First published in Issue 52 2016



Ella Lister assesses the positive start to the year, offers an overview of wine auctions in the first quarter, and indicates what to look for over the coming months

I ended the last Liquid Assets asking whether the market had found more stable foundations for a positive 2016. So far, so good. Wine indices have made gains across the board in each of the first three months of this year. January is often a positive month, but this year February and March have consolidated that positive thrust. Indeed, growth accelerated in March, with the Liv-ex 100 up by 5 percent, possibly suggesting a return to the days when anticipation of an en primeur campaign boosted the market.

This theory is all the more likely given that Bordeaux has been a driving force behind this growth. The five first growths rose 5.9 percent, and in March they accounted for the top five wines traded by value on Liv-ex. The Liv-ex Bordeaux 500 rose by 2.4 percent in March alone -- its biggest monthly gain since February 2011 in the run-up to the apex of that summer. Furthermore, while Bordeaux's trade share on the Liv-ex exchange was down slightly on December (at 78.6 percent in January), this was still above the average for 2015.

The broader Liv-ex 1000 index, containing many wines from outside the Bordeaux region, rose by a more modest 3.4 percent. This nonetheless compares favorably to a flat first quarter of 2015 and is another positive sign that the fine-wine market is moving in harmony rather than relying solely on the fortunes of a single region. A Bordeaux revival -- if indeed this is on the cards -- will be much more stable and sustainable in the context of a general wine-market uptick.

Hanging in the balance

The trade, however, is not celebrating quite yet. "We remain cautious," notes Adam Brett-Smith, managing director of Corney & Barrow, adding, "We're more bullish about the secondary market [than new offers]." Giles Cooper of Bordeaux Index believes "it's still too early to call it a turning point," referencing similar first-quarter trends in 2012 and 2013, "thanks primarily to increased demand due to Chinese New Year -- which has then tailed off and reversed into decline following disappointing en primeur campaigns where either wines or prices, or both, were not what the market wanted.

"That said, this year does feel a little different, mainly as a result of the challenges we face in picking up stock," observes Cooper. "We're not quite two years on from the bottom [August 2014], so a few more months -- and of course the positive or negative impact of the 2015 en primeur campaign -- are required to clarify the picture," he concludes.

The Liv-ex 50 index was still rising halfway through April. The market's fate for the rest of the year sits heavily in the hands of the Bordelais and the success -- or otherwise -- of the en primeur campaign. "2015 pricing is critical," confirms Brett-Smith.

Q1 2016 AUCTION ROUND-UP

In stark contrast with the positive price movements described above, the auction market seemed to stall somewhat in the first three months of 2016. At $46.8 million, first-quarter wine-auction revenues were down 32 percent on the same period last year. This was the lowest first-quarter total over the past six years, which have averaged $77.9 million. It undid the positive movement in the last quarter of 2015, which momentarily appeared to denote an upturn.

The low first-quarter figures can be put down partly to a popular weekend for auctions falling at the beginning of April rather than the end of March. Heritage, Hart Davis Hart, and Sotheby's all held large sales in the first three days of April 2016. One weekend of sales does not, however, account for a revenue drop of almost one third. The US and Hong Kong suffered the brunt of this drop, with revenues down by 37 and 33 percent year on year. Europe held steadier, with only a 10 percent decline.

The number of sales held globally was down 11 percent, from 27 to 24, with Asia flat at five sales and Europe up at 11, but the US was down one third with eight sales. The average number of lots per sale was down by just 8 percent, but combined with a reduction of 17 percent in the average lot price, this led to seriously shrunk revenues. For the first time since Asia's dramatic entrance on to the wine-auction scene in 2008/09, the average lot price shrunk significantly, to $4,500, down 42 percent from an unusually high $7,900 in the first quarter of 2015, but also by more than $1,000 from the 2015 full-year average of $5,600.

Hung, drawn, and quartered

The top six wine auction houses all suffered during the first quarter, between them bringing in revenues around one quarter lower than in the first three months of 2015. Declines ranged from 20 percent to 35 percent less apiece, with the exception of Sotheby's. In fourth place, Sotheby's sales were just 1 percent down year on year (though in 2015 Sotheby's held a very large auction at the beginning of April and had comparatively low first-quarter revenues). Acker Merrall & Condit retained the number-one spot despite seeing a drop in revenues of 35 percent on the first quarter of 2015. The auction house sold the most expensive lots of the quarter on average.

In second place was Zachys, in terms of both revenues and average lot price, followed by Hart Davis Hart, which held just one sale but a very large one, bringing in $6.3 million over two days. This was, by a significant margin, the largest auction of the first quarter. Devoted exclusively to Burgundy, it included $1.8 million worth of Domaine de la Romanée-Conti, which made up 23 of the top 25 lots.

Banging the Bordeaux drum

Elsewhere there was a renewed focus on Bordeaux, especially from great and mature vintages. "The first live sale of the year witnessed very strong prices for pristine cases of Bordeaux, including the highest prices of the year for '82 Latour, '82 Petrus, and '89 Haut-Brion," reported Heritage's fine and rare wine director Frank Martell, concluding, "Bordeaux is back!"

Stephen Mould, head of Sotheby's wine for Europe confirmed this trend, commenting after a sale in February, "We kicked off the New Year with top prices for Bordeaux," and then again in April, "throughout the sale, there was strong demand for both blue-chip Bordeaux and more mature vintages perfect for drinking now." Head of Bonhams wine department Richard Harvey MW, concurred: "It's very encouraging to see demand strengthening again for Bordeaux."

Marc Fischer, managing director of Steinfels, did point out, however, that "2009 Bordeaux still have not reached the en primeur prices," citing Mouton Rothschild as an example: "2009 was sold en primeur at around CHF840 per bottle, and it now sells at auction at around CHF 600 per bottle plus premium."