Glass half full for US and Asian fine wine investors

Once the cornerstone of every wine collection, the Bordeaux market has witnessed a much publicised decline, yet the recent fall in prices have boosted sales and encouraged US and Asian investors back into the market, giving rise to renewed optimism in the fine wine trade.

According to Gary Bloom, managing director of London based merchants Bordeaux Index (BI), three consecutive years of declining prices and falling interest from Chinese investors have led to a palpable “sense of gloom in the market”. In Q1 2014, aggregate prices fell a further 3%. Which, says Bloom, has represented the “longest bear-run since the early 2000s”.

But, there are early signs of recovery,  BI has reported a surge in sales across both the US and Asia, both traditionally strong investors. Figures, says Bloom, which indicate that the “long suffering market is ready for a turnaround”.

The US: A re-emerging market

According to data from BI’s Livetrade platform, an online fine wine trading mechanism, the United States wine trading market has started to flourish. After a “hiatus” of almost a decade, the index has reported that fine wine sales to the US in Q1 of 2014 were higher than the total sales in 2012 and 2013 combined.

Bordeaux, says Bloom, still holds its traditional appeal as a prized piece in any fine wine investment portfolio and current low prices have encouraged American investors back into the Bordeaux market. “It was only a matter of time before the picture began to improve,” says Bloom.

Eyes fixed on Asia

Asia is still leading the charge in the global wine market. Described by BI as the “engine room” of the global wine trade, in the six-month period from November to April, sales of top-tier Bordeaux have risen by 30% on the same period one year ago. Average sales of Livetrade wines to Asia, comprised of the top 150 most liquidly traded Bordeaux, have risen beyond £1m per month for the first time since 2011.

The future

The appeal of Bordeaux for wine lovers and collectors is persistent, says Bloom. Yet it is the “vital consumption versus storage ratio” that has become the defining feature of this recovery.

The sale of Bordeaux is “turning strongly in the favour of consumption right now”, says Bloom, which is fundamental in the position of Bordeaux as the cornerstone of fine wine investment. In other words, people are buying wines they want to drink now. While prices may take a little while to catch up, says Bloom, “the essentials are still in place for a rally”.

“Overall,” he says, “within the next 12 months we expect to see prices return and rediscover their previous form of a gentle growth of 4-5% per year.”

Ellie Clayton

 

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