No one could have predicted last January that the Covid-19 pandemic was going to hold the world hostage. What we considered normal, pre-covid pastimes such as going to the cinema or meeting friends for drinks have for now become forbidden luxuries. We now find ourselves 12 months on, living in the new normal (whatever that is), trying to come to terms with an unstable stock market, increased awareness of barrier gestures (a term we had never used before) and a great uncertainty on whether there will ever be any light at the end of the tunnel. Yet, there was one clear winner in 2020. While the rest of the world was in freefall, fine wine investments not only proved stable, but fruitful. But how will the next 12 months pan out?
Wine Investment Trends Factors
The Influence of COVID on Fine Wine
You would be foolish to assume that 2020 was all doom and gloom. Certainly, there is no doubt that Covid changed our global wine consumption habits. Online sales went through the roof. Growth rates in investment wines barely suffered and had quickly recovered by the second quarter of the year. The general thinking was that Covid gave the fine wine industry a much needed injection of modernity, forcing producers to move away from the archaic negociant system favoured in France and take up e-commerce, thus opening the wine market to a much wider audience. In a year of great uncertainties for many, 2020 actually proved to be one of the best for fine wine.
You can read more about how Covid-19 affected the fine wine market.
Brexit’s Impact on the Relationship Between Fine Wine and Britain
As if an unexpected global pandemic was not bad enough, the UK (and subsequently the rest of the world) had to deal with Brexit too. As from the 1st of January, new rules for export trading included a mandatory import certificate on all wines entering the UK along with their laboratory analysis and new labelling requirements. Additionally, a highly complex tariff schedule was put in place which will, we assume, prove costly to importers for little or no resale benefit. For a country that imports 99% of its wine, these new rules make physical fine wine trading very complicated in post-Brexit Britain. It should also be noted that such stringent measures have not been put in place for other overseas beverages, alcoholic or not.
These measures come as a huge obstacle for British sales channels, and it will be interesting to see how the wine market in the UK will evolve in the next 12-24 months. The irony of course being that after having successfully weathered the rough-ish conditions of the first six months of 2020, wine investment and purchases of fine wine in Britain ended on an all time high. We only hope these added import measures will not affect the Brit’s famous taste in vino. We’ll definitely drink to that!
The US’ Tariffs on Fine Wine After the Election
So, with Brexit happening in the UK, what was happening over the pond? The United States election was of course the big news for our American friends in 2020, and the hike in tariffication of wines under 14% ABV from France, Germany, Spain and the UK. In case you did not follow, the Trump administration issued a 25% tariff on a many (but not all) European wines as part of the WTO judgement against the European Union (EU). Today, just two months into his presidency, Biden has already been very vocal on his (low) opinion on former President Trump’s tariffs, which he believes are detrimental to the US economy. While a u-turn has yet to be issued, we are crossing our fingers for it to come soon.
The result of Trump’s tariff was this: during 2019, sales of fine wines from Bordeaux had accounted for 48% of the US’s market share. This figure dropped to 33% post tariffication. Wines from Burgundy suffered a similar fate. Although not as popular as their west country cousins, sales of Burgundy – Bourgogne – slipped from 13% down to 8% between January and October 2019. While this is mauvaise nouvelle indeed for the French, a trend for other world wines has emerged. Sales of vino Italiano rose by 7% (from 18% to 25%) during 2019, while New World wines – including South American, South African and homegrown US products – jumped from 4% to 10%. However, despite Trump’s tax, the one clear winner is Champagne. Even with the increase in importation, it seems that nothing can ever equal a bottle of bubbly, and demand not only continued but surpassed its projected market trajectory. To put it into figures, sales of Champagne rose from 10% to 14% regardless of (or perhaps thanks to) the election, the tax and the pandemic. One would almost think that the Americans had something to celebrate.
Wine Investment Trends & Predictions
Working on the basis that 2020 was in fact one of the best years so far for wine investment, our thoughts naturally turn to what the future holds. As the Covid vaccine is rolled out worldwide “normal” activities such as eating out and travelling will once again become the norm. People will diversify their spending power – simply because they can – but we suspect that passion asset investments such as fine wine will remain at the highs of 2020. However, no trend is possible to accurately predict so always seek sound financial advice before committing any funds. We anticipate the following:
Online Wine Exchange Platforms Will Continue to Grow
With enforced lockdowns from Los Angeles to London, the world is holding its breath regarding how socialising will take place when social distancing measures are relaxed. We suspect that there will be a surge in fine wine sales as people carpe the diem after 12-18 months of confinements and curfews. However, once that initial excitement dissipates, lockdown legacy will be that people will look for safe, easy and secure ways to invest their funds. They will want something fun and sexy to invest in, something they can physically own if they want and something that will retain its value if the going gets tough.
Enter an online wine investment app such as Vindome. While fine wine investments have traditionally been marketed to Boomers and above, wine investment apps place themselves at the forefront of the Millennials market. “Millennials do not want a 9-5 job and to retire at 65 the way that their parents did”,says Mario Colesanti, Head of Sales and Marketing for Vindome. “They have become disillusioned by traditional society and are keen to be financially independent by the time they’re 30. Many millennials are already investing, not in traditional stocks and shares, but items that they know and like, hence the success of sites such as stockx. The resale market on sneakers for example is huge, as is limited edition streetwear and collectibles. We don’t see any reason why fine wine won’t find a place in their portfolios – it’s sexy, it’s safe and above all, its a physical asset that they can hold if they want to. The only reason why wine has so far been overlooked is that the technology hasn’t been available. Vindome changes that”.
The Wine Market Will Diversify Even More
Data research from Liv-Ex shows that a diverse portfolio was a strong portfolio in 2020. We fully expect this trend to continue; Covid (plus the aforementioned tariffication in the US on many European wines) meant that people were forced to move away from the traditional safe havens of Bordeaux and Burgundy. Small, low yield producers in Germany, Portugal but particularly Italy that had remained relatively unaffected by the enforced sanitary measures suddenly took centre stage.
At only two thirds of the way through Q1 2021, Liv-Ex has released tentative findings on this year’s fine wine investment market. The report shows that Italian wines have been outperforming their previous years so far, with SuperTuscans performing particularly well. This could be due to Ornellaia and Sassicaia both increasing by almost 10% in 2020 and being mentioned in the top six of Liv-Ex’s Power 100.
Demand for Champagne and Sparkling Wines Will Increase
While predictions foresee sales of still wine is to slow down, sales of Champagne will really go with a fizz. Initial indications for 2021 show that sales of vintage Champagne have bucked the trend from 2020’s non-Covid first quarter, proving once again that fine wine investment is safe, secure and stable. The return of the iconic wine seltzer as soons as pubs and restaurants open their doors might be another trend to watch. While all those mixologists stayed at home, the classic drink was given a glow-up via the social media channels. Established wine producers such as Barefoot have invested heavily on this and launched seltzers in a can, targeting whom? You’ve guessed it, the money-rich, time poor millennials.
If you want to start investing read our guide on how to invest in wine.