• Veblen Wines Ltd

Fine wine predictions for 2020

Rupert Millar - Source: www.thedrinksbusiness.com

What could be in store for the fine wine market in 2020? A natural uprising? An Italian renaissance? Is 2019 Bordeaux already in trouble? Will South American labels benefit from anti-EU tariffs?

Bordeaux is seeing its overall market share declining, Burgundy’s fast track is running out of road, Italy and Champagne are rising and ‘natural’ wines are coming.

Much, therefore, is the same but there is a feeling that some winds of change are in the air and 2020 will pose its own opportunities and challenges.

US tariffs on European wines seem set to widen, the Hong Kong market is in recession and the UK is on the brink of some sort of Brexit. All three markets are the primary engines of fine wine buying and investment scene which could prove a major handicap.

Nonetheless, as Liv-ex remarked at the end of its recent report, the shape and nature of the secondary market at present arguably leaves it better prepared than before to face up to the strong headwinds it faces.

Liv-ex said: “The market has become broader and deeper, putting it on a firm footing to meet the challenges of the year ahead. Regional price performances and market shares will vary according to the fundamentals presented to those with an interest in fine wine. Regions, somewhat overlooked in the past, will likely continue to emerge.”

That said, the choppy conditions at the end of this year can be expected to continue into certainly the first quarter if not the first half of 2020 so anticipate a more bearish outlook for the foreseeable future.

Burgundy slows but grows

The big development this year has been the final grinding to a halt of the Burgundian juggernaut. The Burgundy sub-index on the Fine Wine 1000 was the worst-performing this year down 7.2%.

But the trend for slower growth and even slight decline will continue in the Liv-ex indices. This isn’t a sign of actual decline though, it’s part of a maturing process as more Burgundy labels come to the fore and a certain measure of liquidity is introduced.

En primeur snookered?

What are the Bordelais to do? This year’s en primeur campaign feat. the 2018 vintage was proclaimed – by château owners and certain critics – as featuring even more ‘best ever’ wines.

Then Neal Martin went along this October and found much to like but also declared it short of “potential perfection”.

This was somewhat embarrassing of course because many Bordelais had increased prices substantially from the 2017 offer.

And now it appears that the 2019 vintage is rather exciting indeed – which is really the last thing the Bordelais need because who’s going to buy it?

The recent UK election and resulting Conservative majority sent the pound soaring but renewed Brexit uncertainty has sent it right back down again.

The US has placed severe tariffs on European wines that are possibly going to become even more swingeing.

These are the two principal foreign markets for Bordeaux futures each year and neither is looking particularly rosy.

The pound could be in a stronger position again by next summer depending on any deal that might be arranged and if the pound is strong then British buyers may take a shine to wines which they’re not going to get for another two years anyway and President Trump is facing an impeachment vote which, if it were to come off, could change things radically across the pond.

These are all highly speculative however and just as equally the pound might be in the doldrums and Trump will still be in power and ratcheting up tariffs.

All of which will leave the Bordelais releasing wine into a vacuum. The sensible course would be to forgo the current habit of holding back increasing stock and release more but for less. At the very least we might hope for perhaps very small cuts, holding prices and only a very few price increases. The reality, unfortunately, is many (but not all) estates doubling down, holding back more stock and raising prices and, frankly, whatever the sit-rep in the UK and US then, that’s still the worst thing they can do.

New renaissance

If French wines were going to be in trouble in the US it was all coming up trumps (conversely) for Italy which was left out of the 25% tariff back in October.

If that situation had held then there’s no doubt that Italian fine wines had the potential to go gangbusters in 2020 while their European competitors became more expensive.

Now the US administration is eyeing up 100% tariffs on all EU wines and so that forecast seems rather less certain. Even if they are implemented however, there’s no reason that Italy can’t have a strong 2020 because the wines are really starting to turn heads in other markets such as the UK.

The Super Tuscans and Sassicaia in particular lead the way but there’s real interest in Piedmont as well.

It’s interesting that the best-performing wine on the Liv-ex Fine Wine 1000 this year has been Giacomo Conterno’s 2002 Barolo Riserva Monfortino which has risen 75% in price from £5,940 to £10,390 per dozen.

Gaja’s 2007 and 2011 Barbaresco have risen 35% and 31% respectively as well.

Liv-ex is very positive about the potential for Italy in the secondary market and it seems as though it might be a category that weathers the unrest better than others in 2020.

Au 'natural'

This wave of minimal intervention wines of course spans many more countries but France in particular is unearthing some serious boutique producers.

As well as being small scale and from growers who are often organic or biodynamic, they tend to be from regions and use grape varieties that have been overlooked or neglected by the wider market for French ‘fine wines’.

In Bordeaux in particular we see estates such as Palmer and Pontet-Canet and now Yquem going biodynamic. Latour is certified organic too. Estates are retreating from the big, in-your-face style of the late ‘90s and early to mid-2000s and even using fewer sulphites and doing less fining and clarification. Places like Carmes de Haut-Brion are even using a bit of whole bunch fermentation. Natural wines may not overthrow the established order but that doesn’t mean they can’t help shake it up.

La Place evolution

Another feature of the past few years has been a steady uptick in the number of non-French estates, especially US, Italian and South American wineries, joining La Place de Bordeaux.

Some, such as Opus One, Dominus and Sassicaia, have been part of that scene for over 10 years now and their rising stars might be partially attributed to their enhanced distribution by the Bordelais négoce.

We can expect to see more estates choosing representation through La Place but results will be slower to show themselves.

New hope for the new world?

Although he has been impeached by the House of Representatives, there is little is any chance of President Trump being impeached by the Republican-controlled Senate.

Shelve, therefore, any hope that might have been sparked that a Trump downfall would lead to an end to tariffs etc etc.

Even if the 100% bill on EU wines isn’t passed, the 25% tariffs still remain. Italy may or may not be in a better position than its European counterparts as a result but the real beneficiaries in the US market could be all the non-European wines.

It might do a lot to boost demand for South American names: Almaviva, Seña, Catena Zapata and Cheval des Andes are all Andean labels that could benefit. Many of them are lingering on the fringes of the Power 100 list, could anti-EU tariffs be the lift they need to make it into the big time?

Read the full article at: https://www.thedrinksbusiness.com/2019/12/fine-wine-predictions-for-2020/7/