Liv-ex Power 100 List – 2019

IF YEARS of the secondary market were planes coming into land at an airport, then 2019 would definitely be in a holding pattern. “It feels like a transition year,” Liv-ex co-director, Justin Gibbs, remarked at our annual review meeting in November. Those who read last year’s Power 100 report will see many similarities in this year’s: the continued dominance of Burgundy, the ongoing strengthening of Italy, a general broadening of the market and a mixture of highs and lows dogging fine wine favourite, Bordeaux.

Last year marked a new high in the number of wines and brands traded (5,700 and 953 respectively), and this year that rose again with 6,367 wines traded from 995 brands. Three labels from Bordeaux and two from Italy dropped out of this year’s rankings, and those five places were taken up by Burgundian wines. Regional trade share by value continues to slip away from Bordeaux.

From a high of 95% in 2010 that share is now 55%. The value for Champagne, Italy, the Rhône and Rest of the World remained broadly the same (up a little to 8.5% for Italy) but the real benefactor is still Burgundy, which jumped from a value of 14.5% in 2018 to 20.4% this year. With more Burgundian labels joining the Power 100 there seems to be a little more liquidity appearing in the category – but only a little, and pricing is still an issue. Much remains the same, therefore, but there are a number of narratives developing.

In one very important aspect there has been a major change in the Power 100 in that for the first time there are no first growths in the top five places, and, indeed, just one, clinging on by its fingernails, in the top 10. Burgundy, Champagne and Italy rule the roost, but in these uncertain times can any of these hold on long enough to cement a true dynasty?

TOP 10 Quickly scanning the Power 100 list you’ll see that one of the superstar Burgundy regulars on the auction circuit, Armand Rousseau, has leapfrogged Domaine de la Romanée-Conti (second place) and last year’s number one, Domaine Leroy (now third), to the top spot.

Remember that the wines on the list, those that have qualified at least, are graded according to their performance in four criteria: year-on-year price performance; trading performance on Liv-ex (by volume and value); the number of wines and vintages traded; and the average price of the wines. A wine does not need to top every category to end up at the top of the rankings, and we can see that Rousseau comes into its own with the number of unique wines traded (146), for a strong average price (£13,185 per case) and with a decent price performance (up by 20.8% over the past year). Comte de Vogüé is another strongly performing brand this year, and Prieuré Roch has shot out of nowhere straight in at number six on the list.

The likely reason for this can be linked to the death of Frédéric Roch last year, which may have seen previously sat-upon stocks being released from cellars. As Gibbs says: “We never saw it traded; now the liquidity is there.” It’s a similar story, albeit further down the list, with René Engel, another defunct Burgundian domaine, whose wines have dropped straight in at number 56. Geneva-based auction house Baghera held a sale of 1,157 bottles of varying formats, constituting the “last” bottles held in the family cellar in June this year.

The sale made £1.4 million in total, with 24 bottles of the 2004 Grands Echézeaux selling for £40,100. With wines beginning to hit these sorts of prices (albeit at auction), more wines are coming onto the market, and Gibbs notes that those vintages of Engel traded tend to be older ones (older than 2004, at least, the last vintage Philippe made before his death). But the real story of the top 10 is the inclusion of three big Champagne brands: Krug, Louis Roederer (aka Cristal) and Moët & Chandon (aka Dom Pérignon).

Cristal and Dom Pérignon in particular have hovered on the outskirts of the top 10 for a while, their combination of excellent branding, widespread distribution, perceived quality, (relatively) accessible price point in the world of fine wine, decent production levels and solid price performance making them staunch favourites in the secondary market of late – and the same is true for other grandes marques as well. “Champagne is low risk,” remarks Gibbs, and adds that anticipation over the release of the much-hyped 2008 vintage helped “massively”.

Then finally, Sassicaia, the Super Tuscan breaching the inner sanctum of the Power 100 for the first time. Fellow Tuscan Tignanello may have snatched a few headlines in the UK this year thanks to its popularity with prime minister Boris Johnson and Meghan, Duchess of Sussex, but it’s Sassicaia that’s the real hot ticket among the Super Tuscans. It has been mentioned before that of all Italian wines Sassicaia is the one label from the country that’s a real ‘brand’, and that is beginning to ring true.

