2024 has proven to be a challenging year for the fine wine market. With declining prices, cautious market behavior, and a search for stability, the market continues to grapple with significant hurdles.
The Liv-ex indices paint a stark picture: the Fine Wine 100 is down 9.2% year-to-date, while the Fine Wine 50 and Fine Wine 1000 have each declined by 11.1%. Notably, the downturn accelerated post-summer, with the Liv-ex 100 recording its steepest falls in September and November.
Market Participation Amid Price Declines
Despite falling prices, market participation remains robust, with trade counts up by 5.5% compared to last year. However, trade volumes have dipped by 1.9%, reflecting hesitancy among buyers to acquire stocks without immediate resale prospects. Interestingly, the diversity of traded wines (LWIN11) and brands (LWIN7) is on track to match or exceed 2022 levels, showing resilience in the breadth of market offerings despite the tough climate.
Shifts in Liv-ex Indices and Buyer Behavior
The Liv-ex indices have underperformed relative to major equity markets and commodities like gold over the past year. Adding to the uncertainty is the potential impact of Donald Trump’s second term as U.S. President, particularly concerning tariffs and macroeconomic policies. The S&P 500 has seen gains post-election, but fine wine participants in the U.S. remain cautious, wary of possible tariff reintroductions.
Currency dynamics further complicate the landscape. The second half of 2024 saw a strengthening U.S. Dollar, driven by interest rate cuts across the U.S., Europe, and the U.K. This bolstered U.S. buying share, which rose from 34.5% in Q2 to 39.9% in Q3. Still, the interplay between anticipated inflationary pressures and further rate cuts leaves questions about the dollar’s trajectory in 2025.
Regional Trade Trends
Bordeaux: A Struggling Giant
Bordeaux’s dominance in regional trade continues to wane, marking a return to the long-term trend of diversification away from the region. Ineffective release prices and a surplus of stock have plagued Bordeaux’s demand-supply balance. The bid-to-offer ratio of the Bordeaux 500 remains at historic lows, with many wines trading below their ex-château release prices. However, pre-2009 vintages have shown more resilience, benefiting from consumption-driven scarcity and a different era of pricing.
Italy: A Beacon of Relative Stability
The Italy 100 index has declined by 6.0% year-to-date, faring better than most sub-indices. Italian wine trade has seen impressive growth, with trade counts up 17.6%, volumes up 17.3%, and values rising by 9.8%. U.S. buyers have driven this demand, particularly for Tuscan wines, whose trade value has surged by 16.1%. Notable performers include Masseto and Soldera, which benefit from scarcity, and Sassicaia, whose recent vintages have traded consistently around their release prices.
Spirits and Other Highlights
Spirits have emerged as a growing segment within the fine wine and luxury beverage market. Trade values for Scotch whiskey have soared by 244.8%, even as Japanese whiskey’s trade has declined. Among wines, Vega Sicilia Unico has been a standout performer, with dramatic increases in trade volume and value, largely driven by U.S. demand.
Challenges and Opportunities for 2025
As 2025 approaches, the fine wine market faces continued uncertainty. The potential reintroduction of U.S. tariffs and broader macroeconomic factors could further disrupt trade. However, the oversupply in regions like Bordeaux and Burgundy may force a much-needed reset in pricing. Speculation suggests Bordeaux châteaux might reduce 2024 release prices by up to 40%, a move that could rekindle interest and encourage new collectors to enter the market.
For Burgundy, an abundant 2023 vintage set to release in January could test market tolerance for high prices. Current bid-to-offer ratios indicate weak sentiment, suggesting the need for competitive pricing to stimulate demand.
Conclusion
The fine wine market’s struggles in 2024 underscore the need for adaptability and strategic pricing. While current trends suggest continued challenges, the downturn’s pace could hasten a return to stability by clearing excess stock and attracting renewed interest. As always, market participants will need to navigate these uncertainties with caution and agility.
Liv-ex data remains an indispensable tool for understanding these dynamics, offering insights into global trade activity and price trends. The road ahead may be uncertain, but for those who can weather the storm, the fine wine market’s enduring appeal offers long-term potential.
Source: Liv-ex