Michel Bettane looks at the inequities of wine prices and wonders about the sustainability of wine prices both high and low.

Looking at wine prices globally, I see that Chinese demand for ultra-speculative wines is falling. All the thousand-euro bottles of Bourgogne Aligote, €400 bottles of Jura white, €600 bottles (and more) of famous Bordeaux en primeur, €1,000–10,000 bottles of Burgundy grands crus—investors aren’t buying, and merchants aren’t selling. And not before time. Whether we’re talking about a few thousand bottles or just two or three, this is a case of the tree hiding the forest—a forest of wines sold at obscene prices for what is in the end just an agricultural product. If we must let market forces prevail, let us at least acknowledge that the consumer has the right to know what’s really going on here—how it is that the wine market is being driven by greedy connoisseurs, entrepreneurs, and makers and sellers of wine who are only in it for the money. 

The cost price of a good wine will obviously vary depending on operating costs, which may include recouping the enormous outlay on a plot of vines exceeding €1 million per hectare. Some wines cost as little as €8 a bottle to produce, others as much as €100; but based on an average yield of 30–35hl/ha over a ten-year period, very few wines justify a wholesale price tag of more than €30 a bottle. So, a Corton selling at €100 a bottle generates a tenfold profit for its producer compared to a Chinon. Not bad when you think that Chinon producers are by no means to be pitied as agricultural producers go. Imagine, therefore, the money made on a €150 bottle of a great Médoc cru classé bought en primeur or before bottling and shipping. A Médoc cru bourgeois, meanwhile, is lucky to fetch one tenth of the price of its more illustrious neighbor, despite being crafted with just as much skill and passion.

Wine prices and a trade in trouble

The same disparity is seen when comparing the profit margins made by French restaurants with those made by wine merchants (typically between 30 and 50%). A Michelin-starred chef, for example, only has to apply a threefold markup to make a tenfold profit compared to the wine’s producer, for a wine that was two years in the making. So-called petits vins can clock in at ten times the wholesale price—a price tag that no doubt reflects the ten minutes it takes to bring them up from the cellar. Joking aside, restaurant wines are too often served within a year of purchase, usually at the wrong temperature, with no thought for the type of glass or the dish they are to accompany.

It is hardly surprising, then, that the world is making and drinking less wine, with vineyards being ripped up as we write, producers going bankrupt or out of business, and difficulties transferring wine estates to the next generation. The wine trade is in trouble, and France’s stupid, confiscatory tax rates don’t help. Eventually, good wine and the skills that inform its culture will leave us all cold, and France, together with many other wine-producing countries, will lose an irreplaceable part of its national heritage. Wine drinking, once practically institutionalized, is now a matter of choice. We drink because we want to, never mind the growing calls to have alcohol banned altogether, or the embarrassment of non-alcoholic drinks now flooding the market. Creative marketing can sell just about anything, including that absurd and unnatural thing, “dealcoholized” wine. The prospect of juicy profit margins is an added incentive.

It is high time that those who reap obscene profits from peddling the greatest wines of all time were taught a lesson—especially now, with the sword of Damocles hanging by a thread over their heads, and climate change set to wreak unprecedented disasters that spell even greater uncertainty for the future of their business.  ▉

The post The tree that hides the forest appeared first on World Of Fine Wine.

Chloe Ashton reports on the latest news and views from the world’s fine wine salerooms, as things begin to cool off again.

One year ago, fine wine registered a new record: the steepest price climb the market had seen since records began. Over a period of 30 months, from March 2020 until September 2022, Liv-ex’s three main indices rose by an average 38 percent. Since then, market prices have fallen, prompted by global economic jitters as the era of cheap financial lending comes to an end, and worsened by the natural close of an enormous demand cycle from collectors whose cellars are now bursting. Speaking to various members of the global fine-wine trade throughout 2023 thus far, the phrase “market correction” has been employed often, suggesting that price rises incited during the Covid pandemic were unsustainable. Correction or not, the current fine-wine era is likely to be transformational: Brexit threatens the UK’s position as a world trading hub, the baby-boom generation is reaching the end of its buying cycle, and climate change is rewriting the books of what a “normal” vintage looks like. Whatever lies ahead, making predictions (and assumptions) based on what has come before is riskier than it has been in the past.

Fog ahead in the fine-wine market

Indeed, when I asked George Wilmoth, head of sales at leading UK merchant, Justerini & Brooks, where the wine market might be heading in 2023, he deferred his answer: “Ask me again in September,” he said. A quieter market during the summer is usual, but it’s hard to know whether the current cooling-off period will extend into fall and beyond. So far this year, Liv-ex numbers all point toward market deceleration. The platform’s widest measure, and the biggest performer of 2022—the Liv-ex 1,000—dropped 6 percent between January and June this year (fig. 1). Its siblings, the Liv-ex 100 and Liv-ex 50, declined by 3.5 and 3 percent respectively. On the one hand, these are not big numbers relative to financial indices. The S&P 500 dropped 5.8 percent in one month between August and September 2022, finishing last year with a net annual loss of 19 percent. On the other hand, the Liv-ex 1,000’s rate of decline (1.17 percent per month) over the past six months matches exactly the average pace of its unprecedented upward climb from March 2020 through mid-September 2022. They say the faster the climb, the harder the fall, but at least the Bordeaux first-growth index—the Liv-ex 50—provides a cushion to soften the impact. Its journey down in 2023 (so far an average monthly loss of 0.79 percent) is at least slower than its previous rise (of 0.93 percent per month). Commenting on this year’s downward trend, Robbie Stevens, senior broker for Liv-ex reminds me, “The wine market is naturally cyclical.” Indeed, after such a surge, and considering the current context of muted demand, we should probably expect further falls for Liv-ex indices in 2023.

The fourth dimension

Supply-and-demand theory in its purest form is perhaps insufficient to describe wine-collecting cycles. Given the long cellaring periods that great wines require, demand does not equal immediate consumption, and a drop-off in purchases therefore cannot be an accurate measure of consumer interest. Demand can be active and passive—reflected in fine wine’s track record of peaks and troughs, wherein price rises generally indicate an overactive market; during plateaux, however, buyers are consolidating and holding, not necessarily actively trading. Matthew O’Connell, CEO of Bordeaux Index’s LiveTrade platform, appears relaxed about a temporary market downturn. While he admits that “business is slow,” he specifies that it has been more robust in the UK and Europe, while quiet in the US and quieter still in Asia. This “technical lack of activity,” as he puts it, has not skewed LiveTrade transaction prices as much as Liv-ex indices might suggest. “Burgundy’s cult names are still trading at prices similar to last year,” he tells me, albeit with lower frequency. Such market stagnation seems to be universal: Stevens notes that until March this year, merchants remained optimistic that the reopening of China might create room for continued growth, in demand and price elasticity. “[China’s] unlocking has actually had the reverse effect,” he explains, due presumably to distractions caused by the reopening of international travel and the country’s own internal trades taking precedent. 

The question over how much a lack of demand can genuinely bring prices down can only be answered through an additional dimension: time. An inactive market only becomes bear when merchants or collectors cannot continue to hold stock until demand picks up again. For the UK wine trade in general, Stevens predicts that trades on the Liv-ex exchange under market prices will increase in July and August, as consumer buying remains quiet and some merchants lose the nerve (or simply the ability) to continue retaining stock. For private collectors, the prior surge in demand combined with today’s choppy economic waters might shake a few bottles out of the fine-wine tree, from those who overshot on their purchases and are now forced to sell. O’Connell nonetheless reassures me that this need—and its consequent contribution to lowering wine prices—remains marginal. 

The tortoise and the hare

Regionally speaking, the table of relative success has turned in 2023. Liv-ex’s wider Bordeaux measure—the Bordeaux 500—has been the platform’s least worst performer so far this year (losing 2 percent since January 2023). The resilience of Bordeaux in harder times is not new, though O’Connell comments that its performance—in terms of pricing and trading density—could have been better, had this year’s en primeur sales proved successful. He notes that high prices for 2022 not only made for a small campaign, they also “failed to generate the usual enthusiasm and momentum for the region as a whole.” Indeed, despite some trading activity related to recent deliverable vintages, Arthur Coggill, associate director and fine-wine buyer at Goedhuis & Co, tells me, “Our buying director said it was the worst campaign he’d seen in 20 years.” He goes on to note, “The campaign’s poor momentum and misinformed pricing extinguished interest from buyers who were otherwise poised to invest, either because they had set money aside to do so, or because they buy en primeur systematically each year.” Despite this, Bordeaux has seen its market share increase on Liv-ex’s exchange, from 34 percent last year, up to 39 percent as of June 2023. For the small group of collectors forced to liquidate some of their wine holdings, Bordeaux seems to be the first port of call. “It’s certainly not what I would rush to sell, but people always seem to get rid of their Bordeaux first,” observes Wilmoth. He elaborates by explaining, first, that collectors tend to be less emotionally attached to Bordeaux than other regions; and second, that the strong returns observed thus far for Burgundy entice owners to hold these wines closer to the chest. Minute volumes of each cuvée also likely mean that the Burgundy that collectors have acquired will be more difficult to replace in future, whereas mature Bordeaux is still relatively available. Any discounted Burgundy trades on the Liv-ex exchange contributing to the Burgundy 150 index’s losses of 6 percent since the start of 2023 are more strategic; their sellers still earn strong net gains following the index’s recent ascent (70 percent between March 2020 and end 2022), and opportunistic buyers are still poised to snap up ultra-rare stock. The behavior of Liv-ex’s Champagne index appears similar…  

Sprint and stall

High trading of Champagnes under the peak prices of 2022—presumably on the part of those cashing in after the unprecedented price rises of the region—have brought Liv-ex’s Champagne 50 down by 9 percent between January and June 2023. O’Connell comments that “Champagne prices have risen so much over the past couple of years, it would almost be weird if they didn’t come down a little.” While he’s confident in Champagne prospects for the long haul (particularly given their solid backing by some of the luxury industry’s biggest players), the picture in the mid-term is perhaps less certain. Wilmoth believes we can expect the index to stall for a while: “The string of mediocre vintages to be released over the next few years is likely to keep prices flat,” he explains. But the worst performer of 2023 thus far has been Liv-ex’s Rhône 100 index. Declining by 12 percent between January and June 2023, similar mechanics as have befallen Bordeaux may be at play: liquidation by trade and private collectors alike, who are perhaps reevaluating the hefty investment in storage and patience required for top Rhône wines to become drinkable. Stevens notes, “The region’s succession of high-quality vintages means buyers will have a lot of Rhône in their cellars after the past decade.” The timing for release of 2021—a subpar vintage—amid fine wine’s current conditions has surely not helped. 

Live and online auction revenues totalled $226 million in the first half of 2023—down 21 percent on last year’s record-breaking H1 (fig. 3). While sales still look buoyant compared to the Covid-stricken results of 2020, this year’s decrease is significant enough to fall below 2019 and 2018 levels—a definitive sign of decline in global demand. 

Stable Sam

Indeed, all three major markets—the US, Europe, and Asia—report revenue reductions compared with H1 2022. The US maintains its position as top continent for wine auctions, taking a 57 percent share in sale revenues (equal to $129 million) for the first half of 2023. Its relative stability is also evident, as the market that has lost the least ground when compared to the first half of 2022: American auctions in H1 2023 were down 15 percent in value, whereas Asia—comprising sales in Hong Kong and Singapore—registered a loss of 30 percent (at $67 million). Europe’s auction total for January to June 2023 stands at $30 million, 26 percent down on the same period last year. And while global giants, aka “the big five”—Acker Merrall & Condit, Zachys, Sotheby’s, Christie’s, and Hart Davis Hart—still dominate the market, they have all suffered the consequences of muted enthusiasm for active buying of fine wine in 2023 thus far. Acker Merrall & Condit remains the world’s biggest auction house by value, earning $67 million in wine sales in the first half of 2023—a decrease of 11 percent on last year’s H1 achievement (fig. 4). Its compatriot Zachys registers an H1 result of $42 million, closing the gap on its rival with a smaller comparable decrease of 5 percent. Perhaps expectedly, all but three further auction outfits achieving six-month sale totals above $1 million reflect market decline. Those showing growth on the same period last year—Swiss houses Steinfels and Baghera, and Cannes-based Besch—are perhaps testament to the power of micro-markets, since they benefit from respective local (and more loyal) audiences.

Cracks appearing

As for explaining the cause and effect of cracks appearing in the market, opinions are mixed. Charles Antin, head of wine-auction sales at Zachys, maintains a positive outlook on the auction market in 2023. He notes that “blue-chip bottles have retained their high value” and that the “market has proven resistant in the face of uncertain economics.” In contrast, Steinfel’s Marc Fischer shares a different experience: “We clearly see that the interest in very expensive top wines is considerably lower, and prices have come down. In particular, there is almost no more demand for the super-expensive top Burgundies.” He observes that “UK wine merchants were bidding very carefully,” while “interest from Asia is still very strong, and Swiss clients are still very strong bidders.” Across the cultural border from Zurich to Geneva, Baghera’s Julie Carpentier noted a “renewed appetite from collectors around the globe” in Q2 2023. Her colleague and director of Baghera’s Singapore-based arm, Arthur Leclerc, shares his commentary on Asian activity: “The Singaporean wine market has been heading for a sharp price correction since the start of 2023. Wine merchants have large inventories and are retaining—they are therefore not in a buying period. On the other hand, we can count on an ever-increasing number of private buyers and consumers. This is particularly the case in Singapore and Asia in general.” Hope springs for Asia over the long term, as Leclerc notices “the ever-decreasing average age of our buyers.”

