The wine market is in the red as Chinese demand dries up

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Fine wine investors have been left without toast this year, after prices for vintage Burgundies and Champagne fell sharply as demand from Chinese consumers dried up.

The price of Burgundy fell 14.4 percent this year until the end of November, according to wine exchange Liv-ex’s Burgundy 150 index. Vintage Champagne fell 9.8 percent while the broader Bordeaux index lost 11.3 percent.

The falls mark the second year in a row of heavy for the fine wine market, which was due in 2023 with high interest rates – making low-yielding commodities such as wine unattractive to investors – and declining demand from Asia, traditionally a major buyer of French red wine.

“It’s been very difficult,” 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 are not out of the woods yet.”

Liv-ex’s Fine Wine 100 index as a whole is down 9.2 per cent this year to the end of November, while global stocks are up 20 per cent over the same period.

The losses are in stark contrast to the market boom during the coronavirus pandemic. Even though restaurants were closed during the lockdown, retail investors, saving money and time on their hands, rallied.

Unusual weather patterns associated with climate change – warm weather at the beginning of the growing season, followed by a brutal cold that killed the buds – also reduces the supply of new wine.

They were the benefits that Champagne and Burgundy were sometimes bought for outpaced the gains of emerging markets and technology tools.

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

“This bear market has been a prolonged correction after an unprecedented bull market during the pandemic,” said Callum Woodcock, chief executive of wine investment platform WineFi.

The market has also been hit hard by falling demand from Chinese consumers, who have snapped up high-end Burgundies in recent years but are now spending more as the local economy slows.

Investors who had bought other commodities such as wine in recent years as a way to diversify their portfolios had become more vulnerable to the uncertain economic conditions, said Tom Gearing, managing director. the head of investment firm Cult Wines which was formerly a UK monopoly. translation of A student.

Among the big-name wines that 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 12, according to Liv-ex. Its 2012 classic is down 42 per cent to £1,740.

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

There could be worse to come. Some in the industry point to sales by Asian collectors, which they say are even more depressing prices in the region. Many European producers fear that the president-elect of America, Donald Trump, will impose trade tariffs, as he did on other wine imports from European countries during his first term in office.

In addition, the Bordeaux wine industry is called first campaign – an annual spring festival where new wines are discovered by critics and can be bought before the bottle – proved to be very unsuccessful. That’s because consumers often found that, instead of buying what was essentially a vintage wine, they could buy old wine that had already been bottled on the secondary market. at a low price.

Now the producers of this area are faced with the challenge of how to sell the price for next year first campaign, will produce the 2024 vintage. After an unfavorable combination of mold, heavy rain and cool temperatures, this is a “terrible vintage across the board”, according to Tom Burchfield, head of intelligence for ‘ market at Liv-ex.

Michael Saunders, chief executive of Coterie Holdings, which owns wine merchant Lay & Wheeler and wine cellar Coterie Vaults, who was recently in Bordeaux meeting with producers and retailers, said: There is little confusion about what is the right course of action.”

Despite a general sense of pessimism in many industries, some investors are using this year’s prices as an opportunity to buy high-quality vintages at low prices.

Cru Wine’s Swartberg says he has been buying, and advising his customers to buy, Krug 1996 and Dom Pérignon 1996, which he describes as Champagne “vintages” and which he believes will do well given the lack of supply.

In Bordeaux he has bought 2000, 2005 and 2009 vintage wines such as Château Angelus and Château Cheval Blanc, and he has taken the latest Burgundies from Domaine Romanée Conti, Rousseau and Dujac.

“More and more people are starting to take advantage of the current market conditions,” he said. “It was unthinkable two years ago to buy this wine at these prices.”