How did the fine wine category perform in the midst of a devastating and disruptive global pandemic? Rather well, as it turns out.
In March 2020, merchants in London admitted that they were selling smaller volumes of expensive wine compared to the same period in 2019. At that point, few businesses in New York or London expected a bumper year for Krug and Latour. It all looked very glum indeed.
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Yet Covid has not, thus far, proven to be the market's undoing. If anything, the pandemic has once again demonstrated that fine wine is a most robust and resilient category. Short of a full scale nuclear holocaust, I'm not sure what would kill off demand for DRC.
However, producers and merchants across the globe are not (generally) reporting an unprecedented bonanza either. But at the start of a new year, many brands are sharing a collective sigh of relief. Interestingly, although consumer buying behavior is clearly market-dependent, the anecdotal evidence is that many countries have followed roughly the same trajectory since March 2020.
"Covid-19 has not severely affected the global market for fine wine – at least in our experience. Sales in Asia and Canada are currently ahead compared to last year," reports Ornellaia's CEO Giovanni Geddes da Filicaja.
"Each market reacted more or less in the same way as the pandemic progressed. There was an initial panic and a resulting slowdown, but then sales returned during the third quarter. The slowdown in spring, especially with the closure of restaurants in most markets, resulted in lost revenue. However, sales subsequently picked up."
Ornellaia, like many others, took the decision to continue with business as normal – as much as possible – in 2020. Working practices were adapted and international travel was replaced with Zoom. Nevertheless, new vintages were released and online channels were swiftly employed. But how did consumers react?
If I attempt to extrapolate a median average from the comments in my inbox, then the word on the street is that the US market fared the worst in 2020 – exacerbated by punitive tariffs – and that China has bounced back quickly. Most producers claim that, overall, the primary market for young wine is reasonably buoyant. En primeur 2019 actually surpassed expectations, according to several owners I spoke to.
"European markets, meanwhile, are stable or slowly developing their importance; they became the top markets for the 2019 en primeur campaign. But it is obvious that this virus impacted our activity. We had to adapt ourselves commercially, notably by working on the sales of older vintages, which consumers are interested in today."
Consultant and Saint-émilion stalwart Hubert de Boüard is slightly more sanguine. He says that while his consulting activities have continued largely unabated, the pandemic has undoubtedly brought about changes to consumer behavior.
"We can see that commercial activity is maintained in Asia – in the US it is okay for wines with an alcoholic degree above 14," he says. "However, the global situation has affected prices in some cases."
The point about pricing is one which Ornellaia's CEO, although generally optimistic, also concedes.
"Sales at the higher end of our portfolio have slowed slightly, but we are progressing faster on our second and third wines. Customers recognize the pedigree of Ornellaia and this added value is transferred to the more affordable wines such as Le Serre Nuove dell'Ornellaia and Le Volte dell'Ornellaia, volumes of which are growing compared to last year," says Geddes da Filicaja.
Of course, collectors who have converted their garages into makeshift cellars are probably more interested in the longer term viability of wine as an investment commodity. Over the past 15 years, wine has consistently outperformed other assets in delivering solid and dependable returns. But is that likely to continue into 2021 and beyond?
Exchange platform Liv-ex is broadly confident that investors will continue to make money from the fine and rare. The secondary market, they argue, is far from being a plucked canard.
"In the past 10 months, global markets have been through everything from single-day crashes to full scale bull markets. However, fine wine prices, much like the physical bottles stored deep in underground cellars, have remained largely unaffected by events,”" says Liv-ex's director and co-founder Justin Gibbs.
"Year-to-date, the Liv-ex 100 was up 2.6 percent to the end of September 2020, far outpacing the FTSE 100 (-21.6 percent) but trailing the tech-led S&P 500 (4.1 percent) and traditional risk hedges like Gold (23.9 percent). Amidst 2020's turbulence, the fine wine market showed its strength – steadfast returns and low volatility. We saw record transactions in 2020 as merchants across the globe have begun to automate client access to the wholesale market."
I ask Liv-ex if one particular category outperformed its rivals in 2020. The answer might be surprising to some.
"The Champagne 50 was the best-performing Liv-ex 1000 sub-index last year – up 6.8 percent," says Gibbs.
"Champagne provides excellent relative value for money and is currently exempt from the US import tariffs, which were introduced in October 2019. Shortly after the tariffs were introduced, we noticed a shift in regional buying patterns, as wines from Champagne saw an increase in trade value on the market. This trend continued into 2020 once the Covid-19 pandemic struck."
And yet, at the start of the pandemic many analysts and buyers predicted that luxury fizz would bear the brunt of the pandemic's capricious gaze. "Who the hell will want to celebrate?" one merchant opined. But then again, Champagne is no longer reserved for bar mitzvahs and weddings. Deluxe cuvées have been re-branded as a lucrative investment vehicle, a fact which partly explains why some houses are deliriously happy.
"We released Clos de Goisses 2011 last year and our allocations are almost sold-out," says Philipponnat's director Charles Philipponnat. "As far as we are concerned, the demand for luxury Champagne remains very buoyant."
Yet it isn't just prestige labels that are driving this demand.
"We actually sold more bottles in France in July 2020 than in July 2019," explained Christian Holthausen, AR Lenoble's communications manager.
Undoubtedly, however, some Champagne houses and growers have really suffered due to the pandemic. Since March, the CIVC (Champagne's governing body) has put out numerous pessimistic forecasts.
I recall a communication sent to global press last year, where the CIVC noted that "Champagne has been hit hard by the world economic crisis linked to Covid-19, and suffered a historic drop in shipments".
Indeed, CIVC president Jean-Marie Barillère said that he believed the loss in global sales in 2020 could reach "100 million bottles, in the event of a possible rebound of the pandemic after the summer".
But there is enough anecdotal evidence from a cross-section of brands to suggest that tales of Champagne's demise have been grossly exaggerated.
Like their colleagues in Bordeaux and Tuscany, certain brands are proving capable of handling almost any setback – any level of global disruption. As long as the tectonic plates don't collapse, the sound of expensive corks popping will always be with us.