Top down

And while pockets of interest are still bound to crop up for the ultra-rare and desirable stocks, further evidence of a down-cycle can be found in lot volumes and top lot prices. Analysis of four-quarter rolling averages since 2020 suggests that both buyers and the access to high caliber lots attracting strong demand have decreased since the auction market peaked toward the end of 2021 (fig. 5). Thereafter, the average top-lot hammer price of live auctions has fallen steeply, by 43 percent between Q4 2021 and Q3 2023. Regionally, Bordeaux top lots were slower to peak than Burgundy, reaching a high in Q2 of last year before then declining 38 percent to end June 2023. Burgundy top-lot prices have been in freefall since the end of 2021, dropping a frightening 49 percent. And while Burgundy top lots show signs of stabilizing overall—with prices virtually flat for the past two quarters—the region’s dominating auction star, Domaine de la Romanée-Conti, may still have further to fall.

A market galvanized

On paper, this paints an ugly picture for the immediate future of the fine-wine trade. Merchant activity is low, and even with some access to unicorn wines at competitive prices, collectors may simply have had their fill for the time being. In reality, current market conditions provide the perfect hunting ground for new entrants, or indeed anyone with deep enough pockets and a good dose of patience willing to take discounted deals and sit on their wares for some years. Looking at the full fall schedule of auctions, and with a new Burgundy vintage due for release toward the end of the year, there will be opportunity aplenty for those willing to jump back in the game. Wilmoth comments that, ultimately, “the rich are only getting richer,” and this can only be good news for fine wine, since competition continues to increase for the most sought-after wines. 

Still, if the outlook appears bleak for 2023, my prediction is that the scales will tip back again in 2024, albeit less vigorously than the frenzied purchasing period during the global pandemic. While some merchants and Bordeaux négociants might kick me for writing so, a global market cleanse could be just what fine wine needs. 

Stockholders with solid capital backing could help consolidate the market, prices will “correct,” and consumer demand could rebalance geographically, reducing the historical bias of markets such as the UK or Hong Kong. For now, all signs point toward a new era for fine wine: galvanization. 

The post Liquid Assets: A transformational fine-wine era appeared first on World Of Fine Wine.

Has the fine-wine market finally been caught up in the chaos of the wider economy, asks Chloe Ashton in her latest in-depth overview of the secondary market.

As the first quarter of 2023 came and went, the world passed two significant milestones: 365 days since Russia invaded Ukraine, and three full years since the start of the first global pandemic in over a century. The effects of the former and aftermath of the latter have created a melting pot of macroeconomic turmoil—cost-push inflation from reduced food and energy supply due to sanctions on Russia, and demand-pull inflation following three years of low spending during lockdowns. Financial markets reacted to this concoction of chaos from March 2022, but the fine-wine market, as ever, has taken a little more time to reveal the symptoms.

Stable or stalemate?

Contrasting the general picture of the wine market in 2020, 2021, and the first half of 2022, in which Liv-ex indices climbed to record highs, fine wine appears to have flatlined over the past 12 months. Liv-ex’s main indices remain stable—the Liv-ex 100 and 1000 both displaying positive 12-month performances as of March 2023, of 3 and 4 percent respectively, while the narrowest measure—the Liv-ex 50—has experienced slight negative growth, of less than one percent (fig.1). Meanwhile, the S&P 500 has continued to fluctuate heavily in comparison and has yet to recover its losses since last March. A closer look at the first three months of 2023 paints a less encouraging picture for fine wine. While financial markets show faint signs of recovery—the S&P 500 rising 7 percent in the first quarter of the year—the wine market appears to consolidate further. Liv-ex’s 1000, 100, and 50 indices all dipped around one percent between January and March 2023 and registered further falls in April 2023.

Most merchants I speak to offer the same feedback: “It’s been pretty quiet.” Absence of demand is mechanically sure to lower prices in moderation, as those needing to liquidate their assets make compromises to close deals. Considering the sheer acceleration of demand—especially for Burgundy and Champagne—between mid-2020 and end of 2022, it’s little wonder a portion of buyers now seek a quick exit. And while private bankers continue to suffer sleepless nights under the threat of another 2008 crisis looming, the wine trade seems fairly calm about it all. In the UK, Stephen Browett, chairman of Farr Vintners, tells me that “sales so far this year have held up well,” though they are “a bit down on last year.” In Hong Kong, Thibaut Mathieu, managing director of Corney & Barrow Asia, explains that “the lifting of all Covid restrictions in Asia and the reopening of borders had an impact on sales.” Instead of boosting them as much of Europe anticipated, Mathieu specifies that “buyers resumed traveling and spent less on wines,” though “the blue-chip fine-wine market, for new vintage releases, remained strong.”

Zooming out for a moment, it’s important to look at the reality beyond the recent numbers; market prices fell or remained flat for five years after Bordeaux’s dramatic rise and fall around release prices for its 2010 vintage (fig.2). This gave rise to wider consumer interests—Barolo, Super-Tuscans, California, and Champagne—ultimately protecting the market through greater diversification. After fine wine’s latest ascent, slower price performance is to be expected—but how long will this last?

What goes up…

Some regions may be in for a rockier ride than others based on the 12-month performance of Liv-ex regional indices (fig.3). The Champagne 50 index displays a veritable price roller coaster in the months before 2023, following a huge climb through 2022 and subsequent drop of 5 percent in one month (Nov–Dec 2022. As the biggest riser of 2022, the index has flipped in 2023 so far, recording a further fall of 6 percent between January and March 2023, becoming this year’s biggest loser so far.

Burgundy’s climb and decline has been similar, if softer, displaying a gentler slope toward the end of 2022 and into 2023. It registers a loss of 1.5 percent in Q1 2023 for multiple reasons. First, rumors of the Burgundy bubble bursting have surely frightened a few buyers into selling wines whose prices have spiraled out of control—Domaine de la Romanée-Conti, Leroy, and the like. Second, appetite for the 2021 vintage, at least in the UK, has been good but not as strong as for the previous three vintages. As for Asia’s take on Burgundy, Mathieu reassures me that “demand remained strong. Buyers have realized that 2021 is a good vintage, with good quality in red and very good quality in white. The style is different from solar years, but this is not new to them.” Generally speaking, the current economic context has done Burgundy no favors, with previously consistent demand “at any price” starting to waver.

Meanwhile, Liv-ex’s Bordeaux indices have essentially remained flat in 2023 so far. Browett mentions that “demand was strong for 2019 Bordeaux following the Southwold tasting in autumn 2022”—this surely served to help maintain the indices’ stability, even if rumblings of an expensive en primeur 2022 vintage are sending storm clouds over the region again. And though these figures may appear bleak, we must consider them in context. This time last year, Liv-ex regional indices had registered an average first-quarter performance of 7 percent growth. Given the current macroeconomic backdrop, the average 2 percent drop from the same indices one year on is a natural, and perhaps even miraculously measured, reaction.

Auction update

Live and online auction revenues for Q1 2023 totaled $90 million—7 percent down on 2022 (fig.4). Digital auctions maintain their importance post-Covid, representing 15 percent of sales in value for the year’s first quarter (as in 2022 and 2021). In contrast to the relative radio silence of the retail and wholesale markets, auction activity seems to have had a more energetic start in 2023. Marc Fischer, CEO of Zurich-based auction house, Steinfels, tells me, “Our first auction in 2023 showed stronger prices than the November auction. Wine merchants were actively bidding, and we had a record number of private bidders.”

Euro-division

If there is a geographical success story to be told thus far in 2023, then Europe has stood its ground well, despite being most affected by the increased cost of living. Auctions across the UK, France, and Switzerland make up 14 percent of global auction figures in the first three months of 2023—2 percent more than in the same period last year (fig.5). Sales in Beaune and Paris have made most of the contribution toward Europe’s boosted numbers. Sotheby’s auction of “Iconic Wines from a Prestigious French Cellar” paid homage to its hosting region with a top lot of Georges Roumier’s Musigny 1989 (11 bottles), reaching €112,500. Its sale totaled $2.5 million, representing a first-quarter result increase of 75 percent on Sotheby’s Beaune auction in February 2022, featuring the same number of lots. Paris continues to prove popular with international bidders buying from a distance. French houses on home turf—Artcurial and Tajan—and international house Bonhams have all achieved well in the city of love thus far in 2023, with a combined Parisian auction sale total of just over $2 million.

Auction revenues in Geneva were also up on last year’s first quarter, thanks to Baghera’s creative series of sales, including a record-breaking sale of rare Chartreuse. Rather appropriately for this poignant period in British history, the top lot (selling for CHF34,160) was two bottles of green and yellow Chartreuse VEP, complete with their original wooden case, distilled in 1953 (bottled in 1966), marking the coronation of Queen Elizabeth II.

While London’s results were, perhaps expectedly, down 10 percent on the same period last year, the small decline in auction revenues from Asia is more of a surprise. Following the launch of its Singapore office last year, Baghera’s “Wine o’Clock” auction, with online-only bidding, achieved a sale total of $606,260. This, combined with sales by Acker Merrall & Condit, Bonhams, Christie’s, Gelardini & Romani, Sotheby’s, and Zachys still falls short of figures covering Asia from Q1 2022, when some Covid restrictions were still in place.

Paddle persistence 

The global wine market was expecting a surge of revival from Asia—led by Hong Kong—but as confirmed by Mathieu, the newfound freedom from Covid restrictions has had the opposite effect, lowering purchases but shifting consumers toward “focus-buying.” Analysis from iDealwine’s 2022 market barometer offers some positive light on the subject, suggesting that while buyers based in Asia may not loom large in volume, they will still lift the paddle for very specific lots: “Customers in France and the rest of Europe saw the lowest rates of overbidding [in 2022] (15 and 16 percent respectively), while those in Asia and the United States saw the most, with rates of 21 and 20 percent. Within Asia, Japanese buyers were the most ambitious, with a rate of 30 percent.” Following more than a decade of increased buying of fine wines, it is not unusual to see this ultra-sophisticated and well-served market raise its expectations in terms of lot caliber, its biggest buyers seeking out only the few unicorns they’ve yet to acquire.

Strong numbers from global auction houses headquartered in the US prove that American demand remains wide and deep. Acker Merrall & Condit matches its total auction figure of Q1 2022 in the first three months of 2023, with live and online wine sales achieving $32 million (fig.6). Compatriot Zachys records three-month revenues of $14 million—a value decrease of 34 percent on the same period last year, but a pleasing result nonetheless after a quiet end to 2022. Zachys’ head of wine-auction sales Charles Antin comments, “We have noticed a strong first quarter between our two March New York live sales, our London live sale, and our Hong Kong live sale dubbed ‘The All Sar Collection.’ The dip experienced toward the end of 2022 has largely rebounded, and we’ve continued to see high hammers for the finest and rarest wines, despite the uncertain economic climate.”

Sotheby’s and Christie’s both show vastly improved results compared to their figures for the first quarter of 2022: They achieved $14 million and $6 million from sales between January and March 2023. Hart Davis Hart, though down 30 percent on its Q1 2022 sale total, completes the global auction-powerhouse quintet, maintaining its 100 percent sold record.

Wavering prices of Burgundy on the secondary market do not seem to have slowed appetite for the region at auction. Burgundy claims 56 percent of all top lots disclosed in the first three months of 2023, while seven of the ten highest hammer prices of the quarter are Burgundian. As if providing a small glimmer of hope to the 2022 Bordeaux en primeur campaign, the highest hammer price of the quarter was won by Bordeaux—for a parcel of eight bottles of Mouton Rothschild 1945, sold in Christie’s March auction, “Grands Crus Part III: Finest and Rarest Wines from the Cellar of Christen Sveaas,” held in Hong Kong. This suggests that more than ever the auction market’s success remains based on offering elite clientele the vinous treasures they cannot find elsewhere and have little hope of coming across again.

Sailing against the wind

While years such as 2019 and 2021 demonstrate the results of a fine-wine frenzy, wherein bidders are caught up in the action of simply possessing as many fantastic bottles as they can get their hands on, market conditions such as we are experiencing today separate the wheat from the chaff, both in terms of the personal esteem in which purchases will be held and in the quality of those bottles purchased. Louis Krieger, deputy fine-wine director at Boston-based auction house Bonhams Skinner, notes, “The market remains strong, with buyers favoring bottles with clear and demonstrable provenance. Highly desirable bottles continue to experience fierce bidding.”

As fears of a recession mount, both auction and secondary markets are bound to tighten as buyers force themselves to be more selective with purchases. This will create greater competition for allocations of the rarest lots, or indeed create bargain opportunities for savvy players. Antin explains that Zachys has already noticed “especially strong results among the more entry-level fine and rare wines, as buyers capitalize on strategic opportunities.” Long may these continue—to steer us through the calm waters that are bound to continue through 2023. What lies beyond the horizon will surely depend on the state of the global economy and how much wind the fine-wine campaigns of this year—2022 Bordeaux and Burgundy, and other key releases from Champagne, Barolo, Tuscany, and so on—can put in fine wine’s sails.

The post Liquid Assets: The big picture appeared first on World Of Fine Wine.

Can fine wine weather the dire economic conditions, aks Chloe Ashton, as she rounds up third-quarter activities in wine salerooms around the globe and looks at what the near future might hold.

Global finances have taken a turn for the worse in 2022; the stage is macro-economic Armageddon, mixing the longer-term effects of the Covid-19 crisis, interest rate rises breaking an historic decade of lows, pending energy shortages, and cost-of-living inflation. Dark echoes of the 2008 financial crisis have already sounded amid traditional asset classes: At the time of writing, the S&P 500 is down 22 percent year to date, and the IMF forecasts an inflation rise of 8.8 percent by the end of 2022. What’s more, the ongoing conflict between Russia and Ukraine generates further uncertainty in an already volatile environment—the world waits on tenterhooks. 

