Will Covid-19 simply accelerate the inevitable?

Our previous article looked at the wine investment market's initial reaction to the Covid-19 outbreak, and there was plenty to be optimistic about. With many wine merchants reporting a sharp uptick in sales since the Coronavirus lockdown, has this demand been echoed in the fine wine investment market?

Two weeks ago we were beginning to come to terms with being locked down, the equities markets had been in turmoil and workers across the UK were getting used to working remotely, or not at all in some cases. Despite this the wine market had shown signs of stability with the Liv-ex 50 only showing a fraction of the losses seen in equities and some regions continuing to increase their share of trade, of course at Bordeaux and Burgundy's expense.

By the end of March Bordeaux's share of trade had slipped to a record low and with Burgundy also losing ground, the ongoing power shift continued leaning toward other regions. The USA made great strides and helped to double the Rest of the World's share of trade from 5% last year to 10% in 2020, hitting a new record high.

Last Friday Liv-ex reported that their benchmark index, the Liv-ex 100, had declined by 1.06% during March, but against a backdrop of global financial turmoil this could almost be seen as a victory. The broader Liv-ex 1000 index also fell last month, shedding 1.35% despite Italy trying its hardest to prop performance up. The index has struggled since Trump introduced tougher import tariffs in October 2019.

The Italy 100 index has grown by almost 4% over the last twelve months and continues to be an area of focus for drinkers and investors alike. Recent releases from Tuscany and Piedmont have proved popular with merchants and have helped to boost results. Following a great start to the year Champagne remains in our buy zone. Prices started to stagnate by the beginning of April due to a build up of stock on the market but based on the region's performance to date, this may well represent a good opportunity to strengthen your position before things starts to advance again.

It's definitely not all doom and gloom, during the first week of April the value of fine wine available on the Liv-ex exchange exceeded £50million for the first time in its history. This is a reflection of the wine trade adapting to overcome the closing of bars and restaurants, and following an initial drop in bidding activity there is evidence of buyers returning to the market now prices have softened.

Acker Chairman, John Kapon

The auction scene has been much more positive. Acker's first Hong Kong online sale since the virus took hold saw strong demand with Domaine de la Romanee-Conti (DRC) and Japanese whiskies rising to the top. Driven by Chinese buyers, the sale saw a magnum of DRC Romanee-Conti set a new world record selling for USD$57,231. Acker Chairman, John Kapon commented "it was very reassuring to see strong demand across the board in this intimate sale. The three top buyers of the sale were from three different cities in mainland China, which shows that China is ready for business and wants the world’s greatest wines as much as ever."

Meanwhile their latest online sale in New York took place on 3rd and 4th April. Attracting buyers from around the world, it delivered some very good results with a total of 119 new world records set. The top ten was again dominated by Burgundy. A jeroboam of 1990 Dujac Clos de la Roche came out on top setting a new world record at USD$43,400, followed by great results for Petrus, Leroy, Meo-Camuzet and Rousseau. Following the sale Kapon acknowledged the global challenges we face adding "it is wonderful to see that demand for fine and rare wine remains healthy, and that people remain engaged. Wine remains something that will always bring people together even if physically apart"

Cult & Boutique Managing Director, Enzo Giannotta

The fine wine market revolves around supply and demand, so it's great to see the consumption end of the market thriving. We feel that Bordeaux's reduced trade share can only benefit the market as a whole. As the back bone of the market it should always take the lion's share, and will no doubt remain as the blue chip element. The ground it has lost will allow Italy, USA, Champagne and Rhone to flourish as the market further diversifies, and ideally the spread between prices should also continue to contract.

Cult & Boutique's Managing Director, Enzo Giannotta added "seeing this overall level of consistency within the fine wine auction market is encouraging. Even though results vary for individual products due to the pure volume of lots sold over two days, it offers a viable exit strategy and a very rewarding one for those with the most patience."

By Spencer Leat