Liv-ex Power 100 list - What changed from 2018 to 2019?
In January this year, Liv-ex has published the 14th edition of the Power 100 – the annual list of the most powerful brands in the fine wine market in 2019. Armand Rousseau topped this list for the first time, but is no newcomer: it was ranked No. 7 in 2018 and No. 8 in 2017. Particularly with Burgundy, that consistency is not typical of the Liv-ex Power 100 list. Recent years’ results have suggested that the interests of market participants have spread from DRC, which traditionally dominate the Burgundy trading market, to other well-respected producers. This year, Burgundy has made its presence truly felt in the wine investment market, with 13 new entrants (out of 18 in total) from the region being added to this list, indicating a widening of interest beyond the iconic producers.
Apart from price performance, trading activity on the secondary market is also considered an important factor when determining producers’ growth potential. Among the top 3 wines on this year’s Power 100 list, we noticed that the biggest increase, compared to 2018, can be seen in the number of unique wines traded on Liv-ex from Armand Rousseau, up from 46 to 146 – an impressive 217% (Exhibit 5). In 2010, 68% of the wines that traded on Liv-ex were from Bordeaux, they now represent only 37% of trade and wines from Burgundy and other important regions are catching up 1. In particular, the Burgundy offering has risen significantly, with its number of individual wines trading on Liv-ex standing at 1580 by the end of 2018, jumping from 248 in 2010.
Exhibit 5 Armand Rousseau has seen the biggest rise on numbers of wines trading on Liv-ex
Exports of Burgundy exceeded 1 billion EUR for the first time in 2019, according to the Drinks Business. Hong Kong and Japan have seen good growth (measured by value), indicating growing demand for top Premier and Grand-Cru wines from those markets 2.
CW retained its overweight stance on Burgundy for 2020, with a special focus on second tier and up-and-coming producers. Last year, prices for top-Burgundies were growing at a slower pace than a year ago. At the same time, second tier producers and up-and-coming producers have shown potential.
To demonstrate this shift in landscape further, we have compared the relative value, as measured by yearly increase in value, of Liv-ex’s top-performing Burgundies in 2019. As shown in Exhibit 3, except for Armand Rousseau and Comte Liger Belair, which boast the highest priced wines on the list, we have witnessed that most of the excess returns of the region came from Burgundies whose average trade price on Liv-ex are under £10,000 per case of 12 bottles (Exhibit 6). All told, in a broadening wine market, looking beyond iconic producers and being selective on second-tier producers in Burgundy is the right strategy to adopt.
Exhibit 6 Best-performing Burgundies on the Power 100 list
Cult Wines Investment Team discuss the current price disparity created by top tier Burgundy producers