It acts like Bordeaux of old used to, with a good price that gives it room to grow, and decent volumes (it is the number one brand traded by volume on the Liv-ex Exchange this year) to back up demand, which was high this year for the, justifiably, highly rated 2015 vintage, which rose in price by 25% when it was named Wine Spectator’s Wine of the Year, and the 2016 has appreciated by 71% since Monica Larner of The Wine Advocate gave it a perfect 100 point score.

FIRST GROWTHS? In 2016 the top five of the Power 100 were: Lafite, Mouton Rothschild, Margaux, Haut-Brion and Latour. A year later, DRC and Angélus were in the fourth and fifth spots, and last year Lafite was in second place with Mouton and Margaux in fourth and fifth. This year, Latour has scraped in (barely) to a joint 10th place, Margaux is 12th, Mouton 15th, Haut-Brion 16th and Lafite 19th. This might seem like a wholesale collapse but that’s not the case. Latour is where it is because, explains Gibbs, “there’s less Latour about, it’s less liquid so its price performance is slightly better”.

One might argue that the château’s non-participation in en primeur strategy is starting to pay off, but its ex-cellar offers are not working all that well. The re-release of the 2008 this spring was well received, but the 2011 release in September was wide of the mark price-wise, and the autumn Latour release is now running into a slew of other releases from the négociants, providing a lot of competition for Latour’s ex-cellar premium to cut through. One thing to remember with the Power 100 is that a wine falling down the list doesn’t necessarily mean that it’s failing in the marketplace, it is often just the case that it’s being overtaken by rapidly rising brands that could fall away equally quickly and leave the likes of the first growths back in the upper echelons next year. They’re like a rock, submerged then revealed again by crashing waves.

If you look at the top labels traded by value, Lafite is still right at the top this year, followed by Mouton, then DRC, then Margaux, Latour and Haut-Brion. By volume too they’re well represented within the top 20 of the list. If measured on value and volume trade alone Lafite would still be number one overall, and the other firsts are also top performers. These are still wines that have high demand in the secondary market. Where they’re failing currently is in price performance, with Margaux and Haut-Brion at -1.2%, Mouton at -1.8% and Lafite trailing at -4%.

BURGUNDY: END GAME As noted above, the number of Burgundian labels on the list grew to 34 this year, and their share of trade by value now accounts for 20%. “We’re slightly rolling through second-line Burgundies now,” says Gibbs. “It’s showing signs of maturity, and there’s an expanding field.” Prieuré Roch and René Engel have already been touched upon but some of the other entrants this year include labels from domaines that have younger winemakers at their helms, such as Arnoux Lachaux, Ramonet, Roulot and Raveneau.

It’s striking that white wine producers are catching a bit of attention at the moment, especially with Meursault. Gibbs says they’re “awesome wines”, but they’re also being drunk, as their appearance in numerous social media posts at least somewhat attests to. Is there still a fear of premature oxidation? Either way, their price performances are what’s driving them up. Ramonet has seen a change of 15.6% this year, Roulot 27.4% and Raveneau 13%.

Burgundy has been a juggernaut for the past few years but, just like Marvel’s cinematic Avengers extravaganza, which finally came to an end in 2019, this year feels a lot like its endgame too – at least for prices at the very top end. This has been a recurring theme for a while and is often countered by cries that ‘demand and interest has never been higher!’ But ongoing interest in Burgundy doesn’t equate to sustainable prices.

Gibbs points out that much of Burgundy’s positive performance this year comes from feeding off a strong finish to 2018, because for much of this year the Burgundy 150 index was in a fairly deep slump and was outpaced by other sub-indices. Burgundy is a very volatile market, Prieuré Roch and Engel’s out-of-the-blue impact may dissipate completely by this time next year. Liquidity for a lot of wines is low, with single bottles sometimes all there is available. While some labels have shot up the rankings, elsewhere it a story of decline.

region Domaine Leflaive, Faiveley, Emmanuel Rouget, Coche Dury, Pierre-Yves Colin-Morey, Jacques Frédéric Mugnier, Comtes Lafon, Georges Roumier, Sylvain Cathiard and Etienne Sauzet have all seen their rankings slide this year, sometimes considerably. Gibbs notes that Burgundy buyers are increasingly “tentative”, and they “struggle to price these wines”.

