What’s driving the uptick in the global fine wine market?

Hello and welcome to Intelligence Talks from Knight Frank. The podcast that investigates the most important trends shaping the world of real estate. I'm Liam Bailey, global head of research at Knight Frank and I'm editor of the wealth report. In this edition, the final one of 2025, we're diving into the world of fine wine. Now you might be wondering why an earth is a property podcast talking about wine? Well the answer is that for many years the wealth report has tracked the performance of luxury collectibles to understand where global wealth is being invested and fine wine is massively part of that story. And with Knight Frank expanding our global vineyard investment service this year, the performance of fine wine now is a direct read through to property investment decisions for many of our clients. So to help us navigate this rapidly changing investment sector, I'm really pleased to be joined by Tom Birchfield, head of market intelligence at LiveEx. Tom, welcome on. Thank you very much. Delighted to be here. Actually before we dive in Tom, do you want to just give us just a one minute on LiveEx, what your focus is and where you are, where you sit in the industry? Sure, so LiveEx is the exchange for fine wine data and insight. We started 25 years ago with the mission of making the fine wine market more transparent, efficient and safe. We have 550 members, businesses from across the globe from a variety of different markets who come together to trade efficiently. They also use our data to inform their long and short term strategies. So over 25 years we've built up a lot of transactional data and we are now sort of helping our customers use that data to inform their, not just their trading decisions but their strategies of LiveEx. Well, great to have you on. I'm just thinking actually with Christmas round the corner, is this your busy peer? Are you kind of winding down in the office right now? It's well, we're recording on a Monday morning and it seems like much of the wine traders actually heading off on their Christmas holidays. We see quite a very busy sort of build up towards December and then yes, I think the fine wine trade does like a good break over Christmas. Glad that we can get you before you for you this year. So just before we go into the questions, I was very lucky. I visited Chateau Lynch Barge in Bordeaux last year and it's the first time I've done a winery tour and it was quite interesting because I saw this kind of massive contrast between the sort of state-of-the-art winery that the new one they built, all concrete glass steel sort of feels like a laboratory. And alongside it is that it was the old sort of brick and timber winery with its kind of massive wooden vats. It's like a barn basically. And I said to the team there, I said you must be making a completely different wine to the one you were producing in the 1970s. And they said no, it's the same wine, the same process. We've just got much more control. So basically in their words, it was much harder to make a bad vintage now, even though there are risks still there. And it kind of raises an interesting question, is if quality is rising all the time, is this a golden age for wine drinkers? There's a very strong argument to say, it's a very, it's a golden age for wine drinkers. I think what you're raising there is actually really interesting question, the one that we've been discussing a lot and sort of reporting on a lot actually this year is sort of, I think there has been, I guess, a fragmentation between producers and you mentioned Lynch-Barge, you're talking about, towards the very top of the pyramid, fragmentation between producers who have the means to essentially mitigate poor ventures from ones that can. While there's massive technological improvements, making it easier to do it, it's still relatively costly to do so. And whether it actually sort of makes sense financially or economically to do so is something that we've sort of been questioning, particularly with Bordeaux. But yeah, to answer your question, this is a great time to be a drinker, collector, passionate about wine. There's more regions making great wine, more accessibility, the market is broader than it's ever been. So yeah, not getting too deep into the details, but as a drinker, it's a great time. Now, before we go on to the sort of positives and think about where we should be spending our money, it's sort of just tackle the elephant in the room really, which is what my reading of this is that more people globally are deciding not to drink, and those that are drinking are drinking less, is that a fair summary of what's hitting the wine sector? So, I think probably need to differentiate here between sort of the global wine industry, and drinks industry as a whole, where yes, there are these sort of pretty fundamental structural problems which are affecting it. The fine wine industry is to some degree sort of safeguarded from that. We're not seeing the same sort of pullback and demand in general. However, it is a question that when we speak to our merchants, merchants that operate on livex, it is a question that they're constantly sort of wrestling with of how do they replace essentially their traditional aging collector with the new one. And it's something that I don't think anyone's really got the answer for right now. We're potentially at the end of a three year downturn. There are signs of recovery, and that downturn has essentially been the result of a massive demand supply imbalance. That's across a variety of different reasons. You've got what has been a relatively subdued agent market, so a lack of demand there. Within the traditional European and UK collectors markets, yeah, you have this problem of an aging collector base. Fine wine is something which, for many sort of classic regions, you think of Bordeaux and Burgundy, it's something that you essentially have to wait 20, 30 years before it's drinking well. So you have this sort of aging collector base who essentially have said we have enough wine to see us through. And to be sort of blunt, we're not seeing that younger generation take up the slack. And then this year, sort of thinking