Happy hour: Green shoots for fine wine with ‘normalisation of demand’ after Covid

Spring has brought good news for the fine wine industry as fresh data suggests its turbulent year is giving way to growth.

The industry benchmark, the Liv-ex Fine Wine 100, rose by 0.4 per cent in March, the first rise in 12 months.

The index, has been in freefall since March 2023, dipping 14.6 per cent, whilst the broader Liv-ex 1000 index has fallen 15.3 per cent.

“High-priced and rare wines experienced a sudden and dramatic surge in demand – and therefore price – during Covid, which started to unwind with the end of widespread lockdowns,” Richard Halstead, COO Consumer Research at IWSR, said. 

The reversal this pricing surge over 2022-2023 was in part due to the “normalisation of demand” as the “spending patterns of high net worth individuals reverted to pre-Covid behaviours – expensive restaurants, luxury holidays, big-ticket goods such as vehicles and jewellery,” he added. 

This may have made other asset classes more attractive to investors, and increased costs for those using leverage to fund their wine portfolios.

The market for fine wine has been through a period of price correction, agreed Nick Martin of Wine Owners. “It’s been a hell of a long run, so I’m not that surprised.” Some wines from very small producers that had enjoyed the most exuberant growth saw the biggest drops last year, he said. 

The average price of a fine wine has risen 146 per cent since 2014, but only one per cent since January 2023, according to Knight Frank’s Wealth Report. 

Recovery seems to be underway for some areas of the market, though, marking a change from the cheap prices and buying opportunities that have characterized fine wines recently. 

Several Champagnes, for example, have risen 2-7 per cent since the end of 2023, including Dom Pérignon (up by 2 per cent) Salon Le Mesnil-sur-Oger Grand Cru (up by 4 per cent), Pol Roger (up by 6 per cent) and Veuve Clicquot La Grande Dame Rosé (up by 7 per cent). Many of these were on a downward trend six months ago. 

Will a trend towards abstinence affect the fine wine industry?

Demand for wine globally has fallen as consumers in France and other developed markets cut down on casual wine drinking occasions. Plus, wine is struggling to compete with ready-to-drink beverages and widening consumer tastes.

However, figures from alcohol data and intelligence company IWSR suggests that the trend towards moderation and abstinence among younger legal-drinking age consumers “may have been fuelled by a reaction to price rises and the cost of living generally” rather than pushed by a change in tastes or values, Halstead said.

Regardless, this shouldn’t affect fine wine too much, Halstead said, as the broader wine market and the fine wine market have always largely existed in “different universes”.

“[Fine wine drinkers] may have been influenced by the moderation trend, but if anything, this has increased their desire to drink a more meaningful, desirable and expensive wine on the less frequent occasions they have to enjoy wine,” Halstead said. 

“They are largely unaffected by cost-of-living pressures, though may have sought to consume less conspicuously amid more austere times.”