Meanwhile, fine wine marches steadily on—an asset class seemingly on its own planet. Stephen Browett, chairman of UK merchant Farr Vintners, tells me, “Business is very good. It doesn’t seem that current economic pressures are having much effect on fine-wine buyers.”

Olivier Staub, chief investment officer of Cult Wines, concurs: “Our clients have not slowed down,” he assures me, “and we are seeing interest in fine wine driven by search for diversification from traditional financial markets, which are in turmoil.”

Indeed, the standard industry indicators for wine-market performance—the Liv-ex indices—have continued to rise, despite macroeconomic difficulties, throughout 2022. Fine wine’s most diverse measure—the Liv-ex 1000 index—grew by more than 10 percent between January and September this year, beating its three-quarter performance in 2021 by 1 percent. The narrower two indices—the Liv-ex 100 and Liv-ex 50—saw gains of 3 and 7 percent respectively, falling short of the 13 and 12 percent increases of 2021.

Will Hargrove, head of fine wine at Corney & Barrow, references this more measured defiance of fine wine against economic uncertainty: “I think [economic pressure] has brought a slight coolness to the market—but then it was a bit overheated.” Despite the positive direction overall, all three indices did falter during the summer months, before continuing upward to finish September on a high.

Even as the pound reached its lowest rate against the dollar since 1971 toward the end of this year’s third quarter, the now entirely globalized nature of fine-wine trading appears to have helped maintain a buoyant marketplace. Browett confirms, “The strong HK dollar and US dollar (these are our two main export markets) have been very good for export sales.”

Regionally, the dominance of Burgundy and Champagne remains unchanged since last quarter’s report—Liv-ex’s corresponding regional indices have risen 20 and 16 percent respectively since the beginning of 2022. The frenzied demand for noble Pinot Noir shows no signs of stopping and, based on the supply-and-availability equation alone, may even continue, given the tiny crop awaiting Burgundy enthusiasts for the next round of primeur sales.

The upcoming vintage—2021—was hit by vinous hellfire; an increasingly common mild winter resulted in early budbreak, exposing vines to extensive damage from frost and hailstorms; then a wet summer threatened growing bunches with rot. As I walked around some of the vineyards on a visit to Burgundy in October, the physical gaps left by vines that vignerons have been forced to rip up due to disease or frost injury were a very real marker of how difficult the growing season was. In contrast, the few 2021s I managed to taste were classic and harmonious. Anthony Vertadier Mabille, associate director of Charles Taylor Wines, hails 2021 as “a truly Burgundian vintage” and “a return to the style of old, with good acidity and delicate flavors. But there’s not a lot of it,” he reminds me.

As for Champagne, releases of the 2012 and 2013—both excellent vintages—continue to propel demand forwards. When I visited Champagne shortly after this year’s harvest, the Champenois nonetheless spoke about the past 18 months with mixed emotions. There is a shared feeling of gratitude (and joy) for the impressive and persistent upticks in demand they have experienced since 2020.

And yet some feel frustration, since the region as a whole was bound by local association rules at the start of the pandemic, which enforced lower-than-average production volumes amid fears of having more Champagne than they could sell in a time of crisis. Ironically, the region is now experiencing a real shortage and having to exercise careful control on stocks leaving their cellars. One director of a major house told me, “This is a completely new era. We are not used to having to allocate our Champagnes, and now everything is already sold out through allocations”. Staub confirms that collector interest in Champagne continues to prove “very strong and widespread.”

All other Liv-ex regional indices maintain positive gains, averaging a 6 percent increase since January. Only the Rest of the World index struggles to keep up, sporting a 2 percent rise—compared with gains of 12 percent over the same period in 2021—and stumbling prior to both sets of Place de Bordeaux-based international wine releases in March and September. Theorizing with a Bordeaux négociant on future prospects for these wines as investments, we mused that while Covid created an opportunity for such wines to be discovered by more traditional drinkers, New World wines still lack the history and price-performance track record of the likes of Bordeaux.

Auction Update: Fine wine set for a record-breaking year

This year’s summer auction season generated revenues of just under $86 million, bringing the three-quarter total of 2022 to $375 million (fig. 3). These impressive numbers put 2022 ahead of 2021 year to date by $21 million (or 6 percent) and suggest the year is on course to be yet another record-breaker for auctions. 

Online-only sales have also increased year on year, both absolutely and proportionally: Fine wines auctioned online through major houses up to September 2022 represented $55 million, or 14 percent of all sales, compared with 2021’s three-quarter digital total of $40 million (11 percent).

Speaking to Alfonso de Gaetano—founder of digital auction platform Crurated—online sales appear set to continue their growth, particularly among younger audiences. He notes, “Digital platforms are now making it easier to buy wines and engage with winemakers that were often challenging to gain access to. They have changed consumer behavior, which signaled to fine-wine producers that they needed to rethink traditional distribution and more openly embrace the digital world.” 

Relating to the online space, recent conversations with several auction leaders have yielded a collective, twofold theory to explain the strong ongoing performance of the global gavel. First, this diversification in sales methods has made the auction world more competitive and far more accessible than it has ever been before, both to new kinds of consumers and to collectors living at a distance from physical sales. Second, the digitalization of auctions and wide publication of fine wine’s rising demand may well have encouraged more private collectors with saturated cellars to seek liquidation, filling salerooms with stock and further fueling the demand cycle. 

While it’s a blessing to support healthy bottom lines overall, this may nonetheless have affected hammer-price elasticity. A review of average lot prices since 2014 shows a first peak in 2018—the last time many gavel records were reached—and another last year, matching an unprecedented 12 months for wine prices in the secondary market (fig. 4).

Prices at gavel closure in 2022 thus far are not consistently stretching beyond high estimates—a possible indicator that engagement is beginning to soften. Two Swiss-based houses, however, argue the contrary: Julie Carpentier, co-founder and deputy director of Baghera, says, “We have witnessed strong demand from the international clientele for fine wines during August and September, especially from Asia-based wine collectors.”

Based in Zurich, Marc Fischer is similarly positive. Referencing his house’s summer auction and a vertical parcel of Armand Rousseau’s Chambertin in particular, he tells me, “This collection of super-rare Burgundies came under the hammer, and prices reached stratospheric levels.” He nonetheless observes “less interest from UK and Hong Kong buyers” at present.

Sales achieved by the “big five” auction houses make up 90 percent ($336 million) of three-quarter revenues for 2022 (fig. 5). While Covid-19 leveled the playing field for auction sales figures in 2020 and 2021, the resurgence of these top-performing houses suggests that decentralization of demand was but temporary. Indeed, based on figures to September 2022, the next best-performing auction outfit—Los Angeles-based Heritage—lies a $40-million gap away from 2022’s global auction number 5, Sotheby’s. 

Auction Goliath of the USA, Acker Merrall & Condit remains on top of the podium, achieving a three-quarter sales total of $88 million. Though still in first place, numbers are down 23 percent on the equivalent period for 2021, contrary to silver medalist Zachys, whose $77 million earned between January and September 2022 increases its three-quarter performance year on year by 47 percent. Indeed, the gap between the two houses has reduced significantly—at the same time last year, Acker’s running total represented more than twice that of Zachys.

Commenting on the house’s strong performance thus far, Charles Antin, Zachys’ head of wine-auction sales explains, “One of the strongest drivers of [Zachys’] successes in 2022 has been the quality of the collection as a whole.” Referencing August’s auction, The Unicorn Collection—the summer season’s highest-earning sale—he notes, “When the dust settled, The Unicorn grossed over $16 million and was Zachys’ highest average lot value ever at nearly $20,000; half of the lots on offer sold for over $10,000, and 246 bidders from around the world placed well over 5,000 bids. Half the lots in the auction sold over the high estimate, and $3 million of bids were placed live in the room.”

Christie’s boasts revenues achieved between January and September 2022 of $66 million, exceeding its three-quarter total of the equivalent period last year by more than three and a half times. The outstanding results move the international house up from sixth to third place relative to the first three quarters of 2021. Harnessing a market for online sales has no doubt boosted Christie’s figures, but Antin’s sentiment on the quality of an auction’s presentation (and perhaps, personality) resounds in Christie’s successes, too.

Long-term relationships with top collectors or producers have clearly done both houses a good turn: Five of Christie’s 13 sales between January and September 2022 were single-cellar collections, procured and curated with one private owner at a time, while a further three sales feature blocks of single ownership. Meanwhile, Antin makes mention of Zachys’ close relationship with Fred Schrader (of Schrader Cellars), and the advantage of being able to offer “a massive amount of his namesake wines straight from the winery and his personal cellar.” Wine collecting has always been deeply personal, but I would wager that the need for a human story behind a selection of bottles is accentuated after the global health crisis, as well as in times of turmoil. 

The only consistent exception to this appears to be wines from Domaine de la Romanée-Conti, which continue to dominate leading hammer prices (representing 35 percent of all top lots disclosed to September 2022) regardless of their previous owners, suggesting that any wine benefiting from such gargantuan demand simply has no price ceiling.

At any rate, fine wines with great stories told around them, or names so rare that to own a bottle would tell a story in its own right, may well remain protected from the financial turbulence facing the world at present. As for the wider fine-wine market at large, Staub highlights that “customers at the top of the wealth pyramid are unaffected and continue to buy and consume great wines.”

He adds, “Some are even benefiting from the current situation (high energy prices, strong demand for certain products post-Covid), and pure investors are driven by the search for stability and de-correlated assets to protect their wealth against volatility and inflation.”

While this may ring true in the long term, recent discussions with a handful of collectors suggest a momentary market freeze might hinder price performance in the coming months, caused by distraction amid all the uncertainty rather than any more ominous or persisting affordability issue. Such an occurrence might prove a necessary evil to recalibrate the market for certain icon wines and give those that are undervalued a chance to catch up—before wine prices take flight once again.

The post Liquid Assets: Fine wine in the eye of the storm appeared first on World Of Fine Wine.

Chloe Ashton presents all the latest data from the thriving auction and fine-wine market, where both demand and prices have continued on their dramatic upward curve.

Wine prices have never been higher. Following an initial stumble at the beginning of the coronavirus pandemic (March 2020), Liv-ex indices have risen continually over the two years since, as demand for fine wine seems only to grow. Global uncertainty and, to an extent, simple consumer boredom from tiresome restrictions may have been the initial catalyst for this latest surge of interest (and thus prices), but both have advanced beyond expectations since. Stephen Browett, chairman of leading UK merchant Farr Vintners, reiterates that “wine was one of the few luxury pleasures not affected [by the pandemic], unlike holidays, restaurants, parties, and so on.” If this kickstarted a new era of wine buying and selling, it is riches built up over several years prior that sustain it. Erik Portanger, head of strategy for private wine-collection curator 1275 Collections, explains: “We are at the tail end of a decade-long bull market, which has created a huge amount of wealth and increased the pool of people who have the means to indulge their passion for fine wine.”

Sky’s the limit for the fine-wine market

The Liv-ex 100—the staple fine-wine measure comprising the top most traded wines on Liv-ex’s exchange platform—saw an increase of 22 percent between January and December 2021 (fig.1). Now filled approximately halfway by Bordeaux—and otherwise including important wines from Burgundy, Champagne, the Rhône, Italy, Spain, Australia, and the US—it attests to a fervent interest in fine wines of all shapes and styles. The broader Liv-ex 1,000 index increased by 19 percent in 2021, while the Liv-ex 50, comprising Bordeaux first growths of the past ten vintages, rose by 13 percent. Though the latter sports the least impressive increase of Liv-ex’s three major price measures, its performance relative to previous years is positive: The Bordeaux price indicator achieved its best annual performance since 2016 last year.

Collective price increases may have environmental causes, muses Portanger; he cites climate change as an important factor in wine pricing today, explaining that “adverse weather events are reducing supply just as demand is increasing. This has also drawn attention to the fact that many iconic wines are changing and might not even exist in years to come, which is creating a sense of urgency.” Thibaut Mathieu, managing director of Corney & Barrow’s Hong Kong office, concurs, highlighting consumer awareness of “the prospect of upcoming smaller vintages.” Liv-ex results certainly support this at a more granular level; regional indices ended 2021 on record-breaking highs, growing 10–40 percent between January and December 2021. The last quarter of the year saw a particularly fast upturn for the Champagne, Burgundy, and Rest of the World indices, which, in the case of UK buyers at least, Browett puts down to a “weaker supply of drivers,” magnifying relative demand between October and Christmas 2021.

Champagne on a high

The Champagne 50 index was by far the strongest performer in 2021, rising a remarkable 40 percent over the course of the year. Peter Crawford, Champagne collector and founder of online retailer and grower specialist Sip Champagnes, admits to me that price increases have, in some cases, been “frightening for someone who sells and buys Champagnes designed for drinking enjoyment.” He explains the region’s recent price growth through a culmination of factors. First, Champagne has benefited from a succession of strong vintage releases—2008, 2012, and 2013, which have all garnered unprecedented levels of interest. Second, these successful vintages have perhaps had more of a mainstream voice, thanks to high scores from globally recognized wine critics. Finally, the perverse advantage of lockdown boredom causing traditional fine-wine buyers to move beyond their Bordeaux- and Burgundy-based comfort zones has contributed to Champagne’s impressive ascension. Crawford nonetheless hints that fine wine’s new Everest could be reaching its peak, believing that price hikes adopted by some Champagne producers will simply be unsustainable. He foresees a potential growth deceleration with subsequent declared Champagne vintages. He says, “2014 was good for some Chardonnay-dominant areas, [while] 2015 was struck by disease in some areas.” But he adds that while good (if perhaps not great) vintages across the board are to follow, “we’ll understand fully within the next decade why our great-great-grandfathers planted grapes in certain areas.” Referring to the specific vineyard sites that still perform, be it in lesser vintages and/or under pressure posed by climate change, the near future of Champagne’s price performance may hang in the balance of the specific micro-site, rather than in the region’s traditional tendency for blending and consistency.

