Wine Market Investment Report November 2019
I have just finished reading the latest threats relating to U.S. trade tariffs. In response to France’s application of a 3% digital services tax on heavyweight U.S. tech companies (you know the ones), DT and his representatives are considering recouping $2.4 billion from France’s premium markets; namely handbags, make up, certain cheeses and sparkling wines made from grapes. These tariffs will not be introduced until the new year if at all, so Christmas is saved at least. These products are possibly facing a 100% tax penalty so it’s out with Vuitton, Chanel, Roquefort and Krug and in with Coach, Maybelline, Monterey Jack and Napa Mumm – maybe Brexit isn’t looking quite so bad for us Brits after all!
How these lists are drawn up I do not know; the cheeses include Edam, Gouda and Parmesan which, as we all know, are not known for their Gallic qualities. Unlike still French wines below 14.1% alcohol, Champagne dodged the tariff bullet in October but may now be hit four times harder. These tariffs are messing up our market and we don’t like it! Tit for tat exchanges cannot be the way forward, and we look and hope for more stable trade agreements globally, but we must live with them for now. We have heard of several ‘swerves’ so far; U.S. buyers storing in Europe in the short term, importers identifying the highest alcohol level of any of a producer’s wine and employing that number universally across the producer’s range and even producers being asked to mark 14.1% on the label!
| Index || Current Value || MTD || YTD || 1 Year || 5 Year || 10 Year |
| WO 150 Index || 315.67 || -1.95% || 1.44% || 2.03% || 62.62% || 91.05% |
| WO Champagne 60 Index || 493.15 || 0.77% || 5.40% || 7.02% || 73.96% || 166.01% |
| WO Burgundy 80 Index || 744.26 || -0.61% || 6.08% || 7.35% || 147.25% || 239.18% |
| WO First Growth 75 Index || 274.38 || -3.16% || -2.76% || -2.65% || 48.45% || 64.45% |
| WO Bordeaux 750 Index || 366.5 || -2.23% || 8.20% || 8.98% || 69.82% || 111.68% |
| WO California 85 index || 679.17 || -3.41% || -0.14% || 0.83% || 98.95% || 296.39% |
| WO Piedmont 60 Index || 335.87 || -1.70% || 5.64% || 6.32% || 81.94% || 125.17% |
| WO Tuscany 80 Index || 312.88 || -2.43% || 6.86% || 10.01% || 61.16% || 86.68% |
As predicted last month, the indices are beginning to tell the story of recent headwinds. It is interesting to note that Champagne was bucking the trend - that will not continue now. All the other main indices drifted down; the Italian numbers surprise me as the wines we are currently seeking to accumulate have shown no weakness in price. Italy remains free of any U.S. tariffs although further scrutiny can be expected.
I expect there to be some continued easiness in the market in the short term, but I would not recommend selling now as I think it unlikely the market will retreat by 10% or more. Spreads have widened a little and bids are currently around 10% (or more) below the cheapest market price. There will indubitably be some very interesting buying opportunities in the coming months for those brave (and clever) enough and it is interesting to note rarer stocks already becoming available. Great 1990 Bordeaux is a perfect example; normally very scarce and difficult to buy, there is some volume available and it is a buyer’s market.
If some of the current headwinds, namely Hong Kong politics, U.S. tariffs and uncertainty surrounding GBP stemming from UK elections, and no deal Brexit fears, died down activity would increase, and the wine market would soon shore up. In the world we live in, with low (or negative) interest rates and where investors buy bonds for capital appreciation and equities for income, wine will make a lot of sense again soon. There needs to be a certain amount of unravelling of these issues first, however.
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