about the market in the US, you have the introduction of tariffs, which again has sort of dampened demand. You can't put it down to one thing. You've got an aging collector base. You've got regions which have sort of essentially withdrawn for the past five years. You've got the US, which has taken a backseat this year. But we are seeing signs actually that some demand is actually re-entering the market, particularly in Europe. And just on that. So thinking about the performance of the market, I mentioned at the beginning that LiveX, you know, UX is a global marketplace, but also data is massively important to what you guys do. So the LiveX 100 for those who don't know, that's regarded really as the industry benchmark in terms of how price movements are happening. I think you're tracking 100 of the most sought after fine wines. Yeah, that's how that works. Yeah. So the LiveX 100 tracks the performance of the 100 most liquid wines on the secondary market. Looks across a variety of regions, but you can think of as essentially blue chip, very liquid wines from Bordeaux, Burgundy, Champagne, Tuscany, Piedmont, a couple from the US. And the performance of that, year to date, it's down to 0.8%. The market peaked in September 2022. And since then, it's down just shy of 30%. I guess what we see across other sort of alternative asset classes is that the previous three years have been pretty tough. However, what we are starting to see is actually perhaps some signs of positivity. The past three months, the LiveX 100 is ticked up. It's best performance in three years. Another said, we're starting to see a bit more of demand and figure re-enter the market, particularly from Europe, a little bit from Asia, which is very, very positive. Just on that, on that erosion of value, you mentioned that 2022 was the kind of high watermark just after COVID. And in terms of that erosion of value, was it Bordeaux and Burgundy that had come off a high, that kind of really helped pull down the index, or was it more broad? It was more broad. So LiveX has been around for 25 years, and we've had our indices for the best part of 25 years. Over that period, there have been various upmarkers and downturns, previously, the downturns have mostly affected Bordeaux. So in 2008, following Lehman Brothers' collapse, 2011, it mostly affected the Bordeaux market. This one, actually what we've seen is that effect has affected a much broader, every wine region has been affected. Going back four years, I guess, to the bull run, it was actually not the Bordeaux market that was benefiting the most. It was prices from Burgundy and Champagne that rose the furthest and have subsequently sort of tumbled the furthest. So it has been across the board. The one region which has sort of defied expectations just repeatedly and consistently has been Tuscany. That's the one region where year to date, so we have the Italy 100 which tracks the performance of Tuscany and Piedmontis wines and Tuscany is again this year is slightly up. So that's one area, one region where we have scenes and positivity. Maybe not an area where people are collecting wine, or you correct me, I might be wrong with you, but I mean, Provence has seen a massive flood of investment in kind of lifestyle vineyards, but people looking to place a lot of money in the kind of the boom that is rosé and kind of summer where actually it's all year drinking really. But is that a market that's sort of also outperformed? It doesn't trade very, very consistently on the secondary market. We see it's very seasonal. We see a significant uptick in volume terms for rosé wines, particularly produced like Tompier over the summer months, but it's not something where we see much trade in general on the secondary market. If we think about what is sort of the definition of fine wine, and you do get sort of ageworthy rosé wines, but in general it is a wine which is typical of the high quality wine that is typical of its place, and that has the ability to improve and increase in value over time. Typically rosé doesn't really improve over time. It's something that tends to be drunk quite soon after release. So in the secondary market we don't see a huge amount of trade for that. And just think about global demands. So you talked about the obviously the impact of tariffs and and so on the global market. But I mean, who moves the dial in terms of demand for fine wine? I'm guessing US is critical. The UK is still probably important, or is it kind of shifted to Asia where the kind of the movement happens? No, I mean, the UK is still, you know, of overwhelmingly sort of the fine wine hub is positioned historically. Well, it has been to some degree sort of eroded. It's important. It still remains absolutely vital. The US is really a buying market. Interestingly with tariffs, the thought behind them was that you increased tariffs on European wine being brought into the US, then perhaps US merchants and US drinkers would then start drinking US wine. You know, that's not the case. Fine wine is not fungible. It's not something that you can replace. It's inherently tied to its place. US buyers over index in terms of their size on the secondary markets. They do have a real important impact on the secondary market or on the fine wine market. What's interesting this year is that when tariffs were introduced on April 2nd, US buyers withdrew and we thought the market looked really, really fragile. You know, this was what two and a half years into a downturn. US buyers last year were the most important buying region in terms of value. Purchase value, 80% of their bids were withdrawn overnight and we thought, okay, you remove that level of demand. What's going to happen and what's interesting is that yes, April saw prices fall. They recorded the greatest losses in a couple of years. But what we've seen is that European buyers this year have really stepped up. Their purchase value is nearly 50%. They've taken up the slack from the US buyers and what we can attribute that to, European buyers tend to buy from European sellers. What we can attribute that to is buyers now seeing value in the market. So it's not the same year on year, but we're seeing European buyers this year are