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The Fine Wine Market in 2019

  • Anthony Maxwell, Liv-ex Director

  • 15 Jan 2020 | News & Views

The post below is a summary of our recent report, The Fine Wine Market in 2019. You can download the full 12-page version in English, French and German, here. 

Market Summary

2019 started off positively for the fine wine market. The first half was marked by generally well received Burgundy 2017 and Bordeaux 2018 En Primeur campaigns. Also, in the US, after a long-fought battle over interstate shipping, a Supreme Court verdict removed the durational-residency requirement (prohibition legacy) for liquor retailers in Tennessee, striking down a barrier to free trade. 

However, towards the latter half of the year, the headwinds appeared. Brexit uncertainties, the China-US trade war, political and economic unrest in Hong Kong and, most recently, the introduction of additional US tariffs on all European wine, all started to weigh in on the fine wine market.

Consequently, the Liv-ex Fine Wine 100—the industry benchmark—finished the year down 2.86%.

Regional Performance

In our 2018 summary of the year, we suggested that “the relentless rise of Burgundy might soon be curtailed.” In 2019, the Burgundy 150 was the poorest performing sub-index, declining 7.3% as stockholders came to the market to cash in their chips. Its parent index, the Liv-ex 1000 fell 3.5% on the year.

The two (relative) shining lights of the year were the Champagne 50 and Italy 100 sub-indices—both (currently) excluded from the 25% US import tariffs—which ended the year up 2.25% and 4.70% respectively. Our two reports, Champagne—A Market Without Bubbles and The Fine Wines of Italy: Past, Present and Future, explore their place in the market in some detail.

Chart 1: Liv-ex 1000 – Sub-Indices One-Year Performance 

https://robert-parker-content-prod.s3.amazonaws.com/media/image/2020/01/15/5fa740ca86a44baaaafa6ab5cefe1e59_livex_2019_chart2.png

In 2019, the total value of LIVE bids and offers on the market reached record-breaking levels, surpassing £70m at the end of July. Meanwhile, the number of active markets surpassed 14,000 —a reflection of a broadening market. Contributing to these record-breaking figures is the increase in automated trades.

Using API’s (application program interface) Liv-ex members are now able to connect themselves and their clients to the market. This gives merchant members the ability to share the market directly with their clients, bringing a new level of transparency and with it, an increased confidence in the market as a whole. A merchant connected through API’s can now reach a global audience, 24 hours a day, 365 days a year. 

Broadening of the Fine Wine Market

Bordeaux’s share of trade value has been steadily falling since 2010, dropping from 59% to 55% in the past year. It reached an all-time low in August when the region accounted for just 45% of the total trade by value, over half of what it was just seven years earlier (95%). Changing consumer preference and the rise of new fine wine regions have combined to challenge Bordeaux’s once dominant market share.

Burgundy hit a record high 24% of trade by value in August. Its 2019 share of trade value stands at 20%, up from 15% in 2018. Burgundy has been a great performing market. However, as sellers begin to realize their gains, more supply is hitting the market and the prices are starting to drift. The 7.3% decline in the Burgundy 150 in 2019 reflects increased supply hitting the market and with the 2018 EP campaign now underway, prices should be closely watched.

Italy and Champagne also saw increased activity, taking 9% each of the total trade by value. Over 7,300 individual wines have been traded last year compared to 5,700 in 2018. However, it wasn’t just wine that traded through Liv-ex this year—whisky, brandy and German gin also saw action!

Chart 2: Regional Market Shares on Liv-ex From 2010 to 2019

https://robert-parker-content-prod.s3.amazonaws.com/media/image/2020/01/15/7036bed5820b40bdb686e7b16d4e82da_livex_2019_chart1.png

Looking Ahead to 2020

The major question of 2020 is whether the headwinds of 2019 will ease up. The eyes of producers and international merchants are firmly fixed on Hong Kong and China. The demand from both regions has declined since the summer. If the political situation in HK can be resolved, demand is expected to rebound. And encouragingly, on the last day of 2019, Donald Trump tweeted that he would sign a ‘Phase One Trade Deal’ with China on the 15th of January, with plans for phase two later in the year. 

Italy and Champagne have benefitted from their exclusion from the 25% import tariffs announced by the US in October, but with the proposition of 100% tariffs on all EU wines in the air, the mood amongst US merchants and collectors has darkened considerably. Should the tariffs be imposed, the market can be expected to take a knock, Champagne and Italy included.

Then there is Bordeaux 2019, rumored to be another great vintage for the region, perhaps better than 2018. However, with the much lauded and aggressively sold 2015, 2016 and 2018 vintages showing little return, this year’s campaign will test the market’s willingness to pay in a time of heightened risk aversion. 

2020 could be a defining year for the global fine wine market. Not being overly hyperbolic, the proposed 100% US tariffs could completely change the market’s fundamentals. Intriguingly, the effect on En Primeur campaigns will be watched in the following months and as always, Liv-ex will provide coverage. But with nothing set in stone, the tariffs could be gone as quick as they arrived, time will tell and likely a tweet too.

Readers should take note that the views of this author represent those of a company with an interest in the wine trade. Liv-ex is the global marketplace for the wine trade. It has 475 members in 42 different countries, that range from start-ups to established merchants. Liv-ex supplies them with the tools they need to price, source and sell wine more efficiently. Liv-ex publishes the actual prices that wines are transacted at and its database contains over 644 million current and historic price points, which are relied upon by the world’s biggest fine wine players. These price points are also quoted by media outlets worldwide including Bloomberg and Reuters. Liv-ex’s mission is to make the wine market more transparent, efficient and safe for the benefit of everyone working in the trade.

The opinions of Liv-ex are their own and do not represent those of Robert Parker Wine Advocate or Wine Journal. Liv-ex contributes articles to Wine Journal that we feel are of market relevance to readers, but we do not specifically endorse this company.

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