Can Sterling remain the dominant currency in the fine wine trade post Brexit?

Peter ShakeshaftIn the 12 months to the 30th of June 2016 Bordeaux exported approximately €1.7billion of the region’s wines. This figure was slightly reduced from the previous year’s €1.8billion and the market distribution changed as can be seen in the table below:

Bordeaux wine exports:

  HK China USA UK
2014 – 2015 €251million €236million €196million €208million
2015 – 2016 €276million €300million €187million €160million

Since 2009 the UK’s take-up of Bordeaux wine annually has been between €210 – 380million, but these levels were notably reduced in the period ending June 2016 to €160million and on a year on year measure, uncertainty ahead of the referendum may well have had an impact and in particularly on the 2015 en primeur campaign. The peak of demand in recent years for total wine ex-Bordeaux sales to the UK market was in 2012 at €407,148,721 with significant en primeur acquisitions in the wines of the 2009 and 2010 vintages being an influencing factor.

Narrowing this down to the market Vin-X focuses on, i.e. fine wine, total ex-Bordeaux sales to the UK was around €52.6million in the year June 2015 – 2016 as opposed to €75.6million the previous year. The UK’s market share in 2015 – 16 was still significantly larger than China at c. €35million but still less than half HK’s at €130+million. Of course a number of key London merchants now have offices in HK, which may account for a degree of diversion from London to HK but ultimately Sterling purchases reduced ahead of the referendum.

The relevance to currency is that the Chateaux release prices are based in euros, and the euro currency has never been the benchmark for prices in the secondary market for Bordeaux. Historically the London market has fulfilled this function as this seemingly suggests a ‘neutral expertise’, independent from the primary producer and agent. Some parallels may be drawn to the UK’s financial services expertise.

In the fine wine market where a “stock is held” matters, i.e. in which jurisdiction, and this becomes increasingly apparent in terms of currency movements. The 2016 en primeur campaign this Spring will be a very interesting barometer on the UK market position, particularly as Parliament has now voted to trigger Article 50. Both in terms of politics and economics the UK merchants’ relationship with Bordeaux will be put to the test in the coming months.