Burgundy balloon

Now second in command, the Burgundy 150 index grew by 29 percent throughout 2021, similarly experiencing an uptick in the year’s fourth quarter, which boosted the index beyond its first peak back in 2018. At the time of writing, the campaign for Burgundy’s latest vintage (2020) has already been and gone. David Roberts MW, buying director of Goedhuis, tells me that most wines “sold out incredibly quickly.” Indeed, whispers at the resumed set of Burgundy week tastings (Goedhuis, Flint Wines, Justerini & Brooks, Charles Taylor Wines) indicated that a majority of the wines were already “pre-sold,” while Roberts even muses that he and the Goedhuis team must consider “what further Burgundy we can offer during the rest of the year,” since recent vintages have seen the same pattern of being snapped up so quickly on release. With this in mind, and considering the lower volumes available (particularly for reds) in 2020, Burgundy prices are poised to continue their ascent. Mathieu offers that recent price hikes have not all been entirely market driven: “Producers are putting their prices up in preparation for a small 2021 [vintage].” This nevertheless seems to have done little to assuage demand. Portanger confirms that “appetite for top Burgundies is insatiable” but suggests there exists an alternative route for the insatiate, in “other regions with similar characteristics—most notably Barolo.” He admits the knowledge base of Piedmont throughout the market remains limited, which could present an opportunity for growth.

The Rest is yet to come

Liv-ex’s Rest of the World 50 index achieves third place for price performance in 2021, its 22 percent rise driven primarily by increased interest in wines from California. Meanwhile, Liv-ex’s Bordeaux 500 and Bordeaux Legends 50 indices still trail behind, growing by 10 and 12 percent respectively throughout last year. The Liv-ex exchange reported a record low of Bordeaux’s market share as a portion of platform trades by value. Mathieu admits this pinch is somewhat reflected in Corney & Barrow sales, a phenomenon he attributes to en primeur release prices exceeding the cost of available mature stock. “As long as this is the case, Bordeaux will be a tricky sell,” he says. Other merchant data differ. Browett tells me, “Bordeaux remains king for us [Farr Vintners] in terms of value and quantity sold.” He adds, “Our [Bordeaux] sales remain two to three times stronger than those of any other region.” Roberts echoes the importance of Bordeaux for Goedhuis, similarly noting that the region is still the merchant’s biggest seller by both volume and value. He has witnessed a recent resurgence of interest in Bordeaux, likely linked to the global health crisis. “During the 18 months of Covid, clients were withdrawing ten-plus-year-old Bordeaux from their reserves and rediscovering the joy of drinking claret,” he notes, explaining that this “served as a reminder that it pays to buy and lay down Bordeaux for later years.” Indeed, while last year’s release prices of some Bordeaux 2020 en primeur were “expensive,” Roberts calls the campaign “successful,” adding that it, too, encouraged buyers to revisit further physically available vintages for cellaring: “We sold quite a lot of 2015s during lockdown.”

Auction update

Despite ongoing restrictions linked to the global health crisis permeating parts of 2021, the year saw total live auction revenues from major houses reach $582 million (fig.3). Representing an astonishing increase of 53 percent on the Covid-stricken 2020, auction-house sales figures in 2021 were at an all-time high and even surpassed the previous reigning year of 2018 by $110m (or 23 percent). While purely digital auctions have only been measured since 2019, latest figures indicate that online sales are set to stay a permanent feature of the fine-wine world, after solidifying their importance for wine collectors during lockdown periods. Online-only auctions added $51m to sales in 2020 (resulting in a total annual figure of $432m), and this grew to $53m in 2021, pushing the wine-auction annual revenue total over the $600m mark.

Worldwide web

Geographically, the US has remained the number-one auction buyer in the world, responsible for 45 percent of all live auction revenues in 2021 (fig.4). Once the sovereign city of America’s gavel, New York has seen its live sales outpaced by those livestreamed from the state of Delaware (by Acker Merrall & Condit and Hart Davis Hart). The two areas together prove the power of the Northeast megalopolis, accounting for 43 percent of all global auction sales. Hong Kong represents Asia with a 38 percent portion of auction revenues, while Europe maintains a web of wine hubs, led by Geneva and London, that generate matching sale shares of 6 percent apiece. While key cities retain the obvious advantage of proximity to collector wealth (and a higher density thereof), strong results for outlier auction locations are made more achievable by consumer willingness to buy from a distance. Louis Krieger, deputy director of Boston auction house Skinner, remarks on increased confidence in buying remotely, saying, “Timed, online auctions continue to attract buyers, and fears of realizing lower prices versus live auctions can be assuaged.” Similarly, Pascal Kuzniewski, chairman of Besch auction house, based in Cannes, comments that the positive aspect of “attracting more and more customers from all over the world” outweighs the major disadvantage of remote access to sales; “fewer attendants in the auction room, of course.”

Cross-continental

Multi-continent auction outfits naturally still earn most in revenue terms. The three champions of 2021—Acker Merrall & Condit, Zachys, and Sotheby’s—all held sales in at least two out of the three “big cities” (New York, Hong Kong, London). Maintaining its position as the highest-earning house, Acker achieved sales of $185m in live, livestreamed, and online auctions between New York, Delaware, and Hong Kong in 2021, growing revenues by $59m (or 46 percent) year on year (fig.5). Second in line, Zachys achieved $147m ($64m higher than in 2020), representing an impressive 77 percent increase. Having expanded geographically through its first sale held in London during 2020, Zachys added another location to the gavel list in June 2021, celebrating California greats in St Helena, Napa Valley. Charles Antin, head of wine-auction sales for Zachys, attributes the house’s success in 2021 to being “the first auction house ‘back at it’ with live, in-person sales,” as well as to the variety of sale types on offer (“We had spirits-only, Champagne-only, single-owner live and online auctions”). International auction star Sotheby’s ventured into France for the first time last year, holding two sales, in Beaune and Paris respectively. Both featured single-producer lots—the former an auction exclusively of wines from Domaine de la Romanée-Conti, the latter an online auction in partnership with Mouton Rothschild, revealing the new artist label to be featured on the 2019 vintage bottles. Reaching revenues of $93m, Sotheby’s grew its wine and spirits department figures by $18m (or 25 percent) compared with 2020.

Specialist success

Looking at the wider set of results covering all major auction houses, the boom of fine wine and spirits compared with other collectibles is more evident. In growth terms, those houses specializing only in the auction of wines and spirits, as opposed to possessing the same department category within a larger set of auction offers, have performed better between 2020 and 2021. Wine- and/or spirit-specific houses achieved an average year-on-year revenue growth of 81 percent, while collectible auctioneers with wine departments gained 35 percent. Wine-auction houses are boosted by two single-city performers: Geneva-based Baghera and Cannes-based Besch each increased their 2020 sales figures by 150 percent. An exception to the specialism rule, Paris auction house Tajan improved its wine department’s revenues by an astounding 180 percent in 2021 (fig.6).

One-region wonder

While location and specialism (or lack of) show variable correlation to hammer-price success in 2021, winning-auction subject matter is unanimous: Burgundy continues to hold court in global salerooms. The region accounted for 60 percent of all top lots disclosed in 2021, proportionally flat on the previous year but exhibiting a significant increase in hammer prices. The region’s top lots reached an average $159,000 in 2021, 76 percent higher than the previous year. While Domaine de la Romanée-Conti continues to dominate Burgundian gavel wins (earning 57 of the 100 Burgundy top lots disclosed throughout 2021), the two highest-priced lots are from elsewhere. A 12-bottle lot of 1865 La Romanée from Bouchard Père & Fils, sold by Baghera in the second quarter of last year, remains unbeaten, going for $2,142,294. Next in line is a 10-bottle lot of 1991 Musigny from Domaine Leroy, auctioned in Hong Kong by Acker Merrall & Condit in January 2021. Finally, the most expensive top lot of the year from Domaine de la Romanée-Conti was declared by Zachys: A 6-liter bottle of 1998 Romanée-Conti sold for $684,750 in the American house’s November Hong Kong auction.
Bordeaux also maintains a similar share of top lots in 2021 compared with 2020 (around 26 percent), though its average hammer prices have not risen nearly as much: High-achieving claret and Sauternes grew top-lot prices by 12 percent. The winning representative of the region in 2021 was a bumper lot of more than 100 bottles of Yquem 1990, auctioned by Christie’s at its Geneva sale in November of last year. The sweet lot sold for $295,483, surpassing the hoard earned by Sotheby’s Parisian auction of Mouton Rothschild’s 2019 new artist label collection (containing six bottles, three magnums, a double-magnum, an Impériale, and a Nebuchadnezzar) by just under $133,000. Reflecting recent trends on the secondary market, top lots from Champagne and California continue to make appearances, while the Rhône saw winning hammer prices for the first time in 2021. Two separate sales, by Zachys in Hong Kong and Heritage in Beverly Hills respectively, generated top lots from the Rhône; the first, a nine-bottle lot of Jean-Louis Chave’s Ermitage Cuvée Cathelin 1998, sold for $54,513; the second a much more modest online sale of six bottles of Rayas’s Châteauneuf-du-Pape 2000 (going for $4,551).

All aboard

With record prices infiltrating the auction and secondary fine-wine markets, and a revived roster of live, livestreamed, and online-only sales planned, there is a distinct sense of optimism heading into 2022. The year that will hopefully see the back of Covid may well also earn further price increases, as more consumers seek to join the wine-collection club. Portanger tells me, “There is growing awareness of fine wine’s unique attraction as an enjoyable yet secure store of alternative wealth, offering the option to either drink or realize profits in the future. The good news is that the fine-wine market has been steadily broadening beyond the most obvious names, which creates a continuous stream of opportunities for collectors.” An energy surrounds even the most traditional of regions. Browett foresees “strong sales in 2022 for the great [2019] Bordeaux vintage” now that critics and merchants are tasting it in bottle. Roberts may urge caution to the region for its next en primeur campaign, though mostly relative to strong prior successes for claret. “Clients buying Bordeaux have purchased five out of the past six vintages released,” he notes, “so they may not feel the immediate need for 2021 [Bordeaux en primeur].” Whatever region may spark interest, prospective enthusiasts may do well to board the wine train now, before it speeds away without them.

The post The fine-wine market: Up, up, and away appeared first on World Of Fine Wine.

Chloe Ashton reviews the latest facts and figures from the fine-wine market, amid talk of online bidding looking to make a more permanent mark on proceedings in the wake of its success during the Covid-19 pandemic.

The fine-wine market is back in business, breaking records and bursting with energy. Following a slump through the latter half of 2019 and the pandemic-stricken start to 2020, fine-wine prices have continued their steady road to recovery throughout 2021, fueled by continuous demand from all major markets. Bordeaux Index’s LiveTrade platform activity illustrates a high level of engagement from buyers in the market: Matthew O’Connell, CEO of LiveTrade tells me, “Executed transaction data shows a broad fine-wine performance increase of 15 percent over the past 12 months,” adding that “activity in Asia has been strongest, followed by the US, then the UK and Europe.”

All three Liv-ex indices also maintain their positive upward curves. The wider measure of the fine-wine market, Liv-ex 1000, ended September 2021 at another record peak (fig.1). Having broken its previous price ceiling of 2019 in March this year, it reached a new high for the eighth consecutive month at the end of 2021’s third quarter, growing by 10 percent during the year overall. The Bordeaux first-growth staple, Liv-ex 50, nonetheless beat its more diverse comrade on growth marginally in the nine months to September 2021, rising by 11 percent, while the middle sibling—the Liv-ex 100—took the price performance crown, increasing by 13 percent over the same period and achieving its fastest nine-month price hike since 2016.

The fine-wine market: Time heals all wounds

It is possible that the fine-wine market is learning to self-heal from previous traumas. Following the financial crash of 2008, the subsequent wine boom of 2010 saw the Liv-ex 100 index soar back upward at a rate of nearly 3 percent per month. At the time, Bordeaux first growths and their popularity in China dominated the upward charge, leaving the wider market in free fall at its buying cycle’s end, though thankfully this drastic phenomenon has not yet been repeated. The next upswing in 2016 produced a gentler climb, with the same Liv-ex measure increasing an average 1.87 percent per month throughout the year, and perhaps ultimately resulting in a less dramatic dip in 2019. Now 2021 is appearing stabler still, with the Liv-ex 100 index rising by 1.48 percent each month on average between January and September, and suggesting that a middle balance between traditional investment staples (Bordeaux and Burgundy) and the more exotic choices—from Champagne and Italy, for example—might be the best recipe for long-term stability.

Dizzying heights

Latest Liv-ex figures indicate that prices in the fine-wine market could find even higher altitude by the end of the year, across a broad range of wines charging onward and upward, collectively. As the diversification of consumer interest—accentuated by Covid-19 lockdown periods (in which collectors were more willing to explore beyond the classics)—proliferates after the worst months of the pandemic, all bets are off as to which regions are being bought and appreciated the most.

