Fine wine market within the purple as Chinese demand dries up | USAEMALL.com

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Fine wine investors have been left with little to toast this year, after prices of top-end Burgundies and vintage Champagnes fell sharply as demand from Chinese buyers dried up.

The price of Burgundy dropped 14.4 per cent this year to the end of November, according to wine exchange Liv-ex’s Burgundy 150 index. Vintage Champagne fell 9.8 per cent while a broad index of Bordeaux lost 11.3 per cent.

The falls mark a second consecutive tough year for the fine wine market, which was hit in 2023 by higher interest rates — which make assets without a yield such as wine less attractive to investors — and dwindling demand from Asia, traditionally a major buyer of French red wine.

“It’s been super tough,” said Gregory Swartberg, chief executive of London-based wine investment company Cru Wine. “November [2024] was one of the worst months of the year. We’re not out of the woods yet.”

Liv-ex’s overall Fine Wine 100 index is down 9.2 per cent this year to the end of November, while global stocks have risen 20 per cent during the same period.

The losses stand in stark contrast to the market’s boom during the coronavirus pandemic. Although restaurants closed during lockdowns, retail investors, flush with savings and with time on their hands, piled in. 

Unusual weather patterns linked to climate change — warm weather early in the growing season, followed by brutal frosts that killed the buds — also limited the supply of new wine.

Such were the gains that vintage Champagne and Burgundy prices even at times outpaced the returns from soaring equity markets and technology stocks.

However some in the industry believe prices rose too high too quickly, setting up the market for a fall.

“This bear market was a long overdue correction following an unprecedented bull market during the pandemic,” said Callum Woodcock, chief executive of wine investment platform WineFi.

The market has also been hard hit by falling demand from Chinese buyers, who had snapped up top-end Burgundies in recent years but who are now reining in consumption as the domestic economy falters.

Investors who had bought alternative assets such as wine in recent years as a way of diversifying their portfolios were becoming more risk-averse because of the uncertain economic outlook, said Tom Gearing, chief executive of investment firm Cult Wines and previously a finalist on the UK version of The Apprentice.

Among big-names wines to have suffered this year are Château Lafite Rothschild’s Carruades de Lafite, whose 2021 vintage is down 29 per cent this year to £1,640 for a case of 12, according to Liv-ex. Its 2012 vintage has tumbled 42 per cent to £1,740.

Among Burgundies, Domaine Georges Roumier’s Bonnes Mares Grand Cru 2020 is down 44 per cent to £11,529 a case. Champagne house Louis Roederer’s 2015 vintage has fallen nearly 17 per cent.

There could be worse to come. Some industry insiders point to selling by Asian collectors, which they say is further depressing prices in the region. Many European producers fear that US president-elect Donald Trump will impose trade tariffs, just as he did on some European wine imports during his first term in office.

In addition, the Bordeaux wine industry’s so-called en primeur campaign — an annual spring festival where new wines are scored by critics and can be bought before bottling — proved largely unsuccessful. That was because buyers often found that, rather than purchasing what is in effect a wine future, they could simply buy mature wines that were already bottled on the secondary market at a lower price.

The region’s producers now face the challenge of how to price next year’s en primeur campaign, which will feature the 2024 vintage. After an unwelcome mixture of mildew, heavy rainfall and cooler temperatures, this is “an absolutely awful vintage across the board”, according to Tom Burchfield, head of market intelligence at Liv-ex.

Michael Saunders, chief executive of Coterie Holdings, which owns wine merchant Lay & Wheeler and wine warehouse Coterie Vaults, and who was recently in Bordeaux meeting producers and dealers, said: “There’s a slight mood of bewilderment as to what the right course of action is.”

Despite the pervading mood of gloom across much of the industry, some investors are using this year’s price falls as a chance to buy higher quality vintages at knockdown prices.

Cru Wine’s Swartberg said he has been buying, and advising his clients to buy, Krug 1996 and Dom Pérignon 1996, which he describes as “phenomenal vintages” of Champagne and which he believes will do well due to a shortage of supply.

Among Bordeaux he has bought 2000, 2005 and 2009 vintages of wines such as Château Angelus and Château Cheval Blanc, and he has picked up more recent Burgundies from Domaine Romanée Conti, Rousseau and Dujac.

“More and more people are starting to make the most of the current market conditions,” he said. “It was unheard of two years ago to buy these wines at these prices.”