How fine wine has weathered 2020

Despite going through a quiet patch earlier this year and with all the trade and pandemic headwinds ranged against it, fine wine looks set to weather the storm of 2020.

The end of 2019, with unrest in Hong Kong and the start of the Covid-19 pandemic in China queered the pitch for the fine wine secondary market going into 2020, and things hardly improved with the worsening of the pandemic globally, lockdowns, the tit-for-tat EU-US trade dispute and unknowns of Brexit.

Liv-ex’s leading index, the Fine Wine 100 had a slow start to the year as a result but has been building in momentum since the summer and returned to a 10-year high in October.

What is behind this? As Liv-ex examined in a recent post, fine wine has historically “offered steady returns and low volatility” – it’s a reasonably safe and desirable place in which to invest and also keen ‘winers and diners’ deprived of their ability to go out and enjoy wine appear to have taken those funds and put it into wine.

Liv-ex has spoken a great deal of late about the increasing automation of its platform which is allowing trades to take place day and night, increasing the speed of trade and with it overall volume and value, as well as meaning merchants and their customers around the world are increasingly interlinked.

This in turn is fuelling another longterm trend – diversification of the market. For the past few years Liv-ex has been reporting new record numbers of wines traded, from new domains and new regions as well as, in turn, an increase in market liquidity with the rising value of bids and offers (the exposure) reaching £81 million in early November, an increase of £30 million on the same time last year.

Furthermore, as the fine wine market as decreased its exposure to Bordeaux (which a decade ago accounted for 95% of trade by value and is now down to 42%) and even Burgundy to an extent, so it has been able to avoid seeing an almighty crash given the problems facing the very top labels in these regions in terms of price performance and liquidity.

Instead, with merchants diversifying their offerings over the years to emphasise not only other French fine wines but, importantly, those from around the world too, buyers have been able to feast on a wider array of wines than ever before.

The Champagne 50 has been the best-performing of Liv-ex’s indices this year. Italy has really risen to the fore with its share of trade by value rising to just over 15%. The US is seeing “unprecedented” growth, the Rhône keeps stoically plugging away and there has been higher activity for Australian, Spanish and German labels as well as increased interest in labels from Argentina, Austria, Chile and Portugal.

As Liv-ex said: “Despite an early swoon as the first lockdown took place, the fine wine market would seem to be in a relatively healthy place today,” with that combination of diversity and accessibility helping put the wine market, “on a firm footing in 2020” and, very possibly, into 2021 as well.