Liv-ex’s regional indices are all showing positive growth, led by a clear resurgence of interest in Burgundy (its index rising by 15 percent in the first nine months of 2021; fig.2). A close contender for first place, the Liv-ex Champagne 50, rose 14 percent within the same period. O’Connell tells me that trades for Champagne have shown “particularly interesting dynamics” of late, not least in their position “leading the charge” of activity on the LiveTrade platform (increasing trade of sparkling by 26 percent over the past 12 months). He explains that much of this has been due to a surge of interest in Champagne from Asia, while performance is skewed toward heavy trading of “prestige cuvées and particularly those from Krug and Taittinger.”
Liv-ex’s Rest of the World 50 index earns the bronze medal, sporting a 12 percent hike in the first three quarters of 2021. The remaining four indices—Bordeaux Legends 50, Bordeaux 500, Rhône 100, and Italy 100—form a group of second-tier performers, growing at 7–9 percent over the same period.

Auction update

Live auction revenues in the first three quarters of 2021 reached $314 million, exceeding figures for the same period last year by 37 percent, though still falling $25 million short of 2018’s three-quarter high (at $339 million; fig.3). Following a bumper second quarter for this corner of the fine-wine market, the third quarter of 2021 showed signs of a return to normality from pandemic-related restrictions, with a more modest schedule of live summer auctions than 2020 (17 compared to 28), as collectors reverted to a wider variety of estival pursuits. George Lacey, head of UK sales for Sotheby’s wine, is nonetheless very positive about the performance of the auction market in 2021 thus far: “It has certainly been a more robust year than we might have been expecting after 2020.” He comments that the number of participants in Sotheby’s London sales has never been higher, boosted by the house’s pivot to running live-streamed closes for all sales online. “This has meant it doesn’t matter if someone is on the other side of the world, they can still participate,” he notes.

Back to bases

Despite the continuation of political unrest, the fine-wine market in Hong Kong has maintained strong figures in 2021, representing the Asian auction market with $104 million in sales from January to September—an increase of 34 percent on its results for the same period last year (fig.4). The US maintained its dominance of the global gavel once again, achieving a collective $159 million in the first nine months of 2021 and accounting for 51 percent of all live auction revenues. Though an impressive result, this does mean that the juggernaut continent has ceded proportional ground to Europe when compared to its results last year, no doubt due simply to the revival of normality in the UK, France, and Switzerland.

America’s sovereignty in the auction game remains unchanged: Acker Merrall & Condit achieved revenues of $99 million from live sales in the first nine months of 2021, representing a growth on figures for the same period last year of 50 percent and giving the auction giant an ever-wider lead on other players (fig.5). Chicago-based auction house Hart Davis Hart nonetheless maintains its position in second place. Two sales held in August and September 2021 (the latter reaching an impressive hammer total of $19 million) helped the house increase its own year-on-year nine-month revenues by 40 percent, to $63 million. Senior vice president of Hart Davis Hart, Marc Smoler, tells me that he and the team were greatly encouraged by the strong set of results: “Our 4,700-lot August sale really proves there is no bad time to sell wine in this market. Then September blew records out of the water, creating new benchmark hammers for the wines of Domaine de la Romanée-Conti, Jacques-Frédéric Mugnier, Domaine Leroy, Emmanuel Rouget, Armand Rousseau, and more.”

The old guard renewed

The trio of US-based auction dominators who ruled the roost together in 2020 has well and truly broken up. Following a strong second quarter, international player Sotheby’s counted a three-quarter sale total of $47 million, maintaining its 2021 position in third place, with a mere million-dollar lead on American house Zachys. The majority of Sotheby’s summer success nonetheless occurred outside of the United States, back in Blighty. Indeed, London was Europe’s auction capital for July through to September, thanks in large part to a pair of sales held by Sotheby’s, featuring a mixture of lots from private cellars and direct from producers. Lacey reflects on the four sales sourced directly from producers in 2021 thus far (Primum Familiae Vini, Sassicaia, Eva Fricke, and most recently, châteaux Rauzan-Ségla and Canon in October): “It became evident during the pandemic that producers have become even more keen to connect with their end consumers. Ex-château stock allows us to introduce those who make the wine directly to those who consume it, with the secondary major benefit of perfect provenance.”

Aside from Sotheby’s strong performance, Bonhams also contributed to the UK capital’s summer-auction hoard, earning $1.6 million for two sales held in July and September. And though purchases out of London continue to prove themselves large in number, Geneva remains Europe’s overall auction capital in 2021, since no third-quarter results could outshine the exceptional performance of the live sales held by relative newcomer to the gavel game, Baghera, in April and June respectively.

Into a higher gear

The high engagement in auctions over the summer season is matched by a general growth in top lot prices. Smoler notes that “[Top lot] prices are rising across the board, with some regions realizing more than 50 percent growth, and this momentum shows no signs of slowing.” He is not alone in his observation—and despite the return of real-life pursuits that might distract collectors from fine-wine purchases, demand levels still appear high enough to be pushing hammer prices up a gear. Zachys’ head of auction sales Charles Antin comments, “On the heels of our July live sale, the typical late-summer slowdown was nonexistent. Zachys has seen its hammer prices steadily increase this year, with a massive jump between our live sales in July and September.” He continues, “As evidenced by our latest live sale, the market’s demand for blue-chip Burgundian and California wines is insatiable, as prices for such bottlings have skyrocketed, along with other price increases across the board. We only expect hammers to increase.”

Indeed, top lot prices have never been higher. Of those disclosed, the average top lot price in the first nine months of 2021 reached $148,607—an increase of 22 percent on the previous reigning average in 2018 ($122,223; fig.6). Several top lots over the summer auction season broke previous auction records:A three-magnum lot of Romanée-Conti, 2006, sold by Hart Davis Hart in its September auction, went for $191,200 to a private American customer, while Bonhams’ September auction culminated in a world-record hammer price of $140,300 for a Nebuchadnezzar of Mouton Rothschild 2000. Though Burgundy (and Domaine de la Romanée-Conti in particular) continues to dominate winning hammer prices, the whole market continues to shift upward off the back of the momentum created in crisis. Acker Merrall & Condit’s chairman John Kapon observes, “We are in the midst of a momentum and a market I have not seen in 25 years of doing wine auctions. The Burgundy market is literally doubling right before our very eyes.” Of Acker’s September sale in Hong Kong, he says, “While Burgundy gets all the headlines, Bordeaux quietly achieved 35 percent of the day’s totals, with results often 15–20 percent higher than before.”

All-access pass

While the return of live auctions, and indeed the simple pleasure of enjoying wines in the same room as friends once again, has had only a positive impact on secondary-market prices for fine wine, the concept of digital access appears to be a lasting consequence of the global health crisis. Marc Fischer, CEO of Steinfels, speaks of the downside of the online wine-buying revolution, with reference to his September auction: “Our traditional in-person auction took place on Saturday, and our clients could bid in person, as well as live online. Sadly, fewer bidders are coming in person to our auction, since they can now bid live online.” Lacey, too, remarks on the same phenomenon following the digitalization of Sotheby’s sales: “More than 90 percent of bids on London sales [for Sotheby’s] have been conducted through the online platform this year, as opposed to in-room or absentee bidding by telephone.”

Traditionalists might mourn the days of full live-auction rooms, but overall it should be noted that online access to auctions has primarily served to open up bidding to an international audience, no matter where the physical sale is taking place. After so many months during which collectors had no choice but to buy online, this mode of access to the finest and most desirable bottles has become the norm. The year 2020 will go down in history as the linchpin in fine wine’s digital revolution, with the numbers to prove it: The average price of top lots disclosed by major houses from online-only auctions last year was $31,650 (although this was skewed by an incredible anomaly achieved by Sotheby’s digital summer sale, which saw ten bottles of Domaine Georges Roumier’s Musigny 1997 sell for $866,426). Excepting this hammer record, the average online top-lot price for 2020 was $17,258, while the nine-month average figure in 2021 was 17 percent higher (at $20,272).

Heading down a primrose path?

With fine wine experiencing as yet unseen levels of demand, the outlook for sales in 2022 could see complications arise in the fine-wine market. New vintages set for release from Burgundy and Bordeaux promise good quality but reduced quantities, while many California properties made no 2020 vintage at all, due to the region’s devastating wildfires. Anthony Vertadier Mabille, head of trade at Burgundy specialist Charles Taylor Wines, tells me, “Demand for Burgundy is increasing, but production levels are trending the other way. Volumes of 2020 overall will be slightly smaller than 2019, which in turn was reduced compared with 2018. Luckily, we have the safety net of larger stocks of back vintages, which will help us find balance against the lower availability of upcoming vintages (2020 and 2021). Otherwise, we will simply be looking for more producers to add to our portfolio to satisfy the ever-growing demand from our customers.” On the auction market, Lacey’s analysis of such high demand experienced this year (wherein Sotheby’s London sales have seen the highest ever number of bidders per auction), is linked with last year’s lockdown: “The thirst for wine among collectors is enormous, thanks in all likelihood to the amount of time they spent at home [in 2020] depleting their cellars,” he remarks. One must stop to wonder, will there be sufficient fine wine to go around; and in the absence of availability through both physical and digital avenues, where will collectors turn to next, to sate their appetites?

Upcoming Auctions

Acker Merrall & Condit, Delaware, December 16–17
Sotheby’s, London, December 17
Steinfels, Zurich, December 27
Besch, Cannes, December 28
Baghera, Online, January 11
Baghera, Online, February 8
Steinfels, Zurich, March 5
Baghera, Online, March 8

The post The fine-wine market: Back in business appeared first on World Of Fine Wine.

In her Liquid Assets Q2 2021 analysis, The World of Fine Wine ’s auctions and secondary market correspondent Chloe Ashton looks back at the past few months, as well as to what the future might hold for the auction market.

Despite difficult times continuing due to the pandemic, fine wine is booming. As the world slumped past the somber first anniversary of the World Health Organization’s declaration of an international health crisis, much of it amid a gruesome third wave, Liv-ex’s wider 1000 index appeared weightless, rising to its highest-ever level at the end of March 2021, beating its previous price record of November 2018 (fig.1).

Flying high

The Bordeaux first-growth index—the Liv-ex 50—and the Bordeaux-dominant Liv-ex 100 have followed suit, each rising by 10 percent since March 2020. The latter has more than recovered its losses through 2019 and the beginning of 2020, while Bordeaux first growths lag behind in relative terms, their index remaining just under its best-achieving month of the past three years (August 2018) at the end of the first quarter of 2021. Both indices are yet to fly above the point of their respective all-time highs achieved back in June 2011, but they nonetheless display a positive trajectory going into the summer of this year.

On solid ground

On the ground in the UK, fine-wine sales have stayed solid in 2021 thus far. Will Hargrove, head of fine wine at Corney & Barrow, tells me, “Demand for wines across regions has been very good.” Reflecting on the months that have passed since the pandemic began, he explains that while the first quarter of the year has seen buying patterns settle back “into the more traditional cycle,” the positive effects of Covid-19—namely, the willingness of customers to buy and try a wider range of styles—seem to persist. He is pleased, too, that this continues to translate into the buying of back vintages for delivery, rather than collectors making significant dents in their stored reserves—a phenomenon that he and many of his comrades feared would slow down sales significantly when the health crisis first hit. He is not alone in reporting a strong start to the year. Matthew O’Connell, head of investment for Bordeaux Index, tells me, “We are seeing sales so far in 2021 just shy of the peak of 2011 figures—one of our best years ever.” He specifies, however, that “the demand pattern is much more sustainable looking ahead into the rest of the year.”

Disparate times

While it is a positive picture overall, the three-year performance of Liv-ex’s regional indices shows a slightly more turbulent journey for certain regions (fig.2). The Burgundy 150 is yet to reach either of its previous camel humps, seen during the last quarters of 2018 and 2019. Burgundy prices nonetheless appear to have been boosted by the successful en primeur campaign for the 2019 vintage, as the index rose 3 percent in the first three months of 2021 (equaled only by the Rhône 100 for pace). Hargrove reports a very successful Burgundy en primeur campaign, with buyers willing to snap up wines at all levels—generic, village, premier cru, and grand cru—from respected producers. The longer regional performance retrospective also shows the Bordeaux Legends 50 index still flailing below its previous peak of October 2018, though its more comprehensive sibling fares better, sitting 1 percent above its 2018 high at the end of this year’s first quarter.

Land of the free

Bordeaux and Burgundy have likely benefited in the immediate term from an early act of Biden’s administration—the suspension of punitive US tariffs as of March 5 this year. Executive vice president of top US retailer Total Wine, Jonathan Bennett believes that the full force of this positive pivot is still to come. He tells me, “A lot of retailers are now starting to bring in previously tariff-eligible inventory from négociants and, more generally, are focusing on Bordeaux stocks again. With the pandemic continuing, though, the global supply chain remains in disarray—it will take a while for these shipments to arrive and thus to feel the full effects of tariff suspension.” Though tariff removal means retail prices of these wines will likely decrease, stronger demand as a direct result could boost secondary market prices overall, heading into the summer and beyond. O’Connell suggests this particular consequence is already beginning to show: “We’ve seen a strong resurgence of Bordeaux and Burgundy demand from the US, given the suspension of tariffs. For Burgundy specifically, American buying has been particularly active on the top, blue-chip names.”

