Tag: Wine Investment

Why has confidence in fine wine increased in 2020?

Despite the headwinds of 2020 – tariffs, Brexit uncertainty and the global pandemic – the wine market has remained robust. Today’s post examines what has changed and offers an explanation as to why we are seeing greater confidence in the market during these exceptional times.

Increased liquidity

One of the key changes this year is an increase in market liquidity, which is reflected in the rising value of bids and offers on the Liv-ex marketplace. The total exposure (total value of bids and offers) reached a new record high of £81 million last week – a £30 million increase this time last year.

In recent months, both bids and offers have been on the rise. The bid to offer ratio (i.e. the total value of bids divided by the total value of offers) currently stands at 0.6. Traditionally, a bid-offer ratio of 0.5 or higher suggests positive sentiment.

A broadening market

Another noticeable difference is that more wines than ever are attracting buying interest, taking market share from the traditional strongholds of Bordeaux and Burgundy. As the chart below shows, the wine market has undergone considerable broadening in the past decade. Bordeaux’s share has halved from its peak in 2010 when it accounted for 95.7% of secondary market trade by value. As its share declined, others shined. Burgundy was the first and main benefactor; its trade share rising from 0.6% in 2010, to a record high of 19.7% in 2019. It has dipped slightly this year to 17.4%.

This year, Italy has been the big winner. Having reached an annual average of 8.8% in 2019, Italy now accounts for 15.3% of fine wine trade. As recently highlighted, the US wine market is also developing at unprecedented rate. USA accounted for just 0.1% of trade in 2010. Year-to-date, it stands at 7%.

And then, there is the Rest of the World – an increasingly diverse category. Up from 0.8% in 2010 to 5.9% in 2020, RoW trade so far in 2020 has been led by trade for Australia (1.8%), Spain (1.4%) and Germany (1%), though wines from Argentina, Austria, Chile, and Portugal to name but a few are seeing more and more activity.

What has changed?

So, why are we seeing such increased confidence in the wine market? One well-documented explanation is that investors are seeking to put their money into safer assets in these uncertain times. Historically, fine wine has offered steady returns and low volatility.  Another explanation is that there are simply more market participants than ever before. The number of wine businesses trading on Liv-ex has increased 15% in 2020 alone. This increase in members reflects a growing trend since the Covid-19 pandemic took hold – businesses are looking for web-based solutions to grow their sales.

One such solution is trading automation. Trading automation makes it easier for merchants to list stock for sale, exposing their diverse inventory to an ever-growing marketplace. Regions that once struggled to find a secondary market have been benefitting from the shift to online sales, particularly as lockdowns have closed much of the physical retail. Through APIs, stockholders have been able to list and advertise various wines to a far greater audience, as merchants have connected their customers to this ever-broadening market. Subsequently, wine merchants and private collectors have been able to find less well-known wines from a greater range of wine regions.

Despite an early swoon as the first lockdown took place, the fine wine market would seem to be in a relatively healthy place today. As a tangible, finite asset, it offers stability in a volatile world. It also of course offers a great deal of pleasure for imbibers who are locked down and deprived of their usual wining and dining! And importantly technology, as in so many sectors, has helped merchants from across the globe, to adapt, making wine more accessible and more exciting to all with an interest in it. Combined, these three things have put the wine market on a firm footing in 2020.

Source: Liv-ex

 

 

2017 Bordeaux Futures Prices + Analysis

Chateau Palmer released its prices on April 23, ahead of others — a rarity, as other Bordeaux’s top châteaus wait to see how the other wineries position themselves. In addition, the Margaux a third-growth released the first tranche at 20 percent below its 2016 release price.

A few thereafter, others followed Palmer’s example. Bordeaux watchers are left wondering what the top estates will do in a challenging year for sales. Will they release the wines quickly and cut prices significantly, in a bid to interest consumers in a vintage that is not as eagerly anticipated as the previous two? Or will they move slowly? And will they keep prices high, assuming that even if consumers decline to buy the wines now, they’ll buy them down the road on release?

The 2017 vintage should yield many excellent wines, but it is by no means in the league of 2015 and 2016. Conspiring against prices are the fact that volumes are low: Following a devastating April frost, Bordeaux’s 2017 crop is 40 percent smaller than 2016’s. To make things worse for American consumers, the current exchange rate ($1:€1.19, as of May 8) is less attractive than during last year’s campaign.

Overall, the reds are fresh and pure, built on bright acidity rather than tannins, providing charming wines that will drink well in the near to mid-term. On the other hand, the dry whites are superb, and the sweet wines of Sauternes and Barsac are outstanding. Consumers will need to pick carefully, as a gray and dry summer resulted in a heterogeneous collection of wines that lack the punch and drive of great years.

