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Playing the long game: fine wine’s global trajectory
At such a challenging time for fine wine, it’s easy to forget just how much the market has been transformed over the past couple of decades. Richard Woodard talks to Bordeaux Index’s Matthew O’Connell about globalisation, diversification and the evolution of the company’s LiveTrade platform.
These are undoubtedly troubling times for the global fine wine market – so troubling that it’s easy to forget the huge changes that have swept over the sector since the millennium. From Bordeaux’s China surge and retreat to Burgundy fever; from the emergence of the Super Tuscans, Champagne and Piedmont to the current gloom… hard as it may be to believe, in the bear-ish days of late 2024, fine wine has been on a long-term upward trajectory for a generation and more.
For Matthew O’Connell, CEO of Bordeaux Index’s LiveTrade platform, the story starts with the phase that lasted from 2000 to the early 2010s, which was all about Bordeaux and China, culminating in the “crazy” en primeur campaigns for 2009 and 2010. At this time, he estimates that Bordeaux accounted for 80%-plus of fine wine trading.
That all changed in the ensuing years: Burgundy, previously something of a niche for collectors, provoked rising levels of interest from 2012, punctuated by a couple of big price cycles, such as the one that occurred in 2018.
“Champagne also became a far more tradeable and collectable wine category, really from the release of the 2002 vintage,” O’Connell says. “Then the Super Tuscans came into prominence, but perhaps slightly more gradually – the real excitement here came almost around Covid time. Then there’s Piedmont – the interest in Piedmont somewhat waxes and wanes, but certainly around 2016-17 there was greater interest in what I would call ‘traditional’ Piedmont: Conterno, Rinaldi, Mascarello and so on.”
He continues: “As a net result, today the activity in the fine wine market for serious collectors and investors is definitely sub-50% Bordeaux. That’s a big transformation in 10-15 years.”
And the reasons for that transformation? “I think it’s just globalisation of fine wine,” says O’Connell. “It’s very easy to talk about Asia being the key to everything; it’s not. Asia and Bordeaux were obviously the dream ticket around the 2009-10 en primeur campaigns, but if Asia led with Bordeaux, Burgundy became much more relevant. And Champagne wasn’t really a thing for collectors in Asia then, but it is now.”
In this respect, O’Connell contends, fine wine is part of a global phenomenon: the huge increase in luxury goods consumption, perhaps best illustrated by the fact that luxury brands powerhouse LVMH has seen its share price increase at a compound annual growth rate of about +18% since 2010.
“That performance is notably outsized in scale and it illustrates just how much luxury consumption has grown,” says O’Connell. “That’s what drove more interest in other wine regions – the space was ripe for this diversification of interest. Globalisation means lots of different types of people looking for different things, and they all have different dynamics.”
The result was big price increases for a number of regions: Burgundy first, then the Super Tuscans and Champagne. “I think this is in line with globalisation and brand focus,” argues O’Connell. “Champagne and the Super Tuscans have very similar dynamics in that Sassicaia, Cristal and Krug are big, global brands. If someone starts drinking Champagne or Super Tuscans, they go immediately to one of these, and the supply/demand balance shifts quickly.”
If the fine wine world has changed so much over the past 10-15 years, it’s vital that the trading environment develops to keep pace with it. LiveTrade was originally conceptualised as a platform focused on the most actively traded wines of Bordeaux, Champagne and Tuscany, with Bordeaux Index ‘making the market’ continuously on those wines.
“A lot of the success at that time came from the fact that Champagne and Super Tuscans were attracting increased interest,” recalls O’Connell. “Clearly, we were filling a market role that wasn’t there previously.”
As the market has broadened, so too has LiveTrade, with the new version of the platform now open to practically all wines, as long as they are pristine and stored in bond at any location across the UK and Europe. And anyone – merchant, wholesaler, private collector or investor – can take part.
“That accessibility of the market and trading is important,” observes O’Connell. “There are people who want to buy and sell for various purposes – B2B, B2C, from rare Burgundy to the largest-production Champagne. People coming into this are not expecting to find a small, idiosyncratic trading space. They expect the sort of access that LiveTrade offers.”
Ease of access and market transparency are more important than ever now. “The wine market has obviously softened across the past 18 months,” says O’Connell. “But that came after a substantial break-out period, such that very few prices of Champagne, Burgundy or Super Tuscans are lower than they were in 2021.
“I think what we see in the fine wine market at the moment is that there’s been a bit of a brake on discretionary spending as a result of interest rate movements. That’s muting activity in the fine wine market – although we still see strong activity around rare wines on LiveTrade, and it has looked a bit more positive since the summer, now that people can see a path to lower interest rates.”
Which brings us back to Bordeaux, and the region’s downward price trajectory over the past five years, not helped by what O’Connell describes as “multiple challenged en primeur campaigns”. He adds: “I think when people look and see that the Bordeaux they bought five years ago, they could now buy at the same price, that’s food for thought for anyone.”
Despite this market reality, O’Connell maintains that the wines “have never been better” – and he’s not just talking about the first growths. “I was at Montrose having a tour of the vineyard recently – what they’re doing there is just remarkable, and these are wines that anyone would be lucky to have in their cellar,” he says. “Some top Bordeaux prices don’t look too different to Super Tuscan prices, and I don’t think that’s immediately obvious to people.”
In the longer term, O’Connell concludes, it’s important to remember that fine wine is not a zero sum game. “It’s realistic that people buy Champagne and Bordeaux, Burgundy and Bordeaux,” he says. “Sure, there are more options and maybe the price dynamics in other regions make people focus on them more.
“But Bordeaux activity will pick up again, and LiveTrade has been and will be the obvious venue for that – and for trading in other regions too.”
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