Fine wine predictions for 2020

What could be in store for the fine wine market in 2020? A natural uprising? An Italian renaissance? Is 2019 Bordeaux already in trouble? Will South American labels benefit from anti-EU tariffs?

Our recent publication of the Power 100 list (aka the ‘Power Rankings’) and Liv-ex’s own end of year report have examined a number of trends in the secondary market.

Many are continuing trends but some are really starting to accelerate. The broadening of the market has been happening for a while but it really stepped up a gear in 2019 with 6,367 wines traded on the Liv-ex Exchange from 995 brands.

Bordeaux is seeing its overall market share declining, Burgundy’s fast track is running out of road, Italy and Champagne are rising and ‘natural’ wines are coming.

Much, therefore, is the same but there is a feeling that some winds of change are in the air and 2020 will pose its own opportunities and challenges.

US tariffs on European wines seem set to widen, the Hong Kong market is in recession and the UK is on the brink of some sort of Brexit. All three markets are the primary engines of fine wine buying and investment scene which could prove a major handicap.

Nonetheless, as Liv-ex remarked at the end of its recent report, the shape and nature of the secondary market at present arguably leaves it better prepared than before to face up to the strong headwinds it faces.

Liv-ex said: “The market has become broader and deeper, putting it on a firm footing to meet the challenges of the year ahead. Regional price performances and market shares will vary according to the fundamentals presented to those with an interest in fine wine. Regions, somewhat overlooked in the past, will likely continue to emerge.”

That said, the choppy conditions at the end of this year can be expected to continue into certainly the first quarter if not the first half of 2020 so anticipate a more bearish outlook for the foreseeable future.

READ MORE: Fine wine labels to watch in 2020

Burgundy slows but grows

The big development this year has been the final grinding to a halt of the Burgundian juggernaut. The Burgundy sub-index on the Fine Wine 1000 was the worst-performing this year down 7.2%.

Prices at the very top have become very toppy. It’s not the bursting of a bubble because there is still demand for the wines but a ceiling has been reached and so many are bobbing up and down like boats in a harbour.

The ‘trickledown’ effect is also well underway with more Burgundy producers attracting attention. In this year’s Power 100 the number of Burgundians grew from 29 to 34 labels.

The 2018 vintage from Burgundy which is being officially unveiled next month is a big one so there will be lots to go around, prices should be stable so there’s a chance to sell lots of wine and make loadsamoney which will be a real fillip for the region and merchants right off the bat.

But the trend for slower growth and even slight decline will continue in the Liv-ex indices. This isn’t a sign of actual decline though, it’s part of a maturing process as more Burgundy labels come to the fore and a certain measure of liquidity is introduced.

En primeur snookered?

What are the Bordelais to do? This year’s en primeur campaign feat. the 2018 vintage was proclaimed – by château owners and certain critics – as featuring even more ‘best ever’ wines.

Then Neal Martin went along this October and found much to like but also declared it short of “potential perfection”.

This was somewhat embarrassing of course because many Bordelais had increased prices substantially from the 2017 offer.

And now it appears that the 2019 vintage is rather exciting indeed – which is really the last thing the Bordelais need because who’s going to buy it?

The recent UK election and resulting Conservative majority sent the pound soaring but renewed Brexit uncertainty has sent it right back down again.

The US has placed severe tariffs on European wines that are possibly going to become even more swingeing.

These are the two principal foreign markets for Bordeaux futures each year and neither is looking particularly rosy.

The pound could be in a stronger position again by next summer depending on any deal that might be arranged and if the pound is strong then British buyers may take a shine to wines which they’re not going to get for another two years anyway and President Trump is facing an impeachment vote which, if it were to come off, could change things radically across the pond.

These are all highly speculative however and just as equally the pound might be in the doldrums and Trump will still be in power and ratcheting up tariffs.

All of which will leave the Bordelais releasing wine into a vacuum. The sensible course would be to forgo the current habit of holding back increasing stock and release more but for less. At the very least we might hope for perhaps very small cuts, holding prices and only a very few price increases. The reality, unfortunately, is many (but not all) estates doubling down, holding back more stock and raising prices and, frankly, whatever the sit-rep in the UK and US then, that’s still the worst thing they can do.

New renaissance

If French wines were going to be in trouble in the US it was all coming up trumps (conversely) for Italy which was left out of the 25% tariff back in October.

