Is the Wine Bubble Bursting? Secondary Market Shows Cracks

The secondary wine market, known for its fluctuating dynamics, has recently exhibited signs of fragility according to the May market report from Liv-ex, a global marketplace for wine trade. The headline Liv-ex 100 and Liv-ex 1000 indices experienced declines of 1.3% and 0.7% respectively in April, culminating in a year-on-year drop of 15% and 15.6%. Despite this overall downturn, the Italy 100 index presented a glimmer of resilience, rising by 0.7% in April and outperforming the broader indices over the past two years.

The Italy 100 index's modest rise can be attributed to price increases for several esteemed Italian wines. Notable performers include Giacomo Conterno's Monfortino Barolo Riserva 2010 and 2013, as well as SuperTuscans Masseto 2017, Solaia 2015, and Sassicaia 2017. These wines have garnered significant interest, highlighting a distinct area of stability and growth within an otherwise volatile market.

In the face of ongoing price uncertainties, strategic pricing has emerged as a crucial factor in maintaining buyer interest. Nick Pegna, global head of wine and spirits at Sotheby's, emphasized the importance of setting realistic price estimates to stimulate bidding activity. Speaking to Decanter in May, Pegna noted that correctly priced items continue to attract considerable interest, as evidenced by Sotheby's record wine and spirits auction sales of $159 million in 2023. He advised that lower estimates tend to foster competitive bidding, often resulting in better outcomes for sellers.

Christie's recent auction of wines from the cellar of the now-closed London restaurant Le Gavroche serves as a testament to the enduring appeal of rare and fine wines. The auction achieved nearly £1.9 million in sales, with all 670 lots finding buyers. Highlights included a seven-bottle lot of Domaine de la Romanée-Conti, Richebourg Grand Cru 1993, which sold for £35,000, significantly surpassing its pre-sale high estimate of £22,000. Other notable sales included two magnums of Château Lafite Rothschild 1945 for £15,000 and a collection of four magnums of Krug Champagne from the 1971 and 1975 vintages, which fetched £9,375.

The Champagne market has experienced a subdued period, with declines in prices for prestige cuvées. The Liv-ex Champagne 50 index dropped by 0.9% in April and 15.4% over the year, with top labels like Cristal 2008, Krug 2008, and Salon 2012 falling by over 20%. However, there are opportunities within this market segment. Matthew O'Connell, CEO of Bordeaux Index's LiveTrade, pointed out potential value in back-vintage Champagnes, although he tempered expectations for a rapid price rebound.

Nick Pegna also observed a growing market for mature Champagnes at auction, noting increased interest among buyers for older vintages. Sotheby's is set to host its first Champagne-only auction in June, featuring selections from the collection of Pierre Chen, which could further invigorate interest in this segment.

Grower Champagnes have gained traction, attracting a diverse audience. Auction house iDealwine reported strong sales for certain grower labels in 2023, with producers like Cédric Bouchard and Jacques Selosse leading the way. Grower Champagnes offer smaller production volumes and unique appeal, though they remain relatively untested on the secondary market beyond a few established names.

According to Bordeaux Index, the Champagne market has seen significant gains since the pandemic, with prices doubling over five years up to late 2022. While recent price adjustments represent a natural settling, current levels suggest a foundation for future growth. The strong 2012, 2013, and 2014 vintages have expanded market supply, presenting both opportunities and challenges for buyers navigating the landscape.

The secondary wine market continues to present a complex tapestry of fragility and opportunity. Strategic pricing and careful selection of sought-after wines remain key to success in this fluctuating environment. As demonstrated by recent auction results and the evolving interest in grower Champagnes, there are still numerous avenues for discerning buyers and sellers to explore and capitalize on in the ever-changing world of fine wine.