Ella Lister considers recent performance of Bordeaux and other wine regions, as wine merchants remain positive about the direction of fine wine prices for the rest of 2015
For the first time in three years, the global wine auction market rose in value in 2014, to £220 million, suggesting renewed interest and confidence among buyers. This represents a small increase of 5.5 per cent on 2013, yet remains 26 per cent down on the record results of 2011. The United States is the fastest growing auction market, representing more than half of global revenues in the first quarter of 2015. However, the most expensive lots still find their way to Asia. The eight priciest lots sold in the year to March 2015 went under the hammer in Hong Kong (see opposite page). Six of the top ten were Domaine de La Romanée-Conti.
FIGURE 1: REGIONAL WINE INDEX PERFORMANCE FOR THE YEAR TO MARCH 2015
Overall, the average price of lots under the hammer in the first quarter of 2015 was down 5 per cent yearon-year. Furthermore, in the twelve months to March 2015, fine wine prices decreased across nearly all wine growing regions. The only Liv-ex index to rise, by 4.4 per cent, was the “rest of the world” index, comprising the likes of Dominus and Penfold’s Grange. This was also the only index to outperform the FTSE 100 over the period (Figure 1). Italy and Champagne remained more or less flat, losing less than a percentage point since March 2014. First growth Bordeaux, as represented by the Livex 50 index, fell furthest, by 5.5 per cent.
The Bordeaux-dominated Liv-ex 100 lost 3.2 per cent in the year to March, having ended 2014 with its fourth consecutive negative calendar year. This was in spite of gaining 1.9 per cent from July to December 2014 and the same again in a single month in January (Figure 1). The first growths rose at the same pace in January. This seemingly meaningful rise sparked a new optimism among the trade, with commentators quick to hail a Bordeaux resurgence.
This excitement proved to be somewhat premature. February and March saw first growth prices start to descend once more (Figure 1). Bordeaux’s share of trade on the Liv-ex exchange was unusually low in these months, although it began to pick up in April as the en primeur campaign neared. In 2014 the share of Bordeaux traded on Liv-ex fell for the fourth year in a row, at a nine-year low of 79 per cent compared to 95 per cent in 2010. Other regions continue to attract more attention as collectors’ horizons broaden, in particular to Champagne, Italy, and Burgundy.
This year’s en primeur campaign is being touted widely as a make-or-break event for Bordeaux. The 2014 vintage was saved by a glorious Indian summer that prevented a fourth disappointing vintage in a row. The long, gradual ripening of the grapes up until a late harvest has resulted in balanced, elegant wines, certainly worth acquiring at some stage. They present an even more tempting proposition following three take-it-or-leave- it years. The question is whether the Bordelais’ pricing will be sufficiently attractive to lure buyers backto buying futures.
Price analysis of the last five years’ en primeur releases shows that a consumer would have been better off buying most wines a few years later, once bottled. If this doesn’t change, then the en primeur system will surely meet its demise. It is undoubtedly in the interests of merchants to keep the system going, with en primeur traditionally an important source of revenue for them. Nonetheless, credible merchants have proved over the last three years that they will not flog a dead horse, and many have adapted quickly, increasing sales of other wine regions. The big UK players wrote an open letter to Bordeaux earlier this year encouraging sensible pricing. They will be keen to sell en primeur this year at the rightprice, but not desperate to do so.
In spite of this uncertainty, wine merchants are positive about the direction of fine wine prices for the rest of this year. More than 90 per cent of those surveyed by Liv-ex predicted that its Fine Wine 100 index would rise by the end of 2015. The average prediction was an 8.7 per cent gain from December 2014, to finish at 259. Whilst a useful indicator of confidence, these results should be taken with at least half a pinch of salt. Merchants were proved wrong last year when they forecast a 3.7 per cent rise and instead faced a 7.3 per cent drop.