Happy New Year! A quick retrospective on 2017 and thoughts for 2018

Peter ShakeshaftEvery year it feels the same, the Festive break seems to go on and on whilst we are in it, but once it’s over, January always makes it seem so far away!  That said, it is worth a look over the shoulder to see what we can learn from the year just gone to perhaps give us a few pointers for the months ahead.

2017 was another positive year for the fine wine market, not quite as racy perhaps as 2016 but a steady continuation of a growth trend that felt like a realistic norm, particularly in light of ongoing economic and political uncertainty. Brexit continued to make itself felt with Sterling fluctuations affecting demand, particularly for the Bordeaux First Growths as UK stocks offered particular value for overseas buyers. Currency is a significant factor as performance in US$ over 2017 saw 15% growth compared to a 2% rise in Euros.

April 2017 saw the first dip in the Liv-ex 100 for 16 months, again partly due to a strengthening GBP at the time, with an overall 12-month growth of 5.2%. The broader Liv-ex 1000 index performed well rising 10.1% across the year, ahead of the FTSE 100’s 7.6%, growth and gold’s 3.8%. The Financial Times covered this performance in its article on the 16th December 2017, where it quoted that “Fine wine investors will be raising a glass as their returns for the year [2017] are set to outperform UK blue-chip shares and gold.” And it did!

The market broadened in 2017 and Liv-ex reported an increase of 90% in the number of brands being traded on Liv-ex since 2015. Over the year more than 4,500 wines were traded, representing 769 brands.

Just before Christmas Liv-ex published its annual Power 100 report in conjunction with The Drinks Business, we will be publishing our thoughts on this in our January 2018 report, and you can see the top ten brands ranked overall in the table.

Liv-ex Power 100 2017TOP 20 WINES ACROSS ALL CRITERIA:

Brand Rank 2017 Rank 2016 Value traded Rank Volume traded Rank Av trade price Price growth No. of wines
Lafite Rothschild 1 1 13.76% 1 6.23% 2 3,832.46 18.65% 50
Margaux 2 3 4.17% 5 2.26% 14 3,205.79 17.24% 52
Mouton Rothschild 3 2 7.38% 2 3.53% 6 3,626.58 15.96% 47
DRC 4 6 2.26% 11 0.18% 125 21,579.82 31.12% 65
Angelus 5 7 2.38% 10 1.60% 25 2,585.83 17.06% 27
Ponsot 6 130 1.66% 17 0.76% 46 3,767.75 18.26% 27
Domaine Leflaive 7 27 0.55% 43 0.45% 65 2,102.76 20.57% 64
Armand Rousseau 8 19 0.87% 30 0.27% 95 5,672.36 16.99% 50
Haut Brion 9 4 4.63% 3 2.46% 12 3,262.79 11.60% 48
Petrus 10 8 3.76% 6 0.30% 89 21,556.01 13.61% 28

Source: Liv-ex Power 100 Report 2017

Bordeaux’s level of market share, which has been steadily falling since 2010, is now felt to have a found its new natural level of sub-70% of trade going forward with the firm establishment of brands and trade in wine from Burgundy, Champagne and Tuscany in particular. In 2017 Burgundy’s share of trade by value rose to 12.7%, from 7.7% in 2016, notably going above 10% for the first time. Champagne and Tuscany also showed stronger regional performance in terms of market share by value both in the region of 6%. This should be borne in mind when portfolio planning.

Top ten price performers in 2017

Producer Vintage Price December 2017 Growth in 2017
Conterno, Barolo Cascina Francia 2004 £2,528 157.4%
Conterno, Barolo Cascina Francia 2003 £1,636 89.4%
Guigal Cote Rotie Mouline 2000 £2,931 84.2%
Armand Rousseau, Chambertin 2007 £13,636 80.7%
Ponsot, Clos Roche Vv 2007 £3,293 72.5%
DRC, Echezeaux 2013 £14,492 66.9%
Conterno, Barolo Cascina Francia 2007 £1,809 65.8%
Armand Rousseau, Chambertin 2008 £12,519 65.6%
DRC Romanee Saint Vivant 2006 £17,508 59.7%
Krug, Vintage Brut 1990 £5,459 59.1%

Source: Liv-ex 31st December 2017

So, what does all this mean for 2018?

Certainly, it will be another interesting year – the political backdrop will continue to be uncertain as will the economic climate. Sterling volatility is therefore expected to continue to influence demand from USdollar and Euro buyers. Burgundy has seen significant growth in the last 24 months and there is a question over the sustainability of the region’s prices.

This Spring’s Bordeaux 2017 en primeur campaign could affect market sentiment early summer; the overall vintage quality is not expected to match the outstanding 2015 and a good 2016. Supply could well be an issue as a number of chateaux reported the devastating effect of frost on their 2017 crop in April last year. Those chateaux that do produce well scored wines will need to bear in mind their pricing strategy, as a sensibly priced campaign could have a very positive affect on market sentiment.

There has been speculation since the withdrawal of critic Robert Parker from the Bordeaux tastings of where the real critical influence will lie in the future. This does not yet seem clear and there is no outstanding voice which has any real influence on market price. Parker’s named successor, Neal Martin, announced his move from the Wine Advocate to join former colleague Antonio Galloni at Vinous.com in December, the industry debates whether this will have an effect? Our view is that it doesn’t really make a difference which publication Martin voices his opinion from, his view is one of a number respected by the market along with Galloni himself, James Suckling, Jancis Robinson, et al – but there is, as yet, no single outstanding critic to fill Parker’s shoes, and we may never have that again.

We go into more detail in our January report on the findings of the Liv-ex Power 100 and our view for the year ahead. In the meantime, as noted by the Financial Times only recently, these are exciting times for fine wine investors.

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