Liv-ex: ‘encouraging moves’ hint at fine wine market resilience

The fine wine market is “through the worst of downturns”, Liv-ex has said – but there does need to be more transparency on pricing in the future.

Whether the market is set to return was the key question for a recent webinar by Liv-ex, who drily noted that “we’re all sick of seeing declines; we’ve run out of synonyms for it in our reports!”

Market analyst of Liv-ex’s market intelligence department, Sophia Gilmour, said there had been “some very encouraging moves” in recent weeks. The Liv-ex 100 bid:offer ratio for example rose to 0.7 – the highest ratio it has been since April ’23, when the ratio was still on its way down. The ratio is an effective measure of market confidence that can be seen as a prelude to a turn in the market (although there is something of a lag – of around 3 months). When more participants are trying to offload stock, the value goes up, whereas when confidence is high, the value of the bids increases. Given that a ratio above 0.6 indicates future gains are likely, this was an encouraging sign.

“What’s even more encouraging is that the average spread between bids and offers is decreasing, meaning that buyers and sellers are aligning on the price,” Gilmour explained.

This points to buyer confidence stabilising, as it buying at (or close to) market price is only sensible when a buyer thinks will be able to sell at a profit or have trouble acquiring a particular wine at a later date.

“Looking at mature Lafitte, we can see how this takes place in action. As prices rise, everyone tries to get in on the market, no matter the price at that stage, bids outweigh offers to secure wine,” she explained.

When the buyers and sellers’ expectations align, this suggests that the market is on the turn and while maybe not a wholesale alignment, “we are seeing trades track and in a few cases, move above market price,” she said.

In addition, some key indices have returned to their 2020 lows, meaning “a return to levels at which there had previously been demand before the Covid bull run”.

No bull run

Overall, the tone was positive, with key indicators pointing towards the likelihood of recovery in the future for some regions – although it was “unlikely to take form in the shape of a bull run”.

“Seasoned buyers don’t trust the market and new ones need evidence of investment potential,” Gilmour pointed out.  But prices had fallen so low that further drops “feel incredulous”, which, when coupled with upticks in demand from Asia, was encouraging.

“The market has demonstrated that when the worst has come to pass – US tariffs, lower demand, an unsuccessful en primeur campaign – the market prevails”.

“I could see by the end of next year some more ingrained upward movement, and I think we’ll see a couple regions break out,” Gilmour said.

Seller fatigue

According to Liv-ex account manager Henry Johnson, sentiment and confidence in the UK remains “shaky” Liv-ex said, with many private clients remaining on the side lines due to the knock in confidence of three years of price declines in their cellars and their portfolios.

“That being said, with the current wealth creation that’s continuing in traditional markets, many in the trade who I speak to are finding that they’re more in tune customers,” Liv-ex account manager Henry Johnson added. “Both, in a drinking sense and investment sense, are ready to take advantage of today’s quite favourable prices, but they’re ultimately waiting for signs of a market turn.”

There was, however, an element of “seller fatigue across the market”, with prices reaching a level where clients would “prefer to drink their wine rather than realize monetary loss”.

Asian demand has also started to return to the market, in part driven by depletions in the market in Hong Kong, which had seen Burgundy (particularly white Burgundy) rise for the first time in several years. Californian Cabernet (notably Harlem and Opus One) were also showing growth along with first growth Bordeaux, which remain important to Hong Kong.

Meanwhile the US buyers remaining “at bay” during the summer following the imposition of Trump’s tariffs in April, which rose in August.

New demographic

There has also been some evidence that investment-focused companies in the UK are successfully attracting a new, younger demographic of customers to the market for the first time. However, this may necessitate greater transparency as there needs to be a better understanding of “who’s making what and why, given the availability of information now available via the internet.

“I don’t think you can expect this generation of buyers to take anything at any price,” she said. “There needs to be better communication about why things are priced the way they are, and some acknowledgement of negative returns in previous years.”

Better communication across the industry “will help to get the market back on track,” she said.

“It’s time that we all recognize that the market has changed – new buyers require transparency, personability and reasons to buy beyond prestige.”

 

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