What does 2023 have in store for the fine wine market?
Stock shortages mean that Burgundy and vintage Champagne could be first to suffer from a market downturn.
The fine wine market in 2022 was a game of two halves. The year started with strong secondary market sentiment. In December 2021 the bid-offer ratio, which compares the total value of bids (firm commitments to buy) with the total value of offers (firm commitments to sell), stood at 1.86, reflecting increased buying appetite and strong investor confidence. Historically, a bid-offer ratio above 0.5 tends to indicate an uptrend in the market, or at the very least acts as a sign of price stability. In the first six months of the year, fine wine prices, as measured by the industry benchmark Liv-ex 100 index, rose by 7.1%. Prices for some wines hit record highs last year, but the number of active buyers at these levels dwindled as the year progressed. By December 2022, the bid-offer ratio had fallen to 0.37. The year also finished with declines for fine wine prices. The Liv-ex 100 dipped by 1.1% in the fourth quarter, while the Liv-ex 1000 fell by 0.9%.
In a survey of Liv-ex members, which represent the largest pool of professional fine wine traders in the world, the outlook for the market in 2023 was mixed – 21% of the respondents said they were “quite pessimistic” about the direction of the market, while 34% were neutral.
Main market challenges
The market faced increasing headwinds as 2022 rolled on. Just as most of the world emerged from two years of Covid-19 restrictions, the war in Ukraine further disrupted the creaking global supply chain, sent energy prices soaring, and exacerbated already rising inflation. Bond and equity markets fell. By the end of the year, US$30 trillion of market value had been wiped out. Over half (54%) of the Liv-ex survey respondents said they expect the global economy to pose further challenges to fine wine in the year ahead. Most (30%) noted recession and a global economic downturn, while 20% cited currency weaknesses and volatility. Wine industry-specific factors will also play a role in fine wine market demand and the direction of prices. Merchants saw stock shortages as one of the biggest issues, particularly in reference to the forthcoming release of Burgundy’s 2021 vintage. They also referenced limited volumes of vintage Champagne. The two regions were at the forefront of market activity in 2022.
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Regions to watch
High prices and reduced allocations might force buyers to look elsewhere. While Burgundy and Champagne were the stars of 2022, they are could be the first to suffer from a market downturn. Indeed, the Champagne 50 has now been the worst-performing Liv-ex 1000 sub-index for two consecutive months. However, this might shift demand within the region itself – a phenomenon previously seen in Burgundy – with Liv-ex merchants expecting demand for grower Champagne to pick up pace. Survey respondents also predicted a price correction for Burgundy in 2023, especially for the more speculative brands that might fail to sustain their sky-high prices in the long term. Meanwhile, 7% forecast a rebound for Bordeaux, but with a caveat. Views on the region’s en primeur campaign remain mixed, with equal numbers of merchants predicting both a successful and an unsuccessful (some used stronger language) 2022 en primeur launch. California was also singled out as a region expected to be in greater demand. As last month’s market report pointed out, following a muted performance in 2022, Italy and the Rhône are two regions offering stability, increasing diversity and relative value. Might 2023 see the re-emergence of these more recently subdued market players?
fine wine monitor – in association with Liv-ex
Liv-ex is the global marketplace for the wine trade. Along with a comprehensive database of real-time transaction prices, Liv-ex offers the wine trade smarter ways to do business. It offers access to £81m worth of wine and the ability to trade with 500 other wine businesses worldwide. It also organises payment and delivery through its storage, transportation and support services. Wine businesses can find out how to price, buy and sell wine smarter at: www.liv-ex.com
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