The acceptance of lower prices

The fine wine market's downturn gathered momentum in September, marking a notable shift in the investment landscape. The Liv-ex Fine Wine 100, widely regarded as the industry’s benchmark, experienced a 1.7% drop—the sharpest monthly decline since October 2023. This brings the index back to its May 2021 levels, a staggering 21.0% below its peak in September 2022. However, despite this slide, the market remains 13.1% higher than its pre-2020 bull run values, underscoring the profitable nature of fine wine investment over the long term.
Interestingly, while prices fell, market participation surged. Trading volumes rose by 15%, and the number of active buyers reached its highest point in seven months. Both the Liv-ex platform and the Eleanor trading platform showed similar patterns, signaling a market that, despite declining prices, remains vibrant in terms of activity. So, what does this growing interest amidst falling prices mean for the wine investment market?

Trade increase, price decline

The fine wine market's ongoing decline has prompted a shift in behavior among merchants and investors. While high release and list prices initially held firm, the reality of rising storage costs and prolonged market weakness has pushed sellers to begin accepting lower prices. According to the latest Liv-ex report, activity in the secondary market has picked up significantly, with more merchants lowering their prices to match market realities. This has led to a noticeable narrowing of the gap between market prices and average list prices, signalling that the market is finally responding to the downturn and accepting the lower price.

As more sellers adjust their expectations and reduce prices to attract buyers, the secondary market has become more active. September saw a marked increase in trading volumes, and the final week of the month registered the highest number of unique buyers since February. Wines that were previously difficult to sell at inflated prices are now being traded at more realistic levels, even in some cases at or below release prices. This competitive pricing is creating opportunities for buyers who are keen to capitalize on the lower prices, driving further demand in the market.

Which regions are driving up volumes?

The disconnect between Market Prices and List Prices has been most evident in Bordeaux and Burgundy, where inflated valuations have led to a mismatch that has weighed heavily on trade volumes. Bordeaux, in particular, suffered from very high release prices, while Burgundy faced inflated valuations of both back vintages and newer releases. As a result, wines from these regions became increasingly difficult to trade at their list prices. However, as the market downturn persists and sellers begin to accept lower price points, these wines are becoming more attractive to buyers. This shift is clearly reflected in the uptick in trade volumes for Bordeaux and Burgundy.
Other regions, such as Italy and the rest of the world, have been less affected by the decline. In fact, Italy and Champagne gained market share in Q2 2024, as buyers turned to regions with more stable pricing. Champagne, in particular, has seen growing demand, capitalizing on its relative value and increasing popularity among collectors and investors.

As trade volumes in Bordeaux and Burgundy now begin to pick up, it is evident that price corrections have made these regions more appealing once again. In our own portfolio strategy, we initially focused on Italy and the rest of the world, where we saw the greatest value amid the price mismatches in other regions. However, given the recent corrections in Burgundy, Bordeaux, and Champagne, we are now shifting our focus. We are actively looking into opportunities in these regions, including back vintages, as they now offer more attractive entry points.

Conclusion

The recent shifts in the fine wine market suggest we may be at a turning point. While the decline in the Liv-ex indices has raised concerns, it also reflects a market adjusting to new realities. Sellers are beginning to lower their prices, creating a narrowing gap between Average List and Market Prices. This responsiveness has sparked a notable increase in trading activity, with September witnessing the highest number of unique buyers since February. As demand at these revised price points strengthens, it lays the groundwork for potential price recovery in the future. The evolving landscape offers a renewed sense of optimism for investors, indicating that the market is stabilizing and may soon embark on a more positive trajectory.

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The information provided in this market review is intended solely for general informational purposes. Investments in wine and other financial assets carry risks, including the risk of loss of capital.