Below you’ll find regular updates and analysis on the campaign, with prices given both ex-négoce, which means before importers and retailers add markup, and average retail price, which is compiled from Wine Spectator’s tracking of leading U.S. retailers. It’s what you can expect to pay. Prices for the 2017s are are also listed as the current prevailing retail price for 2015s.

May 9: The Campaign’s Cautious Start
Châteaus Palmer and Valandraud were the first notable red wines to hit the Place de Bordeaux, and in the weeks since, a few other futures have trickled out. Last week saw Châteaus Pape Clément, Batailley and Langoa Barton join the campaign.

Both Pape Clément (91-94 points based on a blind tasting of its barrel sample) and Valandraud (93-96) showed restraint in their pricing, with Pape Clément at 61.20 euros ex-cellar, a 7 percent decrease from the 2016. Because of the weakening dollar, the wine is selling at leading retailers for about $90 a bottle, or $1,080 a case, identical to 2016 futures. It’s lower than the 2015, currently selling for $120.

Valandraud released at 100 euros, a 22 percent drop on 2016. It’s selling at leading retailers for $150 a bottle, $1,800 a case, less than the 2016s, which debuted at $172, and the current price of $204 for 2015.

Palmer’s early and eye-opening release of 192 euros a bottle was a 20 percent drop from 2016. It’s selling for $284 a bottle, $3,408 a case, at top U.S. retailers, 10 percent less than the 2016 futures did and a big drop from the 2015, selling for $353 now.

Other notable releases so far include Châteaus Batailley (89-92), Dauzac (90-93, and an up and comer worth your attention), Langoa Barton (90-93) and Ormes de Pez (88-91). Langoa released at 31 euros per bottle ex-négoce, which means U.S. retail offerings are showing up around $47 per bottle (en primeur sales are typically only offered by retailers in lots of 6 or 12 bottles). Dauzac released at 30 euros, resulting in an initial U.S. retail average of $45 per bottle.

The accompanying 2017 price chart for top châteaus is noted below.

2017 Futures Prices
These estates represent a selection of leading wineries. The ratings are potential scores based on barrel samples. Retail prices are an average of trusted retailers we follow. To provide a comparison, we’re showing prices for 2015 futures and current prices for the 2010 vintage, a classic year that is currently available.

Château2017 Score2017 initial futures offering at U.S. retail2016 initial futures offering at U.S. retail2016-2017 retail changeCurrent 2015 price at U.S. retail
Angelus93-96$NA$380–$384
Beychevelle90-93$77$NA–$101
Calon-Segur91-94$NA$91–$85
Canon93-96$NA$100–$350
Canon-La Gaffelière90-93$NA$99–$99
Cheval-BlancNYR$NA$690–$808
Clinet92-95$NA$102–$157
Clos Fourtet93-96$NA$115–$129
Cos-d’EstournelNYR$NA$163–$188
Ducru-Beaucaillou93-96$NA$189–$193
Figeac92-95$NA$202–$216
Giscours89-92$NA$62–$78
Gruaud-Larose91-94$NA$73–$78
Haut-BaillyNYR$NA$117–$142
Haut-BrionNYR$NA$551–$647
Hosana91-94$NA$160–$160
La ConseillanteNYR$NA$201–$185
La Fleur-Pétrus93-96$NA$234–$239
La Mission Haut-BrionNYR$NA$433–$465
Lafite RothschildNYR$NA$657–$628
Léoville Barton93-96$NA$87–$106
Léoville Las Cases93-96$NA$242–$224
Léoville Poyferré92-95$NA$91–$97
Lynch Bages92-95$NA$131–$142
Malescot-St.-Exupéry90-93$NA$58–$98
MargauxNYR$NA$559–$1,706
Montrose91-94$NA$149–$159
Mouton RothschildNYR$NA$549–$600
Palmer92-95$284$318-10%$353
Pape Clément91-94$91$90+1%$121
Pavie93-96$NA$379–$394
Pavie-Macquin92-95$NA$80–$90
Pichon Baron92-95$NA$155–$167
Pichon Lalande92-95$NA$162–$159
Pontet-Canet90-93$NA$144–$129
Rauzan-Ségla91-94$NA$83–$151
Smith-Haut-Lafite91-94$NA$106–$115
Valandraud93-96$150$172-13%$204
Vieux Château CertanNYR$NA$262–$357 Continue reading “2017 Bordeaux Futures Prices + Analysis”