When China’s demand dries up in the red good wine market

Open the editor’s digest for free

FT editor Rula Khalaf picks her favorite stories in this weekly newsletter.

Fine wine investors have little left to bake this year after prices for high-end Burgundy and vintage Champagne fell sharply as demand from Chinese buyers dried up.

The price of Burgundy has decreased by 14.4 percent this year until the end of November Wine Exchange Liv-ex’s Burgundy 150 index. Vintage Champagne fell 9.8 percent, while the broader Bordeaux index fell 11.3 percent.

The falls mark the second consecutive difficult year for the fine wine market Hit in 2023 With high interest rates – without production making assets such as wine attractive to investors – and declining demand in Asia, traditionally a buyer of French red wine.

“It was very difficult,” said Gregory Swartberg, CEO of Cru Wine, a London-based wine investment firm. “November (2024) was one of the worst months of the year. We’re not out of the woods yet.”

Liv-ex’s overall fine wine 100 index is down 9.2 percent this year to the end of November, while global stocks have risen 20 percent.

It’s a loss that stands in stark contrast to the boom in the market during the coronavirus pandemic. Although restaurants are closed during the closing hours, retail investors, with savings and time on their hands, have piled in.

Unusual weather patterns Associated with climate change – warm weather at the beginning of the growing season, followed by brutal frosts that kill the buds – has also limited the supply of new grapes.

It was such advantages that sometimes drove up the prices of Champagne and Burgundy. It has outperformed the gains from emerging equity markets and technology stocks.

However, some in the industry raised prices too quickly, setting the market up for a crash.

This bear market was a long-overdue correction following an unprecedented bull market during the pandemic, said Calum Woodcock, chief executive of wine investment platform Winefay.

The market has been hit hard by declining demand from Chinese buyers, who have held the bulk of Burgundy in recent years, but now the domestic economy is faltering.

In recent years, investors who bought alternative assets such as wine as a way to extend their portfolios have become more vulnerable because of the uncertain economic outlook, said Tom Gearing, chief executive of the investment firm and a former UK finalist. of Practice.

Among the famous wines that have suffered this year are Château Lafitte Rothschild’s Carroudes de Lafitte, whose 2021 vintage has fallen 29 per cent this year to £1,640 for 12 cases. The 2012 vintage was down 42 per cent to £1,740.

Among the Burgundies, Domaine Georges Roumier Bonus Mares Grand Cru 2020 is down 44 per cent to £11,529. Champagne house Louis Roederer’s 2015 vintage fell nearly 17 percent.

It could be worse. Some industry analysts point to a sell-off by Asian collectors, which they say is depressing prices in the region. Many European producers fear that US President Donald Trump will impose trade tariffs on some European wine products, as he did during his first term in office.

Also called the Bordeaux wine industry first Campaign – an annual spring festival where new wines are judged by critics and bought before bottling – has largely failed. This is because buyers often find that they can easily buy bottled mature wines on the secondary market rather than buying what will become wine.

The region’s producers now face the challenge of how to buy next year’s prices. first campaign, which features the 2024 vintage. With an unwanted mix of mold, heavy rain and freezing temperatures, this is “the worst wine across the board,” according to Liv-X’s head of market intelligence, Tom Birchfield.

“There’s a bit of a sense of confusion about what the right course of action is,” said Michael Sanders, chief executive of Coterie Holdings, owner of wine merchant Leigh & Wheeler and wine cellar Coterie Vaults, and who recently met with producers and traders in Bordeaux. is it”

Despite the gloom in much of the industry, some investors are using this year’s drop in prices as an opportunity to buy high-quality wines.

While buying, Cru Wine’s Swartberg advises customers to buy Krug 1996 and Dom Pérignon 1996, which he describes as a “fantastic vintage” of champagne that he believes will do well because of the lack of supply.

Among Bordeaux, he has bought 2000, 2005 and 2009 vintages, such as Château Angelus and Château Cheval Blanc, and has sourced recent Burgundies from Domaine Romante Conti, Rousseau and Dujac.

“A lot of people are taking advantage of the current market conditions,” he said. “Two years ago it would have been unheard of to buy these wines at these prices.”