actually adding the positivity. We can attribute much of the sort of recent stability in pricing down to an increase in European demand. The Asian market is an interesting one. They've been subdued for the previous five years really. They've been a massive amount of stockpiling of top end, Bordeaux and Burgundy wines. And essentially what has been needed over there to unlock demand and Asian purchasing is nearly 20% this year. Probably two things. One is prices to full far enough to show value and the other one is just to get through that excess of stock. And what we're seeing this year is Asian buying has ticked up particularly for more liquid categories of sort of burgundy, top end burgundy which is producing very small volumes. It looks like the stock overhang of that has now been got through and now they're actually buying the sort of entering the market again for that. I think the other probably interesting thing is that there's been little to no correlation historically between sort of major asset classes and fine wine. Focusing on Asia this year you know the hang sang is up. It's probably the one area where we are where we might have seen a bit of a sort of closer relationship this year. For example in Hong Kong we're seeing an increase of demand for essentially the most expensive wines. So top end, blue chip burgundy that kind of speaks to wealth creation actually trickling down into the fine wine market. In terms of Asian demand it is Hong Kong more important than mainland China in terms of driving the market. Yes sort of Hong Kong is sort of the main sort of entry point for fine wine. And into the Asian market there's a lot you know a lot of wine that passes from Hong Kong into mainland China either legitimately or not. But yeah Hong Kong is the hub. And we mentioned earlier that the live X100 is obviously it's tracking the most liquid fine wines. You mentioned the right of the outset that actually into this kind of golden age for wine drink because that there is you know that there's more locations as there's more kind of innovation going on in the sector. So is the basket in the live X100 changing and diversifying over time? Yeah so essentially the the makeup of the live X100 tracks the share of trade attributed to any wine region. So if you rewound 15 or so years Bordeaux made up about 80% of the secondary market and that's 80% of the live X100 was Bordeaux wines. That now is about 35%. So the sort of the number of Bordeaux wines that are in the live X100 and sort of you know the impact that they have is is much reduced. It's now being made up then sort of the next regions are our burgundy champagne Tuscany Piedmont and and the US UK not yet I'm afraid delicious wines to drink but not the not the demand in the secondary market just yet. Well actually on that. So just just just turn to vineyards or the implications of the wine market changes on vineyards and producers. So given the fact that as you mentioned Bordeaux prices and price of burgundy wines is down. I mean it's beginning to maybe settle and maybe maybe there's some growth just beginning to come through but that shifting prices over the past through three or four years say three years. How's that affected values of vineyards and then sort of investment decisions by the major shadow? Oh an interesting one. We hear anecdotally lots I think lots of these transactions or lots of these sort of vineyard purchases go through sort of behind closed doors. We've heard that the number of Bordeaux shadow up for sale is I come with is that it's at a very very high level at the moment and the one area where we have heard of a sort of people looking to sell is is from Chinese owners who sort of piled into the market I guess over the past 10 or 15 years and now not seeing the returns and I'm putting yeah putting shadow up for sale. It's an interesting one as well you know we see we hear a lot about in Bordeaux you know producers are being intensifies to rip up vines. This at the moment is not so much affecting the fine sort of fine wine producers but I think what we are seeing is you know that there is increasing pressure across the supply chain to producers. It is interesting you mentioned the the fact that if vineyards are selling you know so it's so much that it's kind of privately done and and actually doesn't really so hit the headlines as it were and actually very bravely or we attempted in the wealth report this year to track the performance of global vineyards and I think we tracked about 20 locations around the world and trying to assess you know what it costs for an average hectare of vineyard land and how that value had changed over time and it isn't as you mentioned it's not an easy exercise. We noted that one location seemed to be outperforming and that was Essex I mean it's not the world's biggest vineyard market right now but in terms of growth in prices it was certainly out there at the top. You mentioned that English wine is not yet in the live X100 but there has been massive investment in the English vineyard scene do you see that as is that peaked or is it more to go? Well I expect there's there's more to go. A lot of champagne houses are have invested in in in land in the south of England quality is generally on the app as well. I would expect continued investment particularly with global warming I mean that's that's the reason isn't it so I think I'm in the exact figure but it's you know the south of south of England and south of the same soils as champagne and the same climate as champagne out in the 80s so with the way things are going it does it does seem to me that they'll be sort of increased in investment into into UK production for sure. You mentioned there's a lot of investment going on globally there's not so you know there's sort of more choice than ever really for a drink as where do you see the kind of the most interesting markets that moment where are people kind of desperate to to to move into or to kind of expand operations. I think in terms of regions which on the app when we see real real growth of demand probably from a low point you'd look at Spain lots of them lots of investment there and lots of you sort of untapped potential I think we also see