Variety show

Elsewhere, the rise of the Champagne 50 and Italy 100 indices continues into the first quarter of 2021, having both already increased by 6 percent over the course of last year. These two indices join the Rhône 100 as the top benefactors of a diversification trend, accelerated by collectors at the start of the coronavirus pandemic. Interest from an avid fine-wine-drinking audience exploring beyond fine wine’s most traded staples translates into both variety and volume. The WFW Drinkers’ Index 50 registers its biggest ever jump, up from one quarter to the next between the end of 2020 and the beginning of 2021. Bennett confirms that, since March last year, “consumers were restricted as to where they could spend their disposable income, and much of this moved into the wine and spirits category”; even existing customers have been buying in higher volumes, but not to the detriment of quality. This lockdown effect appears to be lasting, and fine-wine lovers today are willing to pay more, for quality across top regions, almost than ever before. Indeed, only one of Liv-ex’s regional indices falters heading into the second quarter of 2021: The Rest of the World 60 has stayed flat this year and has lost a token 1 percent of ground since March 2018.

Such widening of interest finds further evidence in Liv-ex’s market-share split (fig.3). Bordeaux once again concedes space to all other regions apart from Champagne. After wavering in 2020, Burgundy’s market share shows a return to form, achieving its highest ever level to date, of 23 percent in 2021, now just 13 percent behind Bordeaux. Burgundy’s rebound is the possible cause of a slump in share volumes of the Rhône, Italy, and wines from the rest of the world, which, despite continuing their rise, do so at a much slower rate than was achieved between 2019 and 2020.

Auction update

Revenues from live or live-streamed global wine auctions totaled $73 million in the first quarter of 2021. The 20 real-time sales held by major auction houses between January and March this year prove the relative resilience of the sector, even within the ongoing context of a global health crisis and its economic consequences, achieving an increase by value of 21 percent on Q1 2020 (fig.4).

Within limits

The lower number of sales for the quarter corresponds to a reduction in the number of lots presented at each sale: 910 on average in the first three months of 2021, compared to 1,096 from January to March 2020. While partially symptomatic of more sales occurring within the period compared to last year, there is some evidence to suggest that this is also consequential of ongoing travel and social-distancing restrictions due to the pandemic. Andrew Currie, deputy director of press for Bonhams, describes such an effect on the live sale held by the British auction house in the first quarter of 2021: “It was smaller than usual, because the restrictions meant specialists couldn’t travel to inspect the wines, either in the UK or abroad.” He nonetheless qualifies that, in terms of actual conduct, the continued presence of Covid is barely of consequence: “The sale proceeded pretty much as normal; even in non-Covid times, most bidding is done by phone, on the Internet, and by leaving advance bids, so not being able to have bidders in the auction room is not really a factor.”

Digital drive

Even if the nature of live bidding in an international market has kept its pre-pandemic behavior patterns, the introduction (or proliferation) of online-only auctions has proven profitable for a handful of key players. Acker Merrall & Condit retains its crown as the number-one highest-earning auction house thus far in 2021, and it continues to widen its lead ahead of the competition (fig.5). It achieves impressive numbers in the first quarter of 2021—$34.6 million, of which $4.6 million (13 percent) is from online-only sales. Fellow New York giant Zachys more or less matches this ratio, reaching live-sale revenues just over $13 million, and digital sales amounting to $2.4 million between January and March 2021. Of auction houses achieving revenues above $1 million in Q1 of this year, Sotheby’s has best succeeded in capturing online bidders: Of its total sales figure in wine and spirits for the first three months of the year ($6.7 million), 50 percent originates from online-only bids.

Jamie Ritchie, worldwide head of Sotheby’s wine, sheds light on the benefits of this particular sale type. “Online-only auctions have advanced bidding, an automated close, and we notify buyers if they have been outbid.” He adds that “smaller, niche sales (under 350 lots) perform exceptionally well under this format.”

Great demand

Though holding no online-only sales, Hart Davis Hart reached revenues of $16 million for the first quarter of the year, arriving in second place of all top auction houses. Its live-streamed auctions, unique to the house prior to the pandemic (when takeup of digital, video-streamed auctions became much more normal), continue to produce an unbeatable sell-through rate: All three of its sales held between January and March this year were 100 percent sold. Marc Smoler, senior vice president of Hart Davis Hart, tells me that engagement from customers with the house’s auctions has been encouraging. He has witnessed “wine prices [going] up by 30 percent,” adding that this percentage rise stretches even higher “depending on the category.” This is matched by a “22 percent increase in the number of bidders”—momentum he expects to carry further into 2021. Charles Antin, head of sales at Zachys, is similarly positive about performance this year. “Zachys has been consistently averaging 130 percent of low estimates on sold lots,” he tells me.

Burgundy and barley

As a category, Burgundy continues to prove the overachiever: “Leroy, d’Auvenay, Coche-Dury, Roumier, and DRC regularly exceed their pre-auction high estimates,” Antin says. This traditional trend also holds true closer to the homes of these vinous icons: Parisian auction house Artcurial describes its first live auction of 2021 as “very dynamic,” where “prices rose above their valuation most for Burgundy grands crus and premiers crus,” as well as for “Bordeaux crus classés.”

While the noble Bourgogne continues to be the major driver of winning hammer prices in 2021 (accounting for 16 of the 23 top lots disclosed from sales in January to March this year), other regions are also proving popular. Antin mentions that firm interest exists beyond the crown jewel of the auction court: “Bordeaux, the Rhône, and California have all seen a noticeable bump in activity lately.” Sotheby’s “Vine” online auction in March this year saw a collection case of The Primum Familiae Vini (covering iconic producers in Tuscany, Bordeaux, Alsace, Champagne, Spain, and beyond) and a “passport” to visit its members’ properties sell for the sterling equivalent of $112,028—the fourth-highest hammer price of the quarter after lots of DRC, Leroy, and Dujac respectively. Hart Davis Hart’s top lot of the quarter was a bottle of The Macallan 50-Year-Old Anniversary Malt, which reached a final hammer price of $83,650. Though not included in auction numbers that feature in this article’s analysis, spirits-only auctions do appear to be on the rise. Sotheby’s first dedicated spirits auction in New York rendered impressive results, with a one-of-a-kind original bottle of 1967 whisky from The Macallan’s Anecdotes of Ages collection (with label artwork by Sir Peter Blake) selling for $437,500. Zachys, too, has “finally taken a full dive into the spirits world,” with two dedicated spirits sales in April and May 2021.

Sound the gavel

Overall, and despite the convenience of remote bidding in any form, it seems that the excitement associated with the sound of a gavel continues to resonate with buyers, whether live in a physical auction room or watching via a live-stream. Ritchie confirms that “larger sales benefit from the live element” but that the phenomenon of advanced bidding combined with notifications when customers are outbid has clear merits. He explains, “This gives more transparency, which is greatly appreciated by new and younger buyers coming into the market, and it helps achieve higher prices.” Whether due to such advancements made during Covid or simply thanks to a revival of consumer interest, the average top-lot price achieved thus far in 2021 suggests a genuine boom for the sector (fig.6).

Top lots in 2021 (to March) reached an average $119,638, just 2 percent shy of the average top-lot figure in the auction world’s best year in recent history, 2018. A more cynical critic might put this down to a peak of purchases by default—customers with wealth who simply have nothing better to do during periods of lockdown and restricted travel—but the exceptional prices achieved in auction rooms thus far in 2021 replicate the behavior of fine wines on the secondary market. Could this signal that fine wine is finding its way again? For now, it appears to be treading a path previously interrupted between 2019 and 2020 by the ultimate macro-economic trifecta of Trump, Brexit, and Hong Kong’s political unrest. As global vaccination programs continue to roll out, easing the catastrophic stranglehold in which coronavirus has had the world, we can only watch and wait to see if wine will stay its current course.

The post Liquid Assets Q2 2021: A “new normal” and a change to the status quo appeared first on World Of Fine Wine.

The World of Fine Wine ’s auctions and secondary market correspondent takes a look at how the pandemic has continued to have an impact on fine-wine saleroom activity during the third quarter.

The fine-wine market has become comfortable with uncertainty during Covid-19. Since the glory of autumn 2018, which saw the Liv-ex 1,000 index reach record-breaking heights, turmoil of one kind or another has plagued major markets—but the industry and its assets have resisted well.

Exceeding expectations

“Things are less negative than we thought they were going to be,” says Tom Stopford Sackville, CEO of fine-wine merchant Goedhuis & Co. Speaking to him just before the beginning of the UK’s second Covid-19 lockdown, he nonetheless caveats that as far as London is concerned, while the first stint of staying at home was perhaps a novelty for some customers, who consequently “decided to spoil themselves with fine-wines,” the next bout “may have a different effect” on demand levels. British business for Goedhuis through 2020 has nonetheless been good, with the merchant boasting its best-ever August, and a successful October that saw revenues up 15 percent on the “non-Covid-ridden” October of 2019. Brexit seems barely a concern—Stopford Sackville takes the position of “waiting, watching, and seeing,” not least because any serious threat from outcomes of a no-deal will now officially be postponed until July 2021 (thanks to a grace period on any additional import documentation). Olivier Staub, Investment Director of Cult Wines is equally relaxed on the subject of the UK’s political separation from Europe: “The UK has been importing and trading wine for over 500 years,” he observes, “as a trading hub, it is too important to European industry for things to turn nasty.”

As for Hong Kong, Stopford Sackville tells me there has been “good action in the market.” “Our drinking lists in Hong Kong and Singapore were decimated over the summer.” He tells me that Goedhuis recently had to send an emergency shipment to its Asia storage facilities to satisfy continued demand. As another major UK player with roots across Asia, Cult Wines has experienced similar success. Staub attributes this partially to a quick recovery from the Covid-19 pandemic compared with much of Europe, but equally continues “to be amazed by the sheer quality of fine-wines people are drinking” in Hong Kong.

The US wine market—a sticky subject for its importers, and especially European producers for many months—is likely breathing a sigh of relief at Joe Biden’s presidential win. Election results notwithstanding, Joe Marchant, Director of Bordeaux Index’s American branch, is optimistic: “We have had a good year for business so far in the US. If it weren’t for the tariffs, it would have been an exceptional one.” The 25 percent import tax has clearly been the biggest blocker of exponential growth for the wider market, and while hitting the “sub-$100” retail sector the hardest, Marchant explains that the “degree of elasticity” in pricing at the high-end has meant no significant change to business for him. Staub’s view is a touch more conservative; he believes that the threat of even higher tariffs under Trump took its toll on sales of non-physical stock to US clients: “American buyers were more or less absent from the Bordeaux en primeur campaign.” Under a Biden presidency, the tariffs are less likely to be re-imposed next year, and in this case Marchant foresees a genuine boom of demand and ensuing imports to the US for 2021.

Bouncing back

As Covid-19 cases mercifully tapered off over the summer, Liv-ex fine-wine indices recovered from their rough start to the year. The Liv-ex 100 was both the slowest reactor to the first effects of the global pandemic, and the quickest rebounder, regaining all ground lost between September 2019 and the end of Q3 2020 (fig. 1). Suffering slightly more severely, the Liv-ex 50 and 1,000 indices dropped 8 and 7 percent respectively between last autumn and each of their worst months in 2020. Thereafter, the late spring and summer of this year were kinder, with growth that placed both indices just 3 percent down on where they stood 12 months before.

Enophile oasis

The trough may look deep at first glance, but in comparison to other financial assets, fine-wine has stayed stable during Covid-19. Staub offers an explanation: “Wine is obviously not linked to the central bank, or interest rates, and it is certainly not as liquid [excuse the pun] as derivatives or futures.” Even at the most-traded end (Bordeaux), fine wine does not suffer such “knee-jerk” reactions at the first signs of economic distress; not least, as I understand it, because it generally remains small-fry relative to other wealth assets within any given portfolio. Pure investment aside, the emotional element of fine wine can act as its protector; a keen collector himself, Staub jokes, “My wine collection would be the last thing I’d sell.” Stopford Sackville endorses fine-wine buying even in economic crisis, deeming it “a relative safe haven, compared to say, property” during difficult times.

The initial negative performance of Liv-ex’s Bordeaux and Burgundy indices (fig.2) may not be solely a consequence of the pandemic, nor indeed the longer-term macroeconomic factors at play; Staub confirms that “the market for Bordeaux and Burgundy was already subdued last year.” Beyond these traditionally traded regions, two of Liv-ex’s regional indices have shown impressive growth since September 2019. The Champagne index increased 7 percent in the 12 months to September 2020, and Italy 4 percent. It is probably not a coincidence that both regions—historically strong in the US—are those exempt from US tariffs, though the steady long-term price performance of Champagne, and the increasing quality and demand for Piemontese and Tuscan wines, also contribute to their success. Burgundy remains the worst-performing index of the bunch, seeing an 8 percent decrease over the 12 months since September 2019. It nonetheless follows the pack in showing signs of recovery since April this year, if in muted fashion. As of September 2020, only Liv-ex’s Rest of World index is trending downward.

AUCTION UPDATE

Global wine auctions reflect the hardiness of secondary market prices despite macroeconomic battles on all sides, and the understandably weak first half of the year in terms of sales volumes. Following a peak and subsequent sharp decline since the end of 2018, average lot prices began to level out at the start of 2020, and even managed a small upward turn into the year’s third quarter (fig. 3).

Collective comeback

Marc Fischer, MD of Steinfels comments on the results of the Zurich house’s September auction: “In general, the achieved prices were very strong and higher than we expected.” While he attributes this to continued interest from private clients in particular, he also tells me that technology had a part to play in maintaining good price performance, noting, “Bidders can now enter their bids directly on the website and see immediately if they are overbid. We realize that this leads to higher hammer prices as a lot of clients then come back when they realize that they have been outbid, and bid again.”

