Knight Frank Fine Wine Index Update Q1 2018
The KFFWII is up 9.6% over the year to March 2018, with a 2% gain in the last quarter.
Consolidation of the market at current valuation levels is on the back of the 24 months to December 2017, seeing gains of 38%.
The top of the market is significantly influenced by Asian demand, where a weak dollar is causing bid prices to fall. Changes within secondary market wine distribution into China may create a degree of uncertainty not seen since 2014.
The outlook for the rest of 2018 is one of subdued growth, with the Sterling-denominated index at risk of downward pressure as the currency appreciates against the US Dollar and Euro.
First Growths are up just 3.8% over the last 12 months, half of which can be accounted for by the last 3 months. This broadly reflects the rest of the Bordeaux fine wine market (classified growths and equivalents). However, this subdued performance ought not to detract from 3-year performance (43% price growth) in First Growths, and 55% appreciation in the classified growths and equivalents over the same period.
Risers substantially outnumber fallers in Bordeaux, reflecting the market's continued overall growth. Less new wine is being released from chateaux than ever before, and quality is increasingly consistent. These factors point to continued growth during 2018, although it will remain in single figures, as orderly trading patterns continue.
Burgundy values continue to appreciate, with increases of 21% to March 2018, and 4.6% over the last quarter. To date there are no signs of a let-up in the upward trajectory of top producers' Burgundy prices. We’re about to see Burgundy price appreciation break through the 100% mark over the last 5 years, and reach 257% over 10 years.
Northern Italy (represented in the KFFWII exclusively by Piedmont and Tuscany), is up 9.5% over the last 12 months, of which 2.7% is within the last quarter. The leaderboard is dominated by Monfortino, the standout Italian performer of the last 4 years which is consolidating its position as one of the most investible wines in the world.
Expectations for Northern Italy - Barolo in particular - are that prices will continue to increase into double digits over the remainder of 2018.
Vintage champagne has performed well over the year, up a full 10%, and has kicked up 3% in the last quarter.
The best performers are rarer cuvees from such stalwarts as Selosse, Bollinger, Krug and Pol Roger. Over 10 years Champagne has performed even better than Burgundy, up 283%: demonstrating the liquidity that volume can drive, brand values and early consumption patterns.
California’s moderated growth continues, with annual performance to March 2018 of 6.3%, and is up 2% within the last quarter. After years of bewilderingly strong growth (385% over 10 years), fallers are as numerous as risers within the California index, implying further downsides or a relatively flat outlook.
Top Spanish wines dominated by iconic and traditional large estates in Rioja and Ribero del Douro still represent good value, have good ageing potential, and are produced in large volumes.
These positive trading fundamentals support a market up 8.25% in the last year, and a healthy 3% in the last quarter.
A related effect is that Spanish blue-chips (particularly Vega Sicilia's top wines) are increasingly being traded on exchanges, and markets are being made for these wines through the usual offer and bid mechanisms used by market-makers.
The Spanish index is up 155% in the last 10 years. 45% of that growth has taken place in the last 3 years. The timing of that resurgence coincides with the inflection point in Bordeaux markets in the winter of 2015, when they rebounded from cyclical lows.
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