The Americans are coming: US fine wine trade booms
Amid the talk of Bordeaux’s shrinking trade share, Burgundy’s slower growth and the boom for Champagne and Italy, another set of wines have been making big strides this year – American ones.
A broadening market outside of the US, helped by better distribution and critical recognition have been driving the market for US (predominantly Californian) labels since 2015 but 2020 has seen a positively stratospheric spike in demand.
Liv-ex reported in its latest monthly report on the enormous gear change that has taken place, driving US wine into a much more prominent position in the secondary market.
It’s important to note here what is being referred to by American/US wines. Wine is made across the US but California produces around 85% of the country’s total output and 98% of secondary market activity is for Californian labels.
Here too though it’s worth noting that while Napa Valley wines still account for 79.6% of Californian wines traded, that figure has fallen from 87% in 2019, with wines from Oakville, Rutherford, Sonoma County, Sonoma Coast, Santa Cruz, Russian River Valley and Paso Robles all starting to see increased activity.
US wines in this context, therefore, are still predominantly Californian and from Napa Valley but things are changing.
In terms of the impact US wines have had on the secondary market up to this point, although Napa Valley has earned itself a reputation as one of the world’s leading wine regions, with many sought after (and expensive) wines in the shape of its ‘cult Cabs’ such as Screaming Eagle, Harlan Estate, Scarecrow or Bond, their effect beyond the US itself has been negligible.
Made in small quantities, with a high opening price and with limited, usually domestic, distribution, 10 years ago only four labels were being traded on the Liv-ex Exchange and their share of trade by value was a mere 0.1%.
Things began to change after 2014 though. From January 2014 to January 2019, the California 50 index rose 86%, which was actually better than the Fine Wine 100 and 1000 indices over the same period.
The share of trade was still small however, hitting a record high of just over 3% in 2018 and this dropped back in 2019 as the increased activity attracted more labels to the scene.
This put pressure on the prices of top wines leading to a drop in trade by value, even as the number of unique labels being offered continued to rise.
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Last year US wines’ share of trade fell back to 2.3% after the high of 2018, while so far in 2020 it is at a new record high of 6.8%, and the number of unique wines traded is more than double that of 2019.
This October saw US wines hit their highest share of trade to date, 10.8% for the month which is also the highest level in Liv-ex’s 20 year history, with Screaming Eagle, Harlan and Spotteswoode being the labels most in demand.
Furthermore, it’s worth noting that this big increase in demand is not at all just a result of US buyers looking to domestic wines because of the 25% tariffs on so many European imports; far from it. The value of live bids on US wines in 2020 is up 240% on 2019 and demand is being recorded across the UK, US, Europe and Asia.
In fact, the real driver of demand for US wines being recorded by Liv-ex is from the UK, which has accounted for 63% of sales by value this year. The US, meanwhile, is just the second biggest buying presence on the platform (likely due having more direct access to the wines), followed by Asia and then Europe.
Buying “follows a seasonal rhythm”, said Liv-ex, with activity peaking around September and October which is when the latest New World releases from La Place de Bordeaux are offered and then dies away in the spring when the latest European wines are out.
With Opus One, Dominus, Vérité, Joseph Phelps and Inglenook now available through La Place, however, the global market for top US wines is really starting to open up.
Liv-ex concluded: “The position of American wines in the global marketplace is still in development. It is too early to know where its natural market share will settle but having played virtually no role only 10 years ago, its rise of late is notable. While the focus will doubtless remain on the leading estates, it might well be the emerging estates – the second and third tier producers – that deliver the better returns for collectors going forward.”
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