How well did wine merchants predict the events of 2020?

The increasing diversification of the secondary market, the rising price of Domaine Leroy’s Musigny and the lowering of en primeur prices were all predictions our members got right in 2020.

Liv-ex members represent the largest pool of professional fine wine traders in the world and are estimated to account for 90% of fine wine turnover globally. There are currently 500+ members of Liv-ex across 44 different countries that range from start-ups to centuries old, established merchants.

We surveyed these members in early 2020, asking them their opinions about the year ahead and to predict what the closing level of the Liv-ex Fine Wine 100 index would be on 31 December 2020.

We are happy to say that one Liv-ex member came within 0.14 of the December close of 318.99 with a guess of 319.13. They have won a magnum of Chateau Montrose 2000 (Market Price – £330 per 1×150).

Additional questions focused on what challenges were expected in 2020 and what changes to the everyday they would like to see.

When asked if they could change one thing about the wine trade what would it be, one merchant member said, “more wines with a secondary market.”

In 2020, they got a lot more than that. Distinct LWIN11s exposed (wines with a bid or offer) increased 33.3% to 28,131 while the number of distinct wines traded grew 41.3% to 10,364.

However, 2020 looked set to be a tricky year from the outset and when members were asked what their company’s biggest challenge would be in the year ahead, 32.3% specifically named Brexit, Tariffs, or Covid-19. Three events that have certainly impacted the market – and continue to.

One of the final questions asked the respondents to look forward in 2020 and tell us their ‘big prediction’ for the year. Some predictions were bang on, while others played out slightly differently:

What our members got right

  • ‘The diversification of fine wine investment will continue and “other regions” (i.e.: Rhone, Champagne, Piedmont, Spain…) will continue increasing their share of the global fine wine trade.’ Rest of the World market share increased to 5.7%, doubling its level from the previous year. Italy also saw a large jump in 2020, closing the year at 15.2% of total value traded (2019, 8.8%). We even broke the USA out into its own category for 2020 due to its three-fold increase in market share (2020 – 7.0%, 2019 – 2.3%). See Chart 1 below.
  • ‘Domaine Leroy Musigny over 50.000€/ btls.’ The price per bottle of the 2015 vintage closed the year with a market price of €75,683.
  • ‘2019 EP will be 20% below 2018 on average’. In our 2019 EP closing report, we measured a 21% average price cut on wines released.
  • French tariff will last the whole year. The US tariffs on EU wines and spirits did last the whole year and even expanded to include all ABVs over 14% in the waning hours of 2020. The US Trade Representative announced last week that it would not be revising the tariffs for the foreseeable future.

What our members got partially right

  • ‘First growth to be on the rise again both in terms of market share and performance.’ First Growth market share saw a drift away from its three-year average, falling from 21.3% to 13.7%. However, First Growth prices, as measured by the Fine Wine 50, did see a slight lift, rising 3.45% in 2020.
  • ‘Prices will calm down in Bordeaux to help the market.’ As seen in Chart 2 below, price volatility in Bordeaux calmed down in the second half of the year. Local lockdowns and renewed tariffs caused a stir from March to May, but following those months, prices for Bordeaux have been stable.
  • ‘Whisky will get frisky, US wines will fall out of favour.’ Whisky did get frisky. We observed our largest year of spirits trade, with malt whisky leading from the front. US wines did not fall out of favour however. Instead, they saw increased demand as a greater number of labels from the region found their way into the secondary market.