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Burgundy – will looming shortages and spiralling prices spook collectors?
Scarcity of Burgundy following a run of short vintages and increased consumer demand is likely to cause a shortage of the high quality 2020 vintage in the medium term, Liv-ex has warned – but will this dent the market for Burgundy?
In its latest Burgundy 2020: Stocks and sweet spots report, the fine wine marketplace warns that future shortages of Burgundy are “looming in the background”, as demand continues to hold up, amid shortened supply.
The high quality 2020 vintage was sandwiched between two smaller than average vintages, Liv-ex explained – up 8.3% in 2020 , compared to -14.6% in 2019 and -37.5% in in 2021. Although this alleviated immediate problems, producers have had to take the 2021 shortages into account when determining the allocation of 2020 wines.
Furthermore, according to Burgundy expert Jasper Morris MW there was great variety in terms of yields across the regions even in 2020, particularly in red wine. For example parts of the Côte de Nuits, yielded “about half a crop” in both 2020 and 2021, while the Côte de Beaune saw 2020 volumes higher than those in 2021, but still greatly reduced. Meanwhile the white wine vintage in 2020 at least made up for the shortfall of the reds, yielding just below the maximum permitted.
‘Everybody has got to think about what they’ve got the following year,” Morris pointed out. “Therefore, they have made their pricing high not just because it [2020] is a good vintage, which is clearly going to be in demand, but also because they have to make up for the shortfall next year.
As a result, some producers are releasing full allocations of the high quality 2020 vintage to merchants and importers, to make up for the imminent shortfall. Liv-ex also pointed out that the “insatiable global appetite for Burgundy” has resulted in reduced allocations to collectors, despite another year of rising prices.
Impact on secondary market
The move is not confined to the primary market, Liv-Ex says, noting that the Liv-ex Fine Wine 100 index has recorded 20 consecutive months of gains in the secondary market for Burgundy, and a largely upward trajectory since 2015.
This demand has seen Burgundy challenge Bordeaux as the fine wine market’s dominant force in the past 12 months. Burgundy was heavily represented last year, Liv-Ex said, with 4,084 different wines from the region changing hands on its market in 2021. In the past year alone, the Burgundy 150 index, which tracks the performance of the most traded Burgundian names, has risen 31.0%, and Burgundy is already the most traded region by value in the first few weeks of 2022, taking 28.8% of the market against Bordeaux’s 25.7%.
Will supply limitations and rising prices scare of collectors?
Although Burgundy’s positive performance on the secondary market has been complicated by the questions mark over production and the “ample” 2020 vintage seems unlikely to satisfy the seemingly insatiable market demand, rising Burgundy prices have not discouraged buying or dampened demand.
“On the contrary, they have led to greater diversity and a more robust market,” the report points out.
The search for value has helped to broaden the region’s appeal, with buyers looking beyond the “traditional heavyweights” to more diverse appellations, it explains. For example, the number of Burgundian AOCs trading has grown from 78 in 2015 to 166 growers 2021.
But it’s not only about value. An exciting dynamic Morris points out is the increase of younger winemakers either taking over their family domains or creating something new from scratch, working with less famous appellations and making “gorgeous” wines.
“As long as the region’s winemakers continue to deliver exceptional wines and create new ‘sweet spots’ across Burgundy’s appellations, collectors will have reasons to return,” Liv-ex concludes.
“Tight allocations for premier and grand crus mean eager Burgundy buyers will have to continue their journey of discovery into different appellations if they wish to keep their cellars stocked with the region’s wines.”
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