Q1 2022 Performance Review

Throughout 2021 the wine market shone, setting new records for trade and pushing the market’s leading indices to reach new heights with month after month of consecutive growth.  And 2022 began right where 2021 left off, given a helping hand from a solid 2020 Burgundy vintage.

The market did begin to show signs of a slow down as we edged through February with only small gains from both the Liv-ex 100 & Liv-ex 1000. But this started to pick up again from March onward and although the Liv-ex 100’s Q1 was slower than in 2021 the Liv-ex 1000 showed robust gains fueled by both Burgundy and Champagne.

The Russian invasion of Ukraine on 24th February added to widespread concerns of rising inflation, as the rising cost of oil, gas and metals started to impact negatively on already strained global supply chains.  So far, wine seems immune but we are remaining sensibly cautious.  However, this is the perfect environment for wine to shine as an alternative asset, as it has certain advantages over more mainstream financial options.

Vintage wine is a diminishing asset, you cannot produce more of any particular vintage than was originally made.  Plus, as an asset, it is necessary to invest time holding on to stock in order to see growth.  Both of these factors help to keep the wine market’s volatility extremely low.

As the chart below demonstrates, the Liv-ex 50 has remained very stable during Q1 while other markets and commodities displayed erratic price movements in response to current events.

 

 

Champagne & Burgundy lead the way in Q1

Burgundy and Champagne’s performance was very strong last year, and this continued into 2022.  So far this year Burgundy and Champagne have been the leading performers, growing by 14.6% and 9.6% respectively.  Although the Champagne 50 index has the best annual growth figure at the time of writing, the Burgundy 150 index has been the best performer over the past three months.

Its also worth noting that the growing interest in, and value of, US wines such as Screaming Eagle has helped to push the Rest of the World 60 index forward.

 

 

Burgundy’s Leflaive 2012 is the best performing wine in Q1

The following table of Q1’s top price performers clearly demonstrates Burgundy’s dominance with nine of the ten positions being taken by the region.  The best performing wine of the first quarter was Domaine Leflaive, Batard-Montrachet Grand Cru 2012 which grew in value by 76.3% since the start of the year.  This was followed by Domaine Bonneau du Martay, Corton-Charlemange Grand Cru 2014 which grew by 55.2% over the same period.

Regional Overview of Q1

As mentioned above, Burgundy and Champagne have really stolen the show so far this year and this was reflected in their overall share of trade.  Burgundy’s share was 25% and Champagne’s 11.5%, Bordeaux still took the lion’s share of trade at 32.8% but this is lingering around an all-time low for the region and is an ongoing sign that the wine market has matured and diversified beyond Bordeaux’s hay days of 90% trade share.

Champagne climbed the rankings significantly in 2021, making it the third most-traded region. Tuscany was nudged down the rankings in this process but the region sits on firm footings as proven by strong trade in Super Tuscan wine Sassicaia in Q1.

Q1 2022’s Most Desireable Labels

Although Burgundy completely dominated the top ten price performers, you’ll be glad to hear that the top wines traded by value were more varied.  Champagne’s Louis Roederer Cristal took three of the top spots for wines traded by value, alongside Dom Perignon, Screaming Eagle from the US and Pomerol’s Petrus.

 

 

California 50 Outperforms the Broader Market

Looking back at the past year, one region has presented itself as a very secure option for growth.  The California 50 index has grown by 34% over the last 12 months to reach its highest ever level.  We have been recommending premium Californian wines since as early as 2010 and clients with the foresight to have taken up our early offers have either sold their positions or are now in a very comfortable position.

Prices from the region’s best wines continue to soar, boosted by great ratings from the world’s most influential wine critics.  The UK market for top Californian wines has also developed and now sees an increased demand for premium labels such as Screaming Eagle, Dominus and Harlan Estate.

For example, Screaming Eagle’s flagship Cabernet Sauvignon is the best performing wine in the California 50 index and has risen by 42% over the last year, easily outperforming the index’s other contributors.  This growth has largely been the result of the stellar 2009 and 2010 vintages which have delivered 61% & 75% respectively over last year.

 

Where from here?

Even though global stock markets have experienced a rough ride of late they have managed to recover the majority of their losses, regardless of the volatility seen in commodity markets and gloomy global economic forecasts.

While the snowballing effects of COVID, Brexit and the European war are yet to knock the markets completely off course there remains a sense of financial insecurity that actually bodes well for the fine wine market.  Wine is increasingly being used as a financial safe haven, similar to the traditional use of gold in times of uncertainty.

Bordeaux’s En Primeur campaign is well underway and is a time when the market traditionally slows down as it awaits the first inkling of what quality the next vintage will be. A well-priced futures campaign can serve as a huge boost to the market heading into Summer but if the chateaux are too greedy price-wise then market progress could be dampened.

Overall the market is in a similar place to the close of 2019 where external events – global trade disputes and Brexit – lead many to defensive strategies to protect their capital and reduce the volatility of their overall investment portfolio.  The wine market’s track record of low volatility and steady returns is now common knowledge and the confidence it builds could help to shape the rest of the year for wine investors.