Signs of stability for fine wine

The downward trajectory of the fine wine market looks to be bottoming out after an increasingly stable 2015.

After years of decline it would appear that the worst is finally over for the secondary market after a dull but mercifully flat year.

As the year is not yet over the Liv-ex Fine Wine 100 index may yet finish in the red – for the fifth year running – but the more positive turn to the market from summer of 2014 until September of this year should have been enough to stop most of the damage.

Liv-ex stated: “While market sentiment definitely remains on the side of caution as we move into 2016, the levelling off of the Liv-ex indices this year has at least broken the downward cycle of previous years.”

As Bordeaux trading sunk back to levels not seen since 2004, the rise of the Burgundy, Italian, Champagne and ‘Rest of the World’ indices has brought some much-needed positivity to the market.

The Burgundy 150 and Rest of the World 50 (both sub-indices of the Fine Wine 1000) both reached record highs this year, while Italy, Champagne and the RoW indices substantially upped their share of trade on the Liv-ex platform.

Italy and Champagne have in fact now overtaken Burgundy as the most traded regions behind Bordeaux though Burgundy is still a far more valuable part of the overall market – albeit with a yawning chasm opening up beneath it.

The US also surged this year, building its market share to 2.1% on the back of strong price performances by Scarecrow and Screaming Eagle. US brands now almost rival the Rhône’s 2.3% market share.

Liv-ex’s best-performing wines from the FW 1000 (see chart below) reflects this increasingly broad and diverse marketplace and keen-eyed observers will note that the three Bordeaux labels on the list are all from the 2005 vintage and each received upgrades to a ‘perfect’ 100-points in Robert Parker’s retrospective this summer.

Although Mouton Rothschild took the top spot in the ‘Power 100’ list compiled by Liv-ex and the drinks business, wine of the year was really Haut-Brion and, arguably, the year as a whole was a good one for Pessac-Léognan.

Source: Liv-ex

So what next for the fine wine market? As was noted in the Power 100 feature, 2015 was the year in which practically all trace of the China bull-run were erased.

“The shape of the market is back to what it was before China even happened,” Liv-ex co-founder, Justin Gibbs, observed. “The bubble has gone, the market has normalised.”

Although the index tracking the first growths continued to decline in 2015 (down 1.9% on the year-to-date), Bordeaux prices continued to slump and the 2014 en primeur campaign fizzled out rather disappointingly, the region actually had a number of positive headlines throughout the year.

Parker’s aforementioned review of the 2005 vintage 10-years on saw a flurry of agitated trading and his rather positive review of the newly released 2012s garnered that vintage a little more attention. It was recently noted that Lafite 2012, despite a downgrade in points, had maintained not only a case price of £3,000 but also steady trade through the latter half of the year.

Bordeaux’s bid:offer ratio on Liv-ex began to climb and it was noted that the Left Bank index comprised of second to fifth growths was performing strongly.

In fact, take the Left and Right Bank indices alone and the Bordeaux element of the market would have declined just 8.4% since 2011 rather than 20%.

There are even signs that buyers are returning to the 2010 vintage again now that prices have begun to settle.

Looking ahead, Liv-ex expects this positive Bordeaux news to continue. It noted: “Market participants are now beginning to perceive value in Bordeaux. combined with a relative value argument on the back of Bordeaux’s decline and other regional rises hints at some cause for optimism for Bordeaux heading into 2016.”

But, it cautioned: “The success or failure of Bordeaux will be determined in part by the approaching en primeur campaign. Early feedback suggests the 2015 vintage will fall somewhere between the good vintages seen in 2004, 2006 and 2008 and the excellent vintages of 2005, 2009 and 2010.

“Yet buying en primeur has been loss making to the final customer in recent years. Much will depend, therefore, on ex-châteaux release prices – and whether they are attractive relative to wines already in the market.”