Strong demand for Burgundy and Champagne despite activity cooling
Demand for Burgundy and Champagne remained strong across the first half of 2022, Bordeaux Index has said, despite a slight cooling of the ‘intense activity’ in the first three months of the year.
According to data from the company’s online trading platform, LiveTrade, prices of Burgundy on the secondary market rose +26% in the first half of the year, with Champagne seeing strong growth of 11%. Italy and the Rhone also performed well – up 8% on last year, however growth of Bordeaux was more muted, at around only 5%, something which was perhaps not aided by this year’s somewhat lacklustre en primeur campaign.
Speaking to the drinks business, Matthew O’Connell, Livetrade CEO, said that although the most intense activity had occurred in the first quarter of the year, demand had remained strong across the second quarter.
“Prices have not gone down over recent months, they’ve just gone up at a slightly slower rate, an important distinction to make,” he explained.
“I think that the second quarter picked up some noise around macro difficulties, rates are obviously going up and at the margin it does make people behave more cautiously. If your tech and crypto investments are going down in value, then you are potentially more conservative about adding to your investments in other areas.”
However he noted that in many ways wine tended to benefit from such environments, making it likely that prices continue to rise further across the rest of the year.
“The flip side is that we’ve seen a huge increase in interest in investing in wine because people are buying into the fact that wine has proven over time to be very inflation proof,” he said.
The strong demand for Burgundy is firmly based on its rarity, which has appealed to ultra high net worth collectors and investors and there is no reason to suggest that this is likely to change, however O’Connell argues that there may be some “consolidation” as tends to be common after sharp moves.
“Will it continue to out-perform to the same extent it has done? Possibly not, just on the basis that it’s moved quite a long way in a short time and it wouldn’t be unusual if there were a period of consolidation,” he said. “But I think the thesis behind ongoing Burgundy gains over the coming months and years is a sound one given the ever-increasing significance of luxury consumption.”
Although demand for Bordeaux was dampened by the less favourable vintage conditions and a difficult en primeur campaign, in which the price was “not as constructive as we would have liked”, O’Connell maintained that sales of the region more broadly were still “very healthy and certainly significantly up on the same period in 2021”.
“Trading of Bordeaux has been very encouraging since the 2019 campaign which really reinvigorated interest,” he noted. “I think there are signs that interest is down a bit, but trading volumes are still strong by any measure.”
“You might think slightly challenging en primeur campaigns reignite interest in back vintages, but in fact just as easily it can make some buyers turn to other regions: a catalyst for some; a headwind for others.”
That said, the top ten most traded wines on LiveTrade platform included a slew of Bordeaux first growths, including Haut Brion, Lafite Rothschild, Cos d’Estournel, Petrus, Mouton Rothschild, and Margaux. Two Champagnes topped the list, Cristal and Dom Perignon, with Taittinger Comtes de Champagne also making it in in tenth place, along with Sassacaia in fourth place,
Tignanello and Sassicaia in particular among the Super Tuscsans continued to dominate strong sales of Italian fine wine, while Rhone saw strength from Rayas (notably the 2007 vintage) and Guigal’s Cote Rotie La Turque (2010 for example), which both made Bordeaux Index’s top ten top performers, with prices rising 37% and 28% respectively during the first half of the year.
However, the surprise top performing wine was Philipponnat Clos des Goisses 2007, which rose by 50% over the first six months of the year, rebalancing a slight underperformance last year while other Champagne hogged the limelight. Three other Champagnes – Krug 1998, Bollinger RD 2004 and Louis Roederer Cristal 2006 also made the top ten, with prices all up in the mid 20%s area.
While there may be a tension in the macro-economic backdrop, the ultra high net worth demand for luxury demand “is pretty insulated from macro events,” O’Connell points out, and there is a discernible uptick in interest in wine as an investment, partly as a result of inflation but also as the crypto bubble looks to have well and truly burst.
“People are looking for assets that really have a track record of strong returns in difficult times, all the more so if they also have low correlation with other assets and proven protection against inflation,” he said. “The wine market is a very positive story right now – and we expect that to continue.”