The theme of reaction to the pandemic lies not in technological advances alone. 2020’s global auction revenue total to the end of September stands at $230 million. Despite a 24 percent drop in value versus the same 9-month period last year, summer auctions helped immensely in gaining ground after 2020’s slow start, alleviating the negative difference since the end of June (also by 24 percent). Indeed, auctions between July and September this year produced record-breaking results—the quarter saw revenues of $106 million, making it the most successful summer season in the history of Liquid Assets in its current form. Add to this the online-only results hosted by the same major auction houses (given that at least some live auction revenue was replaced through digital streams due to Covid-19 restrictions), and performance in 2020 looks relatively positive, all things considered (fig. 4).

Rightful reign

Achieving sales revenues of $78 million to September, Hong Kong regains its position as the world’s leading auction city in 2020 (fig. 5). Holding ten auctions between July and September (compared to just four in summer 2019), the driving force of fine wine in Asia produced figures more than 2.5 times higher than the city’s weak second quarter, overtaking New York, despite the administrative region’s continued tension with mainland China.

Hong Kong’s strong performance over the summer reduces American auction dominance, but US cities nonetheless still represent 53 percent of global auction revenues collectively (versus 67 percent after the first half of 2020). Joe Marchant hints that US auction success may be the only silver lining of “Trump tax,” explaining, “As importers reacted to the tariffs and the pricing gap closed, auction houses were basically able to offer the sale of consumer collections for 25 percent more.”

New York is still America’s number one wine city, accounting for 30 percent of the US hoard under the hammer (fig. 6). While America’s traditional auction hub maintains its vast lead over other US cities, the picture in Europe is not so clear-cut.

Satellite success

As of June 2020, Geneva was Europe’s leading auction city despite having held only one live sale. Auctions during the summer months from London’s big three—Sotheby’s, Christie’s, and Bonhams—helped England’s capital regain the European crown by autumn, but Geneva has stayed hot on its toes. Indeed, when it comes to value per lot, the Swiss capital blows other auction cities out of the water, achieving an average price per lot of $7,096 in the first three quarters of 2020, versus Hong Kong’s $5,669, New York’s $4,662, and London’s $3,343.

This result is skewed by the top lot of Baghera’s March Auction—a methuselah of Domaine de la Romanée-Conti 1979 La Romanée-Conti, which sold for a whopping $218,251. As of September 2020, the Swiss auction house has seen its live sale revenues increase an astonishing 221 percent year on year, while online sales continue to bear ripe fruit. Deputy Director, Julie Carpentier comments, “Despite a slow-down on activity in Q2, Q3 is marked with a satisfactory upturn, particularly with dynamic September and October online-only sales. Demand for rare wines is still very strong from all over the world, and competition is fierce for all French iconic wines.” Two further houses outside the top five “big guns” make gains for the same period—Italian specialist Gelardini & Romani (up 22 percent) and Beverly Hills’ Heritage (up 10 percent). Simulcast auction leader, Hart Davis Hart, maintains similar revenue levels to 2019, but achieves the top spot for the largest wine auction held in the US in 2020 with its September sale, which generated more than $11 million. As further proof of the ever-more global nature of wine auctions, the top lot—an assortment of wines from Domaine de la Romanée-Conti worth $71,700—was purchased by a trade buyer from Europe.

Autocrats ascending

Maintaining the top spot through the third quarter of the year, power house Acker Merrall & Condit totalled $66 million in live or live-streamed sales by September 2020, surpassing its nine-month revenues of last year by 17 percent. 2019 global auction leader, Zachys, stays steady in the game, achieving $43 million from physical sales for the first 9 months of 2020. Head of Auction Sales, Charles Antin, puts this down to “a manifold increase in our bidder base,” boosted in particular by the house’s European debut in London through the auction of wines from restaurant Enoteca Pinchiorri, as well as “robust demand coming out of mainland China.” If spreading its wings across the Atlantic in the midst of a pandemic wasn’t impressive enough, Zachys achieved an additional $10.7 million in revenues from online-only sales by Q3 in 2020—gains of 75 percent in the digital space on the same 9-month period last year.

As for regional reign, Burgundy still sits firmly atop the auction podium, seemingly unaffected by the deceleration of its price performance in the wholesale and retail sectors. Of the 28 top lots disclosed from live or live-streamed auctions in Q3 2020, 19 hail from Burgundy, and 16 of these were of Domaine de la Romanée-Conti wines. Italy also continues to flex its muscles, with a 9-liter Salmanazar of Ornellaia and an estate visit fetching the highest hammer price of the summer season ($250,476) at the annual Vendemmia d’Artista auction through Sotheby’s in London.

Digital drive

With a little more perspective on how this extraordinary year has unfolded, increased online activity was clearly inevitable. International and local houses alike have made massive digital ground. Heritage, whose monthly online auctions were well-established prior to any sign of a worldwide lockdown, has seen revenues from virtual sales grow by 271 percent year on year. Its European benchmark, Baghera, whose “Wine O’clock” virtual auctions are also longstanding, increased digital revenues by 134 percent in the nine months to September 2020 compared with the previous period. Finally, after a relatively slow start to the year, Christie’s summer selection of online auctions saw its digital figures rise by 154 percent.

Lionel Cuenca, Managing Director and co-founder of European online auction leader, iDealwine, highlights that the online wine market has been “dynamic, given the difficult context,” confirming that the health crisis has “created new purchase habits,” with “many buyers leaning into the digital space.” Though remarking that changes in consumer behavior may not all last longer than the current situation, he believes that digital advances for the industry have nonetheless stepped up a notch—a summation supported by iDealwine’s 100 percent increase in new online customers during the first half of 2020 compared with the same period in 2019. Nonetheless, some major players remain cautious, Stopford Sackville warning, “The wine market is in a fragile state,” and that “we may see prices coming down in the new year.” Staub counters this with an interesting observation linked to the “irrational exuberance” of wine collecting: “A strength of the wine market is that if and when prices go down, there is arguably even more depth in demand.” He cites as an example this year’s Bordeaux en primeur campaign, which “put the life back” into the region thanks to prices appropriate to the economic context, reigniting interest for back vintages that now look inexpensive against the wider fine-wine backdrop.

A truly international market, with collectors willing to buy from anywhere, can only harden fine-wine’s armor against geopolitical hurdles—a weaker pound sterling traditionally results in heightened buying activity on the UK market from the US and Asia. Further balance, albeit very bittersweet in nature, is evidenced in reaction to the closure of restaurants during the pandemic; as Staub puts it, “The wealth is redistributed—instead of spending on a bottle of wine in a restaurant, wine lovers are drinking even better wines at home.” At the risk of overconfidence heading toward the end of 2020, and with the exception of the hard-hit hospitality sector, it seems plausible that fine wine as a whole may yet escape these turbulent times relatively unscathed. For now, at least, a little faith in the unfailing fervor of wine collectors may provide some comfort.

For the full article, please see WFW 70 2020 Q4

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The post Liquid Assets 2020 (Q4): Coping with Covid-19: How the fine-wine market is making the best of a tough year appeared first on World Of Fine Wine.

The World of Fine Wine ’s auctions and secondary market correspondent finds cause for cautious optimism after the first 12 difficult months of Covid-19

Against a frightening global backdrop, fine-wine market prices managed to climb in 2020. While an uphill struggle logistically, with merchants navigating digital adaptation as well as licking old wounds (Brexit uncertainty, US tariffs, Hong Kong’s political instability), heightened interest and activity from collectors propped up the market, finally ending an historic year with positive gains.

Liv-ex indices show that the fine-wine market did stumble at the initial, global impact of Covid-19—the Liv-ex 50, comprising Bordeaux first growths, dropped 3 percent in the first quarter of 2020 (fig.1). “Fear began to set in as sales for Chinese New Year were drastically down on previous years,” explains Justin Gibbs, Co-founder and Director of Liv-ex. On-trade activity notwithstanding, this panic was thankfully short-lived, at least for anyone with a decent customer base in Hong Kong. As Asia started to recover from the worst of Covid, the balance tipped the opposite way in Europe and the US. Business halted temporarily on home ground, and the ensuing weakness of the pound did much to boost sales in Hong Kong after its quiet first two months of the year. “We had enormous sales to Asia at the start of lockdown 1 when the GBP briefly dropped to its lowest level in years against the HKD,” explains Stephen Browett, Chairman of Farr Vintners. Though Covid cases in America hit their first peak at the same time as Europe, Browett notes that “sales to USA were hit more by tariffs than exchange rates.”

It is simple human nature to make comparisons, and following the momentary sterling blip in 2020’s first quarter, whispers of price drops emulating the 2008 financial crisis rippled through the industry. The Liv-ex 100 index plummeted by 20 percent over the course of 5 months during 2008, taking a further 15 months to recover its mid-2008 position. Fast forward 12 years, and the same index has proved resilient, recovering from small losses quickly, and even rising almost 6 percent in 2020. Browett points out that, broadly speaking, “the pound hasn’t moved a lot over the past 12 months”—a crucial difference between “then and now.” Another major variant between the two crises’ respective effects on wine has been the ability (or indeed lack thereof) to continue business as usual. Where throughout 2008 normal industry activity soldiered on, if gloomily in the face of the crisis, 2020 has forced much inter-industry activity to cease—Bordeaux en primeur tastings, Prowein, Vinexpo. With the trade therefore glued to their screens, even more attention than usual has turned toward collectors, who have also had more time on their hands to buy and appreciate wine at home.

The comparatively stable pound is explanation enough for fine-wine market prices to have remained steady, but to see genuine increases during a global pandemic is an entirely separate feat. Zachys’s President, Jeff Zacharia tells me, “Prices and interest have been strong, and consumer growth has continued to fuel prices.” Browett agrees, commenting on the paradoxical benefit of lockdown thus: “Wine drinkers have had few other luxuries available to them during the pandemic on which to spend their money, so demand and sales have been up, and prices have risen.” Managing Director of Lay & Wheeler, Katy Keating, notes not only increased sales for both futures and stock for immediate consumption, but engagement from new buyers in 2020. “We’ve seen a 20 percent uplift in customers joining Cellar Circle, where we help members build a cellar with us, buying mostly wines en primeur,” she notes.

Two years ago, the fine-wine market price progression story was all about Burgundy—today the picture is very different. Not only has fine wine’s Samson seemingly lost his hair, the strength of wine prices now appears to be in numbers rather than a one-horse race, with all but two of Liv-ex’s regional indices gaining ground in 2020 (fig.2).

Perhaps the Delilah in this scenario is US tariffs, betraying not only Burgundy but Bordeaux, too, and allowing Champagne, Italy, and the Rhône (exempt from said taxes, the latter due to its typically higher alcohol content above 14 percent ABV) to reach new price heights—these three indices rose by 6.1, 5.9, and 5.1 percent respectively during 2020.

Gibbs acknowledges that the success of these regions by default may not be the whole picture: “In addition to being on the right side of US tariffs, Champagne and Italy of course also benefited from brilliant vintages to fuel campaigns in 2020.” He refers to further releases of Champagne’s 2008 vintage, and some 2012s, as well as record-breaking Barolo 2016 and Brunello 2015 campaigns. Even Bordeaux’s modest average 3.8 percent rise had its 2019 vintage to thank. Browett notes, “2019 Bordeaux en primeur suggested that the producers may be prepared to give buyers more of a deal, which makes the wines worth buying early on.” Keating is even more enthusiastic, stating, “The [Bordeaux] 2019 releases were just what we needed to enthuse our customers about the region we love so dearly. With the perfect storm of a superb vintage, attractive prices, and the attention of our home-bound customers, it was one of the best en primeur campaigns we’ve seen in a while.”

Though Bordeaux and Burgundy may rank behind other regions in price progression terms, their popularity among collectors remains strong. Wine Lister’s popularity index, ranking the top 50 wines per region based on their respective search frequencies on Wine Searcher, places the two staple fine-wine regions in first and second place (fig. 3). This remains true in practise, according to Browett’s assessment: “Bordeaux is still by far the most demanded fine-wine region in the market, and new buyers always tend to start with Bordeaux. Often people then dabble with other regions but usually come back to it in the end. It’s still more than 60 percent of our [Farr Vintners’s] turnover.”

Demand for Burgundy seems unstoppable, too, despite its flagging prices. Though left-over stocks of the abundant 2018 vintage (relative to Burgundy’s average yields) available throughout 2020 may have contributed to balancing the stark under-supply and over-demand ratio, the Burgundy 2019 en primeur campaign may well have begun to right this course. First, its volume was once again low: Jasper Morris MW writes that 2019 yields were down by 35 percent for Côte de Beaune whites, and 27 percent for reds across the Côte d’Or by comparison with the previous year.

Speaking to Goedhuis’s Business Development Director, Georgina Crawley, it appears that in addition to extreme scarcity at the top, running a purely digital campaign may also have worked in Burgundy’s favor, as “more customers took the time to read and engage with content on producers beyond the hallowed names.” The Goedhuis team tasted through more than 300 samples (in Covid-secure conditions), shipped to their UK office before the start of the campaign. Crawley notes, “It was more important than ever for us to really understand the vintage as a team, in order to make genuine recommendations on the lesser-known growers.”. The success of the campaign, Crawley believes, points to a still-bright future for the region, regardless of what price indices may say. She explains, “The beauty of it [the 2019 campaign] is that quality was there for the taking at every price level, and customers were willing to spread their wings wider, into rising appellations such as Marsannay and Pernand-Vergelesses. It proves buying Burgundy can be inclusive, and a journey of discovery.” This movement need not be to the detriment of the elite that command eye-watering prices: Browett muses that “Top Burgundy prices suggest there is actually no ceiling.”

