Great Expectations – Business: Fine Wine Monitor

The results of the Liv-ex survey on the new Bordeaux vintage might spell prohibitively high prices for US buyers

After a frenetic start to the year, last month the market took a breather. Trade was up 40% on 2005, but down 45% on the record levels of March. This, in part, reflected the shortened month, with UGC tastings and Easter reducing the number of trading days. Stock held by leading stockholders fell by a rather large 6% on the month. This is clearly a positive sign, particularly since much of the depletion in stocks took place in the two most recent vintages (2003 and 2004), where stock levels were highest. The Liv-ex 100 increased a further 2.85% for the month, bringing the 12-month gain to 29.5%.

Each year Liv-ex surveys its membership upon their return from tasting the new vintage in Bordeaux. The survey is designed to track the consensus of opinion among the best professional tasters of young wines in the international trade. Liv-ex’s membership numbers 130 of the world’s biggest buyers and sellers of fine wine, including at least 80% of the UK fine wine market by turnover. The full results can be viewed on our website at www.liv-ex.com, but in summary:

• Margaux was voted the wine of the vintage.
• Pontet-Canet tops the “value for money” category.
• The average score for the vintage is 95+, the highest in five years.
• Prices are expected to be 27% up on 2003 levels, which would be a new record

If these price expectations reflect reality, spare a thought for American buyers. Below we show an index of the châteaux release prices for the top 25 châteaux between the 2000 and 2005 vintages in euro, sterling and US dollar terms. We have calculated the 2005 release prices by extrapolating the results from our recent survey, which predicts a 27% rise (in euro terms) this year on 2003 on average (or 77% up on last year!).

If our members’ expectations turn out to be close to the mark, 2005 would set a new record in euro terms for our basket of 25 top names. Indeed, 2005 would be 20% up on the record opening prices set in 2000. On the face of it, this doesn’t seem too unreasonable, because many of the wines from the 2000 vintage, for example, have appreciated by more than that since release.

Indeed, our Liv-ex 100 Index of blue-chip wines is up nearly 30% in the last 12 months alone and many of the first growths are up by considerably more than that. For our friends in America, however, these
rises have been made considerably more painful by the depreciation of the dollar against the euro. For dollar buyers, even if our members’ expectations are not on the low side, prices will be up 80% this year on 2000 in dollar terms. For the first growths, the rises will likely be even worse. First growths are expected by our membership to be 50% more expensive in 2005 than in 2000. In dollar terms, that is a 125% increase – ouch!  db June 2006