The region’s trade share slumped to an historic low of 37.7% in 2021 after failing to keep pace with the broader market.
It was the first time Bordeaux’s market share had ever fallen below 40%. At the time of writing, it has slipped to 32%, according to Liv-ex.
The company divides its main index into a series of sub-indices. Over the past year, the Bordeaux sub-index increased by a modest 11.5%, compared to 43.8% for Burgundy and 51.2% for Champagne.
The main challenger to Bordeaux’s throne is Burgundy. It has surpassed Bordeaux in terms of its price performance and the number of different wines traded over the past year.
In recent weeks, the region has taken a similar share of the secondary market, and it even surpassed Bordeaux on certain occasions. For example, in the week to 7 April, Burgundy captured 28.3% of the market, compared to just 25.3% for Bordeaux.
Liv-ex noted that Bordeaux remains the most prominent player in the fine market, meaning it is often the first to bear the brunt of economic and political headwinds. It has previously been buffeted by Covid-19, Brexit and crackdowns on luxury gift-giving in China, and it has now significantly underperformed the broader market throughout Russia’s invasion of Ukraine.
A comparison to Burgundy may be perceived as unfair, as the regions yield stylistically different wines. Liv-ex polled merchants to discover which regions were eating into Bordeaux’s market share, and most named Tuscany and California.
The market price for a case of Super Tuscans has increased by 24% over the past year, while the price for a case of top wines within the California 50 sub-index has increased by 25%. That compares to just 12% for the top wines of Bordeaux.
The Super Tuscans attract consistent levels of demand, and they offer a lower point of entry into the fine market than the Bordeaux First Growths, which could explain their greater return on investment.
The number of wines from Tuscany and California trading on the secondary market has steadily increased in recent years, whereas the number of unique Bordeaux wines has decreased by 0.8%.
Bordeaux benefits from removal of “Trump tax”
On a brighter note, Bordeaux has benefited from the United States government’s decision to remove a 25% tax on French wines last year. Vignerons referred to it as the “Trump tax”, which formed part of an ongoing transatlantic tariff war stemming from a dispute over subsidies for Airbus and Boeing.
The USA now accounts for 31% of demand for Bordeaux wines on the secondary market. Continental Europe leads the way with 35%. The market was once UK-led, but British fine wine buyers now account for only 27% of demand, while Asia has slipped to just 7% over the past year.
Liv-ex added that sentiment around en primeur remains lukewarm due to underwhelming returns on investment in recent years. For example, wines from the storied 2010 vintage remain 2% below their en primeur release prices on average, while 2017 wines are still 7% cheaper than they were on release.
The 2021 vintage was the coolest and the second wettest of the past decade, according to data provided by Saturnalia. This should lead to ‘a heterogenous vintage with large gaps in quality between appellations and estates’, according to the report.
Critics are effusive in their praise of the 2019 vintage, but Liv-ex wonders whether they will be so gushing when reviewing the 2021 wines.
‘If it is not a truly ‘great’ vintage, then it does not deserve to be hoarded for years in Bordeaux and eked out incrementally at prices collectors are unwilling to pay,’ concludes the report. ‘The 2019 vintage proved that a well-priced set of wines can find a market, even in difficult times.
‘The uncertainty of a pandemic may be (largely) behind us, but the current headwinds of rising inflation, rising taxes and rising interest rates are rattling the mainstream financial markets and no doubt the wallets of collectors.
‘Here then is another chance to energise the market and inject much needed capital into the distribution network. These wines should be priced to get this vintage out of Bordeaux and into cellars to be enjoyed as the truly great vintages come of age.’