you know there's quite a lot of investment from sort of burgundy sort of collaborations really between sort of like burgundy producers, bought-out producers who are going to the west coast of the US so California, Oregon and setting up over there we see a fair amount of that those are two regions that spring to buy. So just moving away from vineyards and the producers market let's try and before we finish let's try to squeeze in some more property links we might be I was stretching stretching it's a little bit but so no for producer report earlier this year it was the residents report we were looking at luxury residential development globally and one of the things that definitely came out was a trend for developers to accommodate collections so if you've got wealthy collectors of fine wine classic cars all those sorts of things there's definitely a desire to try and accommodate those those collections and actually kind of display them and interestingly on the on the wine sort of display this is this is probably a shift away from hidden sellers that people you know that guests don't see more towards kind of you know glass fronted displays and so forth in interview in in in department developments I'm just thinking does that shift in how wine is how collections are kind of displayed does that influence the type of wine that's been bought? I would say definitely and and I think there are actually probably some really interesting developments here returning to the Asian market lots of demand or buying of from the Asian market historically has been about buying a specific brand not necessarily not necessarily caring about having a great vintage etc but you just wanted to be able to show that brand and what we're actually seeing now is I don't know if it's a sign of a maturing market but historically Asian markets have by have bought off-ventages so that's the cheaper century point into into a specific producer and they've also bought the second wine so if you think about maybe the most prestigious or famous producer in the world Chattalafit Rothschild they make a second wine called Carroid and this has historically seen a lot of demand from Asia what we're seeing now is actually demand for the second wine is falling and so it's not so much you just want to be able to show that you've got Aila Feet or a Carroid which is the second wine of Lafeet what we expect to continue to happen is actually the Asian market will be buying more focus on buying the good ventages of a specific wine so if you're sort of showing your wine or if you've got a sort of very if you've got a glass fronted cellar in Hong Kong maybe you'll maybe you will see a change from just being able to show the brand to actually be showing okay this is a great vintage of Lafeet so a sort of an indexing away from from brand to actually being able to show the quality and just on that sort of shift in buying patterns I'm just wondering I don't know whether this is this is right but I I had sort of heard that there is an uptick in demand for larger bottles so sort of large and standard magnums do they is that fair do they hold value better than than regular bottles well they definitely age better than smaller bottles and they do command a premium for sure in terms of just because they are producing smaller volumes you don't see as much trade for them but that is definite fair assumption you're going to hold more wealth in a magnum than you would do in two single bottles and then just thinking about the location of buyer so we've talked about the important to the us the UK buyer and and obviously the Hong Kong market still being in a very important is there is there a difference between the type of if you've got serious collectors in each of those markets is there a difference in terms of their kind of preferences when they're when they're pulling collections together yes yes for sure the US market US market has actually driven the sort of the broadening of the market really they have historically over indexed for regions where there's been less demand so you think about regions like the Roan Tuscany Pierdmont and they've slightly under indexed on sort of the classic regions like Bordeaux and Burgundy if you switch over to Asia you sort of see the opposite the overwhelming majority of trade that goes the buying from Asia is for is for Bordeaux and and Burgundy again perhaps linked to that that cache being able to show being able to something that's instantly recognizable UK market is pretty you know tens towards those classic regions I think what's what's interesting is that the European market this year as I said their purchases are up nearly 50% and their purchasing of Tuscan wine is up over 100% and historically the European market has very much particularly the French market obviously is as focused on on Bordeaux and Burgundy so there's there is sort of a fragmentation coming from the European market in terms of what their purchasing as well okay so final question Christmas is is fast approaching what will you be opening on Christmas day or will I be opening Christmas day I will be opening some champagne in the morning I got some Paul Roger sorry not UK sparkling just yet and then Barbara Skoe that's just a personal favourite so for sure is that going with Turkey or I am at I'm with my in-laws this year so that is going with Turkey yeah it should be pretty it should be pretty good but I'll I'll make sure to drink some before and after the turkey yeah well done that sounds perfect and listeners that's it for this week thank you so much again Tom for your great insight and perspective into what's happening in the world of fine wine and the vineyard market pleasure thank you very much so as we heard it's a changing marketplace lots of opportunities globally and perhaps just the hint of a corner being turned in terms of values in both wine and also in terms of vineyards for more analysis you can subscribe to my research note that goes out every Wednesday and Friday please visit the show notes for more details until next time see you again and thank you very much for listening and finally I hope you all have a merry Christmas and a very happy new year perhaps enjoying a bottle of something special