Last week Liv-ex announced that the total value of bids and offers on its platform had reached an all-time high at over £50m. It is worth pausing to reflect on the implications of this. In the early years of the century volumes were in the lower single digit millions, rising dramatically from 2008 when Hong Kong removed import duty from fine wine thus releasing the shackles to allow Chinese buyers free rein.
By the June 2011 market peak the figure had risen to £20m, but Bordeaux was very much the dominant element, and the subsequent broadening of the market to include wines from Italy and the US among others was the very result of the correction in Bordeaux. Over the period of consolidation up to 2016 volumes held at around the £20m figure, but the complexity of the market was very much evolving.
Over the last 30 months the figure representing open interest has leapt to £50m, as Bordeaux wines came back to the party, and Burgundy prices continued to skyrocket. It should be said though that this last element would not significantly distort the numbers because while the value of Burgundy wines is very high, the volumes going through are still very limited.
Either way, the fine wine market as represented by the volumes going across the Liv-ex platform has expanded hugely, which can only be a good thing. This is consistent with our own anecdotal evidence from visits particularly to Asia. In many Chinese centres we now have a ready ear for the fine wine investment proposition, indeed no visit to China would now be complete without a presentation in Foshan, a suburb of Guangzhou which would have been off the map three or four years ago.
This speaks to a perfectly logical trend which we are noticing in places like India too. As developing economies expand and throw off more and more millionaires, the middle class starts to expand dramatically. Ask any travel agent and they will cite more and more visitors to the West from Asian centres, a trend under way for quite some years now, especially with respect to China.
Part of the developing market psyche involves an aspiration for Western luxury goods once you can afford them, and fine wine fits the bill not only as a luxury good but also as part of a lifestyle trend. Until very recently whenever we went to India we were told that Indian people only drank whisky and beer. Some people still believe it. Patently untrue. Our partner in India has 65% of the domestic wine market, and has no trouble finding buyers for his wares.
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