No-one can argue that this year hasn’t been a good one for the secondary fine wine market but, as Liv-ex’s end of year report explains, there are some unresolved issues moving forward into 2018.
A growing market for investment wine
Among the good news is Burgundy’s increasing market share and price growth – a sure sign that confidence in the region remains strong and that the market as a whole will continue to broaden and diversify over the next year.
Total exposure on the Exchange – a measure of the total value of live bids and offers – also reached a record high of £45 million in October, indicating an uptrend in the market and signaling price stability.
Fine wine also came out on top in the newly published Knight Frank Luxury Investment Index 2017 – prices rose, on average, by a whopping 25% in the 12 months to the end of June this year, whereas no other luxury investment asset class saw double-digit growth.
So what are Liv-ex’s foibles about the coming year of business?
Fine wine criticism
Firstly, the future of wine criticism hangs in the balance.
For decades, the authority on wine – especially Bordeaux Futures – has been The Wine Advocate.
But with founder Robert Parker having retired to California to dabble in Napa Valley wines instead, ‘heir’ Jeb Dunnock going awol and new Bordeaux sensation Neal Martin off to Vinous in February, it poses the question: who will continue to influence the fine wine market most – the publication or the personality?
It is possible that, moving forward, market prices will be at the mercy of a greater number of voices – especially for Bordeaux.
The unravelling of this issue is going to be particularly interesting to observe in the case of the tricky 2017 vintage.
Currency volatility ahead
The second issue is the on-going volatility of the pound sterling where ‘Brexit’ negotiations are concerned. The falling pound has been a boon to the wine market since the referendum in 2016, but this has been on and off since the spring in response to a yo-yoing euro.
This level of volatility in the currency market will continue to influence demand from dollar and euro buyers and ultimately impact on price growth.
This will be less of a problem for those regions where demand shows no signs of slowing down, such as Burgundy, but more so in those areas undergoing a cut in market share, like Bordeaux.
Piedmont, an area undergoing rapid price discovery, will be another region to watch closely in the coming months.
Bordeaux wines in the balance
Last, but not least, much rests on the success of the En Primeur campaign for 2017 Bordeaux wines.
The campaign this year showed signs of stability with the excellent 2016 wines, but the lack of stock released by the estates posed the biggest problem.
In terms of the coming season, the picture forming is one of a much smaller vintage – less in the Médoc but drastically so in St Emilion and Pomerol – and of a patchier quality – very good in places and very poor in others.
All depends on whether the châteaux continue to withhold stock and what effect this will have on prices.
As Liv-ex warns – “An overpriced campaign with suppressed volumes could turn sentiment in a market that has made steady progress in 2017. On the other hand, a sensibly priced campaign that releases the wines in decent volumes at an attractive discount relative to the secondary market will boost confidence.”
In a constantly broadening and diversifying market, these three key issues could have a huge bearing on fine wine prices in 2018. These are certainly exciting times in the fine wine market, so stay tuned!
Until then, Merry Christmas and a Happy New Year from all of us at Capital Vintners.