Year 2018 in the fine wine market

Fine wine outperforms global equities

Market summary: Fine wine outperforms global equities 

The fine wine market in 2018 has been marked by two notable themes. First, Bordeaux has been steady, consolidating after two years of strong gains. Second, the star of 2017 – indeed, the star of the past five years – Burgundy, has continued to thrive, both in terms of market share and price performance. There is a third underlying theme to note. The market has broadened yet further as collectors have spread their interest in the pursuit of value, leading to trade share gains for Champagne, Italy, the Rhone and beyond. 

The industry benchmark, the Liv-ex 100, has had a very steady year, gaining 0.22%. It has experienced none of the volatility witnessed by global equities, and instead has traded within a 2% range throughout 2018. It is still 14% below its 2011 peak, reached during the China-led bull market, but has gained a solid 32% over three years.

An impressive year for Burgundy 

The Liv-ex Fine Wine 1000 index – the broadest measure of the fine wine market – reached an all-time high this year after rising 10.2%. The main driver behind this impressive growth was the Burgundy 150 index, which had its best year in a decade, gaining 35.5%. 

In October, two bottles of Romanee Conti 1945 broke records, becoming the most expensive wines ever sold at auction.1 While headlines focused on DRC, the success of Burgundy is not limited to this iconic brand. Other labels such as Rousseau, Leroy, Leflaive and Roumier have also been in collectors’ sights. 

Burgundy’s solid gains placed it firmly in the spotlight. Still, Champagne (+8%) and the Rhone (+5.6%) also performed well; stronger than Italy (+2.8%). Our newly created California 50 Index, which is not a constituent of the Liv-ex 1000, has risen more than all of these, up 12.3%. 

To put the performance of fine wine in perspective, Chart 1 compares how the Liv-ex 100 and the Liv-ex 1000 have fared against global equities. The Liv-ex 1000, the broadest measure of the market, has outperformed European, Asian and US equities. The index, which is 26% weighted to Burgundy, has been boosted by the region’s strong gains.

Safe haven: fine wine counters volatility 

Fine wine and Gold have long been considered safe havens due to their tangibility, and therefore lower volatility, against other mainstream assets. This year, the Liv-ex 100 traded within a narrow 2% range, making it even more stable than Gold. There is another explanation for fine wine’s stability, aside from tangibility. The Liv-ex 100, denominated in Sterling, can play hostage to the gyrations of the currency markets. The pound’s relatively stable performance against the euro in 2018 has been reflected in the benchmark index.

The broadening market 

2018 was a record-breaking year for the fine wine market. Bordeaux’s market share, which has been steadily falling since 2010, has dropped from 68% in 2017 to 59% this year. It reached an all-time monthly low in January, when it accounted for 51% of the total trade by value. 

Meanwhile, Burgundy hit a record monthly high of 20.9% in November. Its 2018 share of trade is currently just below 15%, up from 12.7% in 2017. Champagne overtook Italy to become the third most traded region by value, as it has risen from 6% to 8% so far this year. Moreover, the fine wine market has continued to broaden. Over the last year, more than 5,700 different wines traded through the secondary market, compared to 4,500 distinct wines in the previous year.2 Since 2015, the number of brands trading on Liv-ex has increased by 252%. Exposure – the total value of bid and offers on the market – also reached record levels, surpassing £50million in October.

Top performers this year 

Although the market has broadened considerably, the top ten price risers from the Liv-ex 1000 all come from one region – Burgundy, where the trend of collectors following winemakers has continued. The relative scarcity of wines at the top end, combined with growing demand, has particularly influenced the prices of Armand Rousseau and DRC, which have gained 42.7% and 33.5% on average respectively. A number of wines from these labels have doubled in value this year. 

The top performer is Armand Rousseau, Gevrey Chambertin Clos St Jacques 2010, which has leaped 194.8% in price. It is followed by the same producer’s Chambertin 2010, which has increased by over 150% year-to-date. DRC Romanee Saint Vivant 2007 (+132.9%) and Richebourg 2010 (+105.1%) also feature in the top ten.

Conclusion 

Unlike financial markets, fine wine has managed to build upon its existing gains in the past year. As this report highlighted, most of the Liv-ex indices have steadily risen, without experiencing the level of volatility of other investment assets. The broadest measure – the Fine Wine 1000, helped by a strong Burgundy, has outperformed global equities. 

With several significant milestones reached this year and as the market continues to broaden and trading activity grows, 2019 looks set to be a promising year for fine wine