What’s happening in the market?
Lafite 2022 is the top-traded wine of the week so far by value. Having traded for the first time in May, it is now changing hands 5+% below its ex-chateau release price (€ 480/btl).
Today’s deep dive: is the end in sight?
For many in the wine trade, this current downturn is the longest they’ve endured. While the end has felt just out of reach for a long time now, it seems increasingly doubtful that prices have much further to fall. How does this downturn compare to those of the past? And can we find reason to believe that we are finally nearing the end?
Where do we stand?
Year to date, the Liv-ex Fine Wine 100 is down 4.9%, marking a 26.6% decline since its peak in September 2022. Having now dipped below its 2018 peak, its 2020 low is the next available support – a full retracement of the index’s previous move up. In its root causes and duration, we can draw the strongest comparison of the current downturn to that of 2011. Both have been symptomatic of a lack of demand, the problem exacerbated in both cases by overly ambitious release pricing and a withdrawal of a buying segment (China in 2011 and the US in 2025).
Liv-ex Fine Wine 100 over time
Fine wine 100 vs. Equities
While this year has been a volatile period for equities, key stock indices have reached all-time highs. The Fine Wine 100, as we know, has not been so lucky. This may not initially strike us as good news, but there is, in this, one clear benefit to the fine wine trade: wealth is being generated. Though prices are low, few merchants are willing to take the plunge and begin to build their inventories. Instead, they are waiting for consumer demand to pick back up. Only a tiny fraction of the equity market needs to be reinvested into wine for the trade to see a serious increase in demand.
What are we wating for?
The exchange’s overall bid:offer ratio (by value) currently sits at 0.15. During the 2008 financial crisis, where the Fine Wine 100 saw its sharpest ever decline as stockholders raced to liquidate assets, the ratio fell to 0.1. That we are approaching similar conditions may not strike readers as good news, but these are the necessary conditions to induce a reset of the demand:supply balance. Demand for wine is elastic – at low enough prices, seasoned buyers will return to the market and new ones will be tempted to enter it. Some sets are reaching the right levels more quickly (read more on the Bordeaux 2021s here), and these levels vary by region, brand and vintage (read more on Burgundy here and other Bordeaux here). With interest rates falling and potential consumers making gains in equities, there may soon be cash to spare on these correctly priced wines.
An increased willingness to spend paired with lower prices may be enough to draw us towards recovery, but the faster US buyers return to the market, the shorter the path will be. While trade wars between the EU and US seem interminable, once tariffs are set in stone, we can expect to see US buyers return to the market, albeit cautiously.
There is also some hope for a return of the Asian market. Though it will take more time to confirm and understand this trend (demand may be growing or merchants may be replenishing stock), we have seen tentative signs of renewed demand from this segment, led by Hong Kong and Singapore.
The end is in sight, but unless US or Asian buyers make a strong return to the market, we may yet have to see some sharp cuts to reset the balance. A careful eye on bid:offer ratios over the coming months should shed some light on which wines will first be redeemed, and whether we can hope to see a broader recovery soon.
Liv-ex analysis is drawn from the world’s most comprehensive database of fine wine prices. The data reflects the real-time activity of Liv-ex’s 620+ merchant members from across the globe. Together they represent the largest pool of liquidity in the world – currently £140m of bids and offers across 20,000 wines.