The bid-to-offer ratio for Burgundy this year has been 50%, while for Bordeaux, Champagne and Italy it’s 100%. It’s not that buyers don’t want Burgundy, nor that we’re about to see a pricing crash, but the upper tier has reached a peak, and the price performance reflects that, as does the inclusion of more names from domaines where prices have not quite run ahead of themselves… yet.

NEW KIDS ON THE BLOCK Away from the first growths, talk of Bordeaux generally revolves around the misery of failed en primeur campaigns, with a moderately successful 2016 offering quickly eclipsed by the shrieking disasters of 2017 and 2018. Yet, doom and gloom aside, from the ruins there is a bit of a shift in hierarchy going on in Bordeaux, and new players are emerging from both banks. While these post-2010, post ‘the good times’ futures campaigns have revealed some estates to be entirely tone deaf, others have proved anything but.

One particular group of over-achievers includes Canon, Rauzan-Ségla, Calon Ségur, Beychevelle, and Carmes de Haut-Brion. If you’ve read db’s en primeur coverage of the past few years you’ll know these are the names that crop up consistently as wines that have been seen as offering excellent quality and, crucially well-priced releases.

They are releases that merchants and their clients can really get behind. “They’re all brand-conscious owners, and all close in the rankings,” Gibbs points out in his analysis. Carmes in particular is “blazing a trail”, he says. This is the first year it has been in the Power 100, jumping from 105th to 61st place. Its price performance of 18% is excellent, and with an average price of £827, it has a lot of room for appreciation. Other big movers and shakers in Bordeaux must include Vieux Château Certan, which was the biggest riser among the Bordeaux labels this year, up 55 places from 83rd to 28th.

Volumes traded have risen sharply on Liv-ex, and while the price change has been good, Gibbs still thinks it “still looks relatively good value”, and buyers are “clearly circling” as a result. Pichons Baron and Comtesse, Figeac, Haut-Bailly, Pape Clément, Trotanoy and Eglise Clinet would be other brands to watch.

FORZA ITALIA The secondary market is very much French in character, dominated by Bordeaux, Burgundy and Champagne, but Italy is coming to the fore. Ten years ago the country’s share of trade by value was just 2%, now it’s 8.5%, and the number of Italian wines on the exchange has exploded.

The number of individual Italian wines traded on Liv-ex is up by more than 1,000% in the past decade, with the number of labels traded doubling every two years. This year, Liv-ex released an in-depth report on Italy’s development in the secondary market, which only really began 40 years ago. Greater automated trading and more widely available stocks are two reasons Liv-ex pointed to as being drivers of the rise of Italian wines, and with it has come greater exposure and increase in volume and value trading. By far the majority of these trades are the Super Tuscans.

As well as the aforementioned Sassicaia, Solaia, Masseto and Tignanello are creeping up – though Ornellaia took a tumble to 91st place. It was joined this year by Brunello producer Case Basse, whose irascible but respected figurehead, Gianfranco Soldera, died in February. This has perhaps boosted its prices but volumes and values remain low. Nonetheless, Corney & Barrow, which is the label’s sole representative in Asia, says its performance is “superb”.

SUPER TUSCANS The Super Tuscans in particular work because they follow the Bordeaux model of good volumes and value and brand strength. As Liv-ex said in its report: “Tuscany offers one of the cheapest entry points into the fine wine market.” As long as that continues then these wines will continue to thrive.

The other talking points for Italy are Barolo and Barbaresco. If Tuscany is the Bordeaux of Italy, then Piedmont is its Burgundy, featuring smaller production, terroir-driven, single site wines and more expensive expressions. Yet there’s ‘expensive’ and there’s ‘expensive’. Bruno Giacosa (who died in January 2018) has been one notable riser, and has an average case price of £2,460. Gaja – admittedly diluted somewhat by the number of wines it offers – has an average case price of £1,217.

Therefore, while top Barolo can be expensive, one is still looking at paying less for it than top Bordeaux, and far, far less than Burgundy produced in the same volumes. Some Barolos are even rarer and their production more miniscule. That said, being small production and agency-driven Barolo is, says Gibbs, “hard to form a secondary market around”, but there is “something going on” and trades are starting to happen.

