Liv-ex is an electronic exchange for fine wine used by professional merchants and collectors. Market Report is part of a package of services offered to subscribers of Liv-ex, with subscriptions starting at
£49.95 per year. Below is just a brief extract from the latest Market Report. For the full report and to access Liv-Ex's services, sign-up with them at
Liv-ex.com, October 2013
Fine wine sales for the Autumn Chinese festival declined
this year; as such, buyers had no reason to replenish
stocks in October. Trade was muted and the Liv-ex indices
moved lower. Nevertheless, there were some positive signs
towards the month end. The bid offer ratio rose to 0.35, and
active markets hit a record high of 4,248.
Champagne and Italy dropped back in October, taking
trade shares of 1.2% and 3.9% respectively. Burgundy
accounted for 6.6% — its highest monthly share for six months — but it was Port that really came to the fore.
Seasonal demand, particularly for the iconic 1970 and 1977
vintages, boosted its share to a record high of 3.3%.
Bordeaux’s trade share remains low.
Buyers continued to take advantage of purchasing the
2009s and 2010s (the latest physical vintages) at lower
prices, and the two accounted for 42% of the monthly
Bordeaux trade by value. Once again, the region’s market
share was at 80%. So far in 2013, Bordeaux has accounted
for 82.6% of all trade by value, compared to 87.2% in 2012
and 93.2% in 2011.
(more analysis in the full report)
(analysed in detail in full report)
Chart of the Month
First Growth trade falls to 2005 levels
In June 2010, during the market’s bull run, the five
Bordeaux First Growths accounted for nearly 70% of trade
by value on Liv-ex. By the time the market peaked a year
later this had fallen, but was still at 55% - the share that
First Growth trade maintained even after Lehman Brothers
collapsed in September 2008. Since then, Bordeaux and the First Growths’ trade share
has weakened. In the last couple of months it has settled
at around 35%, close to the pre-bull market levels of 2004
and 2005. While this is an indicator of the negative
sentiment that pervades the market, it may also suggest
that we are nearing the bottom of the bear market.
Final Thought - DRC overstretched?
If there is a producer with brand strength to rival the
biggest names in Bordeaux, it is Domaine Romanée
Conti. DRC produces some of Burgundy’s most illustrious
Grand Crus, and relatively large production levels (around
7,200 cases each year) mean that there is enough
liquidity for it to have real market momentum. In 2012 the
brand took the number 1 spot in the Liv-ex Power 100 —
overtaking Lafite, which had held the position for three years.
Bordeaux prices have stuttered over the last couple of
years, but those for DRC have held on. While the Liv-ex
50 index fell 24.9% from June to December 2011, the
DRC index (composed of DRC’s six brands) rose 10.6%.
And kept rising. Over a five year period, the index has
climbed 66.4% - compared with an overall gain of 39.5%
for the Liv-ex 50. But at what point does this divergence
go too far and create unbalanced pricing?
In Chart 1 we have calculated the average price of all
wines in the DRC and Fine Wine 50 index and tracked the
historical relationship between these averages (dividing
one by the other to create a ratio). As shown, the seven
year average price ratio of DRC and the First Growths is
4:1. The ratio has been above this for two years and
currently stands at 4.9 to 1, close to its record level in
June 2012 of 5.1 to 1.
So, which wines have led the charge for DRC’s rise? If we
look at price growth for the components of the DRC index
it becomes clear that one in particular has outperformed.
Over five years DRC’s flagship wine Romanée Conti has
risen 92% - an enormous climb when considered against
the other wines in the index, three of which have risen by
less than 25%. Over the same five year period Lafite, for
example, has climbed just 63%, but at one point was
showing a 170% rise compared to Romanee Conti’s 105%
peak in January 2012. But the prices of the two are wildly
different: at its most expensive in February 2011, the
average cost of a case of Lafite (based on the last 10
physical vintages) was £10,500. The average cost of a
case of Romanee Conti is now £87,000.
To trade on Liv-ex or subscribe for price information, visit www.liv-ex.com
Liv-ex Limited, Tel:+44 (0)207 228 2233