lacoste easily attracted buyers, other brands with less name recognition in China and Hong Kong such as Smith-Haut-Lafitte, Rauzan-Ségla and Figeac have struggled.

The top end of the Chinese and Hong Kong futures market for Bordeaux relies heavily on a culture of gift giving. The Chinese will make a present of a bottle or a case of Grand Classe Bordeaux to a business partner or government official and the most important part of this exchange is the recognition of the brand by the party receiving the gift. If the label isn’t a famous one, the gift giver will lose face.

This top heavy demand has lead to sellers insisting buyers purchase less famous brands in job lots along with their more well known competitors. This has meant a great deal of panic discounting and a level of toxicity creeping into the market.

Although profits were healthy enough there is a worry that only 89% of cases were sold. The Chinese buyers were said to be disgruntled by having to buy wine they didn’t actually want and were puzzled by the disorganised tempo of the campaign. Bordeaux must be aware, as it takes the unusual step of abandoning loyal customers in Europe and America for the perceived riches of the Far East, that many investors would just as happily move their money into other industries if they see a better profit to be made elsewhere. The estates would be wise not to burn too many bridges with their traditional markets.

Two International Monetary Fund (IMF) economists published a 19-page report showing that the performance of fine wine investment actually works in relation to the wider economy. If we are to compare the advantages of alternative investments, fine wine is often considered more attractive than other alternatives, in part because investors can always drink the contents of the bottle, which is not possible with a barrel of oil or a work of art. So when times get tough for fine wine investors, they can always opt to pop a cork or two and enjoy some of the best-tasting wines ever produced, regardless of the profits that are realized.

Depending on the state of the economy, some fine wine collectors will have doubts about selling items from their collection, especially if the market is seeing falling costs associated with certain bottles. But during these times many buyers are also generally quite ecstatic about the opportunity to buy certain Bordeaux wines at a discounted price. Also, in this case Bordeaux chateaus that sold their wines as investment “futures” can eventually experience deflated prices compared to what they once were, prompting some collectors to sell.

Let us take for example the 2006 vintage. After the bottles were delivered, the value for each bottle of wine had not increased and, worse, there was a good possibility that prices would fall. Miles Davis, who was a partner of Wine Asset Managers in London, pointed out that the trend in 2006 was for a strong start to trading, while 2008 was when alternative investments like fine wine ‘went physical,’ with prices rising dramatically, followed by a rapid decline.

Financial experts agree that fine wine investment should not account for more than 10% of most investment portfolios. Even though the current investment activity of fine wines from around the world totals more than $3 billion annually, it is still wise to use a conservative approach when approaching any alternative investment. Thanks to a strong growing interest among Chinese consumers, however, there is still much potential for growth among fine wine investments in the years to come.

Many experts in the realm of alternative investments agree that there are really only three ways to deal with rapid price fluctuations in the fine wine market: either be dedicated to weathering the storm, start to drink from the bottles, or buy more to take advantage of the low prices. Those who have put some hard-earned money into fine wine investment may have seen bad times in the last quarter of 2008, but the prices rapidly picked up again in the first quarter of the following year.

According to experts, now is the best time for collectors to invest in fine wine, in part because it will give them a chance to fill in any expensive gaps. After the major corrections were made in 2008 and again this year, the biggest names in the wine industry were affected, particularly those that belong to the first growth Bordeaux category. Examples of such wines include Lafite, Latour, Mouton Rothschild and Chateau Margaux, among others.

To further support this stance, Charles Curtis, who is in charge of Christie’s wine department in North America, has recently said that now is a very good time to purchase fine wine. In fact, he mentioned that now is the best time in the entire last ten-years. Today, many people have become eager to take a part in fine wine as an alternative investment. The current market has brought unprecedented access to such alternative investments these days, and even ordinary people who do not have millions or billions to spend now have a chance to experience the fine wine market.

Aside from the ever-increasing prices of fine wine, another advantage for collectors who are interested in buying fine wine today comes with the ready availability of many sought-after vintages. Even if the cost of investment-grade wine still ranges in the hundreds to tens of thousands of pounds for each bottle, the exquisite flavour of the most popular vintages is virtually guaranteed to make the wine a highly prized drink, with many of the wealthiest collectors buying fine wines for consumption instead of investment purposes.

In another good example, consider Aubrey K. McClendon, Chesapeake Energy Corporation’s chief executive. A 2009 auction brought nearly $9 million dollars for his fine wine collection of more than 9,000 bottles, when he decided to sell the entire lot in response to a cash crisis. The sale was done in two parts; half in New York last March, and the other half in Hong Kong during the following month. The presale estimate was only $5 million, but McClendon actually came out well above the expected sale price for his fine wine investments.

Much of the credit for this remarkable renaissance must go to Master Wine Maker Philippe Dhalluin. The estate was impressed enough after Dhalluin’s vintage of 2006 to hand him greater control and he set about producing less wine with lower yields and making much needed improvements to the cellars and the wine making facilities. The results have been clear to taste. 2005, 2006, 2008 and 2009 have produced wines of exceptional quality and exuberance and the 2010 promises to return Mouton Rothschild to its place as one of the pre-eminent Left Bank estates.

Early tastings have had critics falling over themselves to find the most extravagant superlatives. Many say it will match those grand old vintages of 1982 and 1986 and even, whisper it, the hallowed 1961.

Even at this young age the Mouton Rothschild 2010 is dense, rich, mouth-coating and opulent, the nose showing hints of crème de cassis, Asian spices, tobacco, coffee and toasty oak. The Le Petit de Mouton Rothschild, the estate’s second wine,  while naturally less concentrated and delivering less complexity and spice than its much-lauded sister, is nonetheless a fine wine, showing oak, spice and blackberry aromas, a medium to full-bodied palate with a coffee, cassis and black fruit finish.