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27/04/2017

Investment Update - Full Q1 Report

by The Investment Team

2017 is the year of LiveTrade and we’re encouraging everyone to go and have a look at the screen, to see how it works and what the opportunities for trading are. More and more of you are doing so and in fact, we’ve had a growing number of users month-by-month through 2017 and April looks to be the best month yet. So make sure you’re not missing out on the action.

If you needed some impetus to get trading, here’s the introduction to our 2017 Q1 Market Report (you can find the full document here).

·         Q1 showed strong turnover, diverse demand and modestly increasing prices
·         BI total turnover up over 20% YOY
·         LiveTrade Index up just 1% - but turnover of LiveTrade wines up 50% YOY
·         Bordeaux sales stable at 55% of total turnover by value
·         Asia demand grows but global picture remains very stable
·         Lafite continues to lead but Cheval Blanc a star performer

Q1 2017 was an important period which bridged the rumbustious and surprising success story that was 2016 with the developing high expectations of the Spring En Primeur season. Typically the key quarter of the year for export-orientated merchants, demand associated with Chinese New Year makes it the largest event in the commercial calendar. As such it is a good time to gauge the health of the fine wine market and the signs are overwhelmingly positive with strong turnover, diverse demand and modestly increasing prices. As we will see below, the positivity is reflected in the numbers but at least as important is the sense of confidence that suffuses the market currently and which encourages merchants and consumers alike to hold stock and take advantage of opportunities.

In contrast to a year previous Q1 2017 was a period of limited price increases – the BI LiveTrade Index nudged up just 1% - but of very strong activity: led by the LiveTrade wines BI’s total turnover stepped up over 20% on the year previous. Indeed the LT component of sales was up over 50% year on year as the better part of GBP9m of sales were recorded through the screen. LT as a percentage of total turnover (aided in no small part by the expansion of the components to over 400 wines with live bid/offer spreads) jumped by 25%.

Typically such a significant step change in the demand profile would be accompanied by some imbalances, with perhaps one region dominating sales, or a qualitative shift in the make-up of sales; but interestingly that was not the case here, although there was a steep up-tick in the average selling price per bottle to over GBP160. The geographic breakdown remains stable with some 55% of sales by value attributable to Bordeaux, followed by 17 for Burgundy and 11% for Champagne. As noted previously, this is a division that speaks to ‘real’ consumption-led demand. It certainly stands in stark contrast to the 2010-11 speculative surge which saw traded-Bordeaux dominating, and, as such, built up the inventory and pricing problems that took many years to unwind. Regional sales were also very stable, with a limited notch up in sales to Asia, indicating that buying confidence is far from just an Eastern phenomenon.

Download the full report, and see our previous Market Analysis pieces, here.