KICKING AND SCREAMING The US has had a topsy-turvy year. Dominus and Opus One both saw previously strong positions eroded. Screaming Eagle, meanwhile, has “hit a wall” – its price has topped out and it slid out of the top 100. But Harlan Estate has zoomed up and in, helped by a good price performance (11.2%) and average price (£3,716) but volumes are next to negligible. Other labels, such as Colgin and Scarecrow, although not in the top 100, have also fallen back a long way too. It would seem, therefore, despite some recent positive chatter about Californian labels, the real beneficiary of an expanding market is still Italy.

With Screaming Eagle it’s an issue of price and rarity, and the others are also likely suffering from collectors sitting on stocks, especially of expressions of Dominus and Opus One, strangling their liquidity. Out of the top 100, meanwhile, but a new entrant that qualified was Joseph Phelps, which this year took an increasingly popular route to market, through La Place de Bordeaux.

NEW AVENUES When talking of an expanding fine wine market there are still parts of the world that are not benefiting from the switch away from Bordeaux. South America in one such area, and Spain has always struggled in the secondary scene. Not much has changed in this regard. Spanish wines work very well when they are offered by merchants.

Excellent quality, value and volume make them very popular sells, but their secondary market – save for Vega Sicilia – is, unfortunately, zip. Nonetheless, the South Americans, alongside Italians and Californians, are increasingly turning to the Bordeaux négociants to help their international distribution. They also help négoce weighed down by all that unsold en primeur stock. A bunch of 15 Super Tuscans, top Napa and icon South Americans now account for 10% of CVBG’s business, according to commercial and marketing director, Valentin Jestin. Almaviva, Seña, Cheval des Andes and Catena Zapata are three recent converts, and how it will affect their global standing will be interesting to track.

Some of them, however, may be coming to the market at too high a price for the demand they’re getting. ‘They need to be low and build or people will lose money and won’t buy them,” warns Gibbs.

AN UNSETTLED WORLD And what of a brief sketch of the future? The three key markets for fine wine: the UK, US and Hong Kong/China, are all facing unsettled economic and political futures, fuelled by unrest in Hong Kong against Chinese authoritarianism, the UK’s ‘will-they won’t they’ split with the European Union, and America’s recently imposed 25% tariffs.

Although at the time of going to press the full figures are yet to be published, it seems likely that Liv-ex’s measures of the secondary market, the Liv-ex Fine Wine 100 and 1000 indices, will finish the year in the red. The Liv-ex 100 in particular has, save for a brief and limp rally over the summer, stuttered all year, and in October was down by 1.2% on the year to date.

The US tariffs present a problem for all wines, save Champagne and Italy, which were, for some reason, left out of the increased import duty, and from which situation they may very well profit considerably. Not that Burgundy and Bordeaux trading will die away completely in the US, given that there is a lot of stock in the country already, but it does put a strain on future imports. There are stories of cancelled orders on unshipped stocks and négociants having to take price cuts to ship others after the tariffs were imposed. Then again, as Goedhuis’ business development director, Georgian Crawley, says: “The talk in the market is that the US will review these going into 2020, and there is every chance of them going as quickly as they came.” Maybe they won’t be a factor, therefore, but can anyone count on that? The biggest headache of this triple-headed beast, however, will be felt most by the Burgundians (who had an excellent but not huge 2019 vintage) to an extent next spring but most particularly by the Bordelais.

MISHANDLED MARKETING It has been touched on before, but the en primeur process is creaking. There has been an unprecedented run of good and great vintages since 2014. But many estates have badly mishandled their marketing and pricing, and with the advent of another excellent vintage in 2019 to be rolled out next summer, many face the prospect of being snookered in how they can go about presenting these wines in a market that, frankly, doesn’t want or need to pay for yet another ‘great’ vintage, when one has already been proclaimed in 2018, 2016 and 2015 to varying degrees of accuracy.

Certainly, Neal Martin’s recent appraisal of the 2018s stopped well short of calling it a universally ‘great’ vintage. The Asian market doesn’t buy futures, the US is going to be very cautious due to the tariffs, and goodness knows what the tax and currency situation will be for the UK at that time. So what do the Bordelais do? Raise prices again? “More expensive? In this environment? No way!” says François Thienpont, who has a foot in both camps, as owner of châteaux and a négociant business. ‘The châteaux need to find a price that reflects the demand of the market,” he continues. “Then the machine can start again. If we play as usual, that’s it; the game is dead.” It’s a comfortingly sensible sentiment, and perhaps next year’s en primeur campaign will prove a pleasant surprise – but past form suggests not all will listen and act so attentively.