In 2016 Fine wine outperforms other markets
by Liv-ex
2016: The Year That Was
-Fine wine outperforms other markets
-Market rises for record twelve consecutive months
-Liv-ex 1000 hits multiple all-time highs
-Burgundy takes lead market share after Bordeaux
-Fine wine market continues to broaden
The Bordeaux market recovered in 2016, having flatlined through 2015 after four years of decline. Market participants started to perceive value in Bordeaux at the end of 2015 and there was cautious optimism as the market headed into 2016. This sentiment was supported by Sterling weakness in the run up to the UK referendum and Brexit proved to be the trigger that pushed prices higher.
All of the Liv-ex indices made gains in 2016. The Fine Wine 100 – the industry benchmark – rose for an unprecedented twelve consecutive months and outperformed other global indices. It is now at its highest level in five years. The Fine Wine 1000 – the broadest measure of the fine wine market – hit multiple all-time highs in 2016. The Fine Wine 50 – tracking the daily price movement of the Bordeaux First Growths – is the best performing index year-to-date, but remains 25.3% below the peak it reached during the China-led boom in 2011.
Several of the Fine Wine 1000 sub-indices hit record highs in 2016. Bordeaux, Burgundy and Champagne were the standout performers. The Rhone, Italy and the ‘Rest of the World’ made moderate gains relative to their peer sub-indices.
The fine wine market received a significant post-Brexit boost after the UK voted to leave the EU. A weaker Sterling encouraged buying from Euro and Dollar-based merchants to purchase wines that included a significant volume of high-value Bordeaux brands. As shown in Chart 3, the Fine Wine 100 index looks very different when viewed in other currencies.
While Bordeaux has been a key price performer this year, its market share is largely unchanged from last year at 74.4%. Burgundy took the second highest average monthly trade share, with 7.7% of the market. Last year, Italy overtook Burgundy, but its market share was lower this year at 6.0%. Champagne was also down at 5.3%, however, it remains well above the 2.8% share of the market it registered in 2014. Market share for the ‘Rest of the World’ was 4.7%.
The fine wine market has continued to broaden with an increasing number of wines trading in the secondary market. Over the last year, more than 4,000 different wines traded from 670 brands. The previous year, 3,000 wines traded from 265 brands.1 In 2016, wines also traded from new regions. The market saw the first ever trade in English wine when Nyetimber, Classic Cuvee, 2010 traded in August. There was also the first ever trade for Chinese wine when Ao Yun 2013 traded at the end of September.
The top ten price risers from the Liv-ex 1000 are split across a number of regions. Pape Clement 2009 received a ‘perfect’ 100-point score from the influential critic Robert Parker in the Hedonist’s Gazette in April, a week after he officially announced his retirement from tasting Bordeaux. He had previously awarded the wine 95 points. The other Bordeaux reds are First Growth second wines. These are popular with Asian buyers seeking access to the top brands at lower price points.
So what can we expect from the market in 2017?
Overall the fine wine market appears robust, but as we head into 2017 it remains to be seen whether a year of sustained gains will continue. Sterling has strengthened over the past two months, and so far, the market has remained firm. However, there are certainly currency related clouds on the horizon. Bordeaux has undoubtedly been the main driver behind the broader market recovery this year and early feedback suggests 2016 could be another quality vintage. En Primeur will therefore be an important factor in determining the direction of the Bordeaux market in 2017.
Yet the story this year has not just been about Bordeaux. The fine wine market is broadening and other regions are increasing their market shares. This is clearly demonstrated by the growing number of brands trading in the secondary market. While Bordeaux continues to offer value after the fall from its 2011 peak, there is a growing awareness that there is more to the fine wine market than the traditional high-value blue chip Bordeaux brands. 2017 looks to be an eventful year.