If that situation had held then there’s no doubt that Italian fine wines had the potential to go gangbusters in 2020 while their European competitors became more expensive.

Now the US administration is eyeing up 100% tariffs on all EU wines and so that forecast seems rather less certain. Even if they are implemented however, there’s no reason that Italy can’t have a strong 2020 because the wines are really starting to turn heads in other markets such as the UK.

The Super Tuscans and Sassicaia in particular lead the way but there’s real interest in Piedmont as well.

It’s interesting that the best-performing wine on the Liv-ex Fine Wine 1000 this year has been Giacomo Conterno’s 2002 Barolo Riserva Monfortino which has risen 75% in price from £5,940 to £10,390 per dozen.

Gaja’s 2007 and 2011 Barbaresco have risen 35% and 31% respectively as well.

Liv-ex is very positive about the potential for Italy in the secondary market and it seems as though it might be a category that weathers the unrest better than others in 2020.

Au ‘natural’

Back in the June issue of the drinks business we examined the rising tide of ‘natural’ and ‘grower’ wines from France.

This wave of minimal intervention wines of course spans many more countries but France in particular is unearthing some serious boutique producers.

As well as being small scale and from growers who are often organic or biodynamic, they tend to be from regions and use grape varieties that have been overlooked or neglected by the wider market for French ‘fine wines’.

The Loire, Jura, Languedoc, parts of the Rhône and Beaujolais are particular hotspots.

French online auctioneer iDealwine in particular has noticed an uptick in interest in ‘natural’ wines. Producers such as Clos Rougeard in the Loire and Domaine des Miroirs in Jura are attainting higher and higher prices at sales and a new record was recently set for a bottle of the first vintage (1992) of Grange des Pères – €5,000.

These are not wines you’re likely to see on Liv-ex (much, any time soon at least) but they are out there making waves.

And this demand for more sustainably made, authentic wine is having a big effect on more traditional areas of fine wine too.

In Bordeaux in particular we see estates such as Palmer and Pontet-Canet and now Yquem going biodynamic. Latour is certified organic too. Estates are retreating from the big, in-your-face style of the late ‘90s and early to mid-2000s and even using fewer sulphites and doing less fining and clarification. Places like Carmes de Haut-Brion are even using a bit of whole bunch fermentation. Natural wines may not overthrow the established order but that doesn’t mean they can’t help shake it up.

La Place evolution

Another feature of the past few years has been a steady uptick in the number of non-French estates, especially US, Italian and South American wineries, joining La Place de Bordeaux.

Some, such as Opus One, Dominus and Sassicaia, have been part of that scene for over 10 years now and their rising stars might be partially attributed to their enhanced distribution by the Bordelais négoce.

As other brands from the New World start to try and expand their presence and reputation further afield it’s no surprise many of them have turned to such well connected middle-men.

It will take time of course but better late than never. It’s also a boon for négoce on La Place, as it gives them another revenue stream and an opportunity to take their minds of all the unsold en primeur claret on their books.

The fact that many of these estates signing up to La Place have links to Bordeaux through châteaux owners, some of whom have interests in négoce is another fact that can’t be overlooked.

Nonetheless, La Place is not a magic cure-all. Opus One and Sassicaia have built up their credentials steadily for over 15 years now but there’s a feeling that some estates are coming in a little too high, too quickly.

There’s also the problem that the more labels join La Place, while it creates a buying opportunity in what is otherwise a slightly fallow period in mid to late autumn, it’s a very fragmented offering with a mix of labels that don’t always have huge traction competing with one another.

We can expect to see more estates choosing representation through La Place but results will be slower to show themselves.

New hope for the new world?

Although he has been impeached by the House of Representatives, there is little is any chance of President Trump being impeached by the Republican-controlled Senate.

Shelve, therefore, any hope that might have been sparked that a Trump downfall would lead to an end to tariffs etc etc.

Even if the 100% bill on EU wines isn’t passed, the 25% tariffs still remain. Italy may or may not be in a better position than its European counterparts as a result but the real beneficiaries in the US market could be all the non-European wines.

Of course US buyers can first and foremost choose to ‘buy American’ which might spark a drive among fine wine collectors for all manner of top Californian and other wines.

It might do a lot to boost demand for South American names: Almaviva, Seña, Catena Zapata and Cheval des Andes are all Andean labels that could benefit. Many of them are lingering on the fringes of the Power 100 list, could anti-EU tariffs be the lift they need to make it into the big time?