Meanwhile, though the Rest of World fine-wine market index underperformed against Liv-ex regional indices in 2020 (rising less than 1 percent), interest in these wines has shown early signs of increase. Although international releases distributed through the Place de Bordeaux are yet to gain the same campaign traction afforded their home-grown comrades during Bordeaux en primeur, cult Californian wines may be on the up. Giles Cooper, Buyer at Bordeaux Index, tells me, “Three of our top customers told me the best wines they’d opened in 2020 were Californian.” As lockdown continues to provide opportunity for collectors to drink from their own reserves wines laid down five to ten years ago, he predicts growth in the emerging New World trend, and subsequent further interest in buying more top Napa and Sonoma wines on release.

AUCTION UPDATE

Global auction sales totalled $381 million in 2020, 12 percent down on 2019 (fig. 4). Despite a slight drop overall, the year’s second half yielded the best summer and autumn seasons to date, reaching $256 million between July and December (compared to $194 million for the same period in 2019). Redeeming ground lost during the Covid-ridden first 6 months of 2020, demand for wines at auction has remained stalwart, despite the challenging global context.

Single cellars were a prominent feature of auctions in 2020. Sotheby’s alone held 11 (live-streamed or online-only) throughout the year, including the Hong Kong auction of wines from the cellar of collector, Joseph Lau in October, which was 100 percent sold.

While pandemic-related restrictions prohibited planned live events throughout 2020, online-only sales experienced an unprecedented boost, with internet auction revenues from top houses increasing more than 70 percent between 2019 and 2020. Two houses nonetheless stand out for their remarkable performance despite the health crisis: Acker Merrall & Condit recorded total revenues of $127 million in 2020, achieving an increase of 47 percent on their 2019 results (fig 5), and crowning them the highest-earning house of the year by a substantial margin (of $43 million), ahead of runner-up, Zachys. Swiss house, Baghera, places second for highest year-on-year growth, earning revenues of $12 million (compared to $9.8 million in 2019, a 24 percent increase), 19 percent of which is thanks to online-only sales.

Despite reduced revenues compared with 2019 results, Zachys and Sotheby’s are the two houses in 2020 that can be praised for truly international reach, holding auctions in all three major markets, as well as online. Jeff Zacharia qualifies Zachys’s prior market lead, reminding me that “volume was high” in 2019. The importance of launching in a new market, and indeed with such an impressive cellar as that of famed Florentine restaurant, Enoteca Pinchiorri, is clearly greater to him: “We expanded our market extensively by launching in London, and doing it with a bang,” he tells me. Zachys’s London debut rendered a world-record price for a single magnum of Henri Jayer Richebourg 1979 at £47,120 ($60,843).

The Jayer lot joins several further successes for Burgundy in 2020, counterbalancing the region’s price deceleration on the secondary market. Proving its continued domination of auction rooms—physical and digital—Burgundy accounted for 65 percent by volume of all top lots disclosed in 2020 (8 percent more than its regional auction share in 2019), and 78 percent by value (a growth of 12 percent on 2019). Indeed, the year’s highest hammer price was achieved in Geneva by Baghera, with a 6-liter Methuselah of DRC La Romanée-Conti 1985, sold for $996,026 (the second-highest wine hammer price of the past five years).

Though Bordeaux’s auction performance reflects its diminishing activity in the secondary fine-wine market (according to Liv-ex indices), Zacharia points out a significant distinction between Burgundy and Bordeaux sales at auction: “The key to Bordeaux in the fine-wine auction market is to have mature stock in pristine condition,” he explains, going on to note the crucial saleability difference “between very young Bordeaux, and mature vintages or at the very least Bordeaux within its drinking window.” One might speculate that, with vintages such as 1989, 1990, and 1996 of top Bordeaux coming into their apogee, opportunities may once again grow for the region in sale rooms throughout 2021 and beyond.

At the very least, year one of the global pandemic seems in wine terms to have been a catalyst for pleasure-drinking and discovery. Perhaps in that sense we are at a watershed in the appreciation of fine-wine, or even at the beginning of another “roaring ’20s”? I look forward to finding out.

Lots to look for:

Skinner, Boston (online), March 2–11: A rare collection of Château d’Yquem dating back to 1891

Zachys, New York, March 11–12: Fine & Rare Wines in Celebration of La Paulée

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The World of Fine Wine’s auctions and secondary market correspondent looks at the continuing effects of the Covid-19 pandemic on the fine-wine salerooms and secondary market

The resolve of the wine industry is being tested. Following an uncertain start to the year, the global health crisis descended on an already-unsteady fine-wine market, forcing a complete halt in business for the on-trade, while the off-trade scrambled to come up with contingency plans to sell and deliver wine with new, “Covid-safe” procedures. Over half-way through the year, the picture is far from bright for restaurants and bars, but off-premise sales offer a glimmer of hope.

After falling 2.5 percent between January and April, the Liv-ex 1,000 index bounced back in the latter months of H1 2020 (fig.1). Also gaining ground lost at the start of the year, and following seven consecutive months of decline, the Liv-ex 50 index (made up of Bordeaux first growths) experienced a positive pivot, rising 3 percent between March and June. The Bordeaux-dominant Liv-ex 100 index continued its downward trend, dropping 2 percent over the first half of 2020.

In regional terms, the Bordeaux Legends 50 index finished H1 2020 where it began in January, and the Bordeaux 500 index fell half a percent short of the same (fig.2). Matthew O’Connell, Head of Investment at BI Fine Wines, qualifies their fluctuation within the context of this year’s Bordeaux en primeur campaign: “Prices were 25 percent down on average—even more for some of the biggest names”. Release prices slashed to gain traction amid the pandemic nevertheless came with a trade-off: a widespread reduction by the châteaux of volumes brought to market. “Fewer customers were able to get hold of the brilliant, and brilliantly-priced wines,” he explains, adding, “In many cases, we had demand five times higher than our available allocations.”

While the combination of attractive prices and high demand caused heavy secondary market trading of Bordeaux 2019s, its impact appears short-lived—the region’s Liv-ex trade share percentage declined further through the first half of 2020, reaching an all-time low of 46 percent by the end of July (fig.3).

Burgundy, too, falls victim to the pandemic, its regional index falling 2 percent in the first six months of the year. While showing signs of a faster recovery by July, it was Liv-ex’s worst regional performer in H1 2020—a consequence of sky-high prices having further to fall during harder times. Less expensive wines from outside the two traditional French fine-wine regions fared better. Despite a reported 33 percent decrease in global sales of Champagne, Liv-ex’s Champagne 50 index is the best regional performer of the year so far, rising by 2 percent between January and June 2020. The Rhône and Italy 100 indices also performed well.

In the UK, regional diversification is firmly afoot. BI recorded a 30 percent increase in turnover from Italian wines over the past 12 months, while trades on Berry Bros & Rudd’s online trading platform, BBX, continue to diversify. “Italy, Rhône, Spain, and North America claim slightly bigger shares each year”, Buying Director Max Lalondrelle told me.

The same cannot be said for Hong Kong. The pandemic, plus political turmoil, has taken its toll on business, particularly given the city’s strong on-trade focus. Bordeaux continues to trend downward: “HK cellars are full of Bordeaux,” says Thibaut Mathieu, Managing Director of Corney & Barrow Hong Kong. “It’s hard to offer mature Bordeaux to an HK collector who is probably sitting on hundreds of clarets, bought while en primeur was still hot,” he continues. Burgundy nonetheless still holds its trade share in volume, albeit at “a more affordable price point” for immediate consumption at home.

Uncertainty for the future generated by the health crisis has translated into thriftier purchases across fine-wine markets. While this does mean a decrease in average sale prices per bottle, the positive takeaway is volume. Indeed, Corney & Barrow’s Hong Kong business for home delivery “has picked up significantly.” “We are selling two to three times more than last year,” Mathieu explains. Tom Harrow, Managing Director of Honest Grapes, echoes a similar sentiment for the UK, with business “operating at a level between 1.5 and double our normal Christmas period since lockdown.”

Auction update

By contrast, the spring live-auction season of 2020 was understandably quiet, with fully operational physical auctions an impossibility for much of the second quarter. Live-auction revenues in the first half of the year reached an unprecedented low of $124 million, down 48 percent on H1 2019 (fig.4). The total number of lots offered saw a smaller reduction (36 percent), meaning a 20 percent decrease in average value per lot ($3,204 in H1 2020 vs. $4,008 in H1 2019). Geographically, the Hong Kong auction scene has been the hardest hit of major wine cities, its live sales experiencing a near-70 percent drop in value compared with January to June 2019.

But while the gavel in Asia was less active during the first six months of the year, its customers were not. Private Chinese buyers were responsible for the highest bids in live auctions conducted by American houses, as well as proving their ongoing thirst for fine wine in several online-only auctions.

The US earned a 67 percent share of global live-auction revenues from January to June 2020. Front-runner Acker Merrall & Condit exceeded its H1 figures on the same period last year, generating $46.6m from live and live-streamed sales (fig.5). Following a well-timed introduction of online-only sales in September 2019, a further $8.6m from digital auctions brings Acker’s H1 2020 total to $55.2m. Zachys also adapted quickly to customers stuck at their computers, arriving “first out of the gate” with its Studio Sales—auctions streamed online with a live auctioneer, and online bidding.

Further success stories of 2020 are found beyond the traditional hubs. The impressive performances of Baghera (Geneva), Heritage (Los Angeles), and Skinner (Boston) compared to the same period in 2019 suggest decentralized trade, linked not only to a requirement for activity closer to home during the pandemic, but also through wider use of online resources for fine-wine buying internationally. Indeed, the digital pivot has already proved of higher importance this year than ever before. With the exception of Christie’s, every major live auction house also offering online-only auctions grew their digital revenues in the first half of 2020 compared with the same period last year, to the collective tune of $26m (a surge of 21 percent).

Online-only auctions still garner lower top-lot prices than their live counterparts, but their upswing in value during the pandemic-ridden months of 2020 relative to 2019 is astounding. The average winning bid value of digital wine auctions in H1 2019 was $4,500, but $17,000 in H1 2020 (an increase of more than 270 percent).

Though 2020’s global auction value thus far is a far cry from the dizzy heights of H1 in 2019 and 2018, the market has shown encouraging signs not only of continued activity and the strategic agility to facilitate it, but also generosity. Auction houses sprung to the aid of the hard-hit on-trade and health charities. Zachys teamed up with Union Square Hospitality Group, raising funds for unemployment relief through the sale of rare wines from its restaurants’ cellars. French online auction platform, iDealWine, received donations from more than 100 Bordeaux châteaux, generating €134,600 for medical charity Protège Ton Soignant. WineBid—the world’s largest online auction platform—also arranged a charity sale, with proceeds going to the Restaurant Workers’ Community Foundation Covid-19 Relief Fund.

In addition to its generous support for an industry in need, WineBid also saw an all-time high in bidding traffic. CEO Russ Mann is optimistic about the permanent changes that 2020 will have brought to fine-wine buying behavior. “Within a $325 billion industry, online wine sales have thus far penetrated as far as c.$10 billion—just 3 percent,” he explains. “I think the pandemic has generated in three to five months the same progression for the industry as we’ve seen during the previous three to five years.” WineBid itself has had systems in place to replicate the physical elements of a live auction for many years. It possesses technology for 360° examination of bottles through hi-res photography, as well as fast-paced “e-bay style” bidding on a weekly cycle, recreating the excitement of a live auction room.

Perhaps a silver lining of this difficult year, therefore, is an openness to buying differently, and from farther afield. Worldwide Head of Sotheby’s Wine, Jamie Ritchie, explains thus: “Whether live or online, out of Hong Kong, New York, or London, our sales this year have proven that the appetite for wine transcends geographical boundaries, as collectors across different time zones are prepared to place their winning bids by any means.” True to this, and despite the ongoing political unrest, Hong Kong showed early signs of some upturn in July. Sotheby’s rescheduled season of spring sales in the city generated $23m, its three-day auction series becoming the third highest-value wine-sales series ever in Asia. Christie’s first live sale of the year also took place in Hong Kong, resulting in “very strong market response,” and a final sale value of $5.5m. Other big players have plans to make up for lost ground through the autumn. After its “busiest June ever,” Zachys is set for an exciting Fall season, including its inaugural European sale—the auction of wine from three-Michelin-starred Florence restaurant Enoteca Pinchiorri.

Through these challenging months the fine-wine industry has shown resilience, and its customers, loyalty, with both parties adapting to the “new normal” without compromising the pursuit of their mutual passion. London-based private members’ club, 67 Pall Mall, reacted quickly and creatively, replacing the physical space of its tasting rooms with a “virtual” membership. The shift saw live tastings conducted through Zoom, for which participants received “tasting packs” in advance, complete with tasting mat, storage, and serving instructions, thermometer, and 75ml samples of the wines. Merchants, too, leaned into their screens, increasing digital activity through video-led tastings. Tom Harrow, Director of Honest Grapes, is delighted with customer-engagement levels achieved over the past few months. “We really grabbed the medium of video by the horns, moving our entire events program online very early into lockdown.” Appetite for online tastings has continued, albeit “a little less frequently, as visits to bars and restaurants become possible again.” The months of lockdown ended on a positive note for Berry Bros & Rudd, too, with BBX seeing its number of monthly trades increase by 15 to 20 percent, and “more active buyers and sellers each month.”

With the world slowly re-opening, it will be interesting to see how the industry’s new digital advances develop. Old habits die hard, but as the coronavirus dust settles—complete with a global recession and an unemployment crisis—so loom once again the longer-standing political threats entrenched before this unprecedented year began: Brexit, US tariffs on wine, Hong Kong’s national security law. Now is the time for all those interested in fine wine to fasten their seatbelts—there may well be a bumpy ride ahead.

For the full article, please see WFW 69 2020 Q3

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