Fine wine market in red as demand from China dries up

Unlock Editor’s Digest for free

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

The price of Burgundy fell by 14.4% this year to the end of November, according to the Liv-ex wine market’s Burgundy 150 index. Vintage Champagne fell 9.8%, while the broad Bordeaux index lost 11.3%.

The declines mark a second consecutive difficult year for the fine wine market, which has been hit in 2023 by higher interest rates – making non-performing assets such as wine less attractive to investors – and declining demand from Asia, which traditionally major buyer of French red wine.

“It’s been extremely difficult,” said Gregory Swartberg, managing director of London-based wine investment firm Cru Wine. “November [2024] it 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 percent this year to the end of November, while global shares have risen 20 percent over the same period.

Column chart of Liv-ex Fine Wine 100 (%) showing wine market suffering post-pandemic hangover

The losses are in stark contrast to the market boom during the coronavirus pandemic. Although restaurants closed during the lockdown, small investors, flush with savings and 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 have been the gains that vintage Champagne and Burgundy prices have even at times outstripped returns from rising stocks and tech stocks.

However, some in the industry believe that prices rose too quickly, sending the market down.

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

The market has also been hit hard by falling demand from Chinese buyers, who had been winning over top Burgundies in recent years but are now cutting back on consumption as the domestic economy falters.

Investors who had bought alternative assets such as wine in recent years as a way to diversify their portfolios have become more risk-averse because of the uncertain economic outlook, said Tom Gearing, chief executive of investment firm Cult Wines and a previous finalist in the U.K. Kingdom. edition of The Apprentice.

A person tastes wine at Silver Heights Winery in Jin Shan, China. The Helan Mountains are visible in the background.
Chinese consumers have cut back on spending on fine wines © Kevin Frayer/Getty Images

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

Among Burgundians, Domaine Georges Roumier’s Bonnes Mares Grand Cru 2020 is down 44% to £11,529 per case. Champagne house Louis Roederer’s 2015 vintage is down almost 17%.

It could be worse. Some industry experts point to sales by Asian collectors, which they say is putting further pressure on prices in the region. Many European producers fear that US President-elect Donald Trump will impose trade tariffs, as he did on some European wine imports during his first term.

In addition, the Bordeaux wine industry is so-called en primeur The campaign — an annual spring festival where new wines are rated by critics and available for purchase before bottling — proved largely unsuccessful. This was because buyers often found that, instead of buying what was actually a wine future, they could simply buy mature wines that had already been bottled on the secondary market at a lower price.

Château Lafite Rothschild 2017 vintage barrels
Barrels in the Château Lafite Rothschild estate © David Silverman/Getty Images

The region’s producers now face the challenge of how to price the coming times en primeur campaign, which will include the 2024 vintage. After an unwelcome mix of mold, heavy rain 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 is a bit of confusion as to what the right course of action. it is.”

Despite widespread gloom in much of the industry, some investors are using this year’s price declines as an opportunity to buy higher-quality vintages at low 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 that he believes will do well due to a lack of supply.

Among the Bordeaux he has bought 2000, 2005 and 2009 vintages such as Château Angelus and Château Cheval Blanc, and 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.”

Leave a Comment