How to value fine wine
Special Report
Executive Summary
This report explores the habits and opinions of fine wine buyers worldwide, and some of the challenges they face. It draws upon an exclusive new survey, conducted by Liv-ex, amongst our global merchant membership. It examines the relative strengths and weaknesses of their preferred buying channels and the increasingly important role of technology in the trade.
- The Liv-ex 50 and Liv-ex 100 declined in July, demonstrating that the pressures of the wider global economic outlook are starting to weigh on fine wine to an extent.
- Champagne’s trade share by value hit a record high of 16.7% of the total market.
- Unlike the other estates in the Rest of the World 60 index, none of Vega Sicilia ‘Unico’ wines dropped in value last month.
- In a Bordeaux 2005 retrospective, Lisa Perrotti-Brown MW awarded seven wines 100 points.
- The secondary market for Australian wine has continued to shrink as export volumes fall.
- The most accessible entry points into fine wine, Sauternes and Port, have seen the smallest changes to their average price since 2019 and remain under £1,000 per case on average.
Wine valuation in the 21st century
Surging prices for fine and rare wines drove the auction house Sotheby’s to report its highest year of sales in 2021, while the annual Hospices de Beaune auction broke records with a barrel of wine selling for €800,000. Headline-grabbing news like this push fine wine collecting into the spotlight, and often prompts questions about how to accurately price wine – particularly when it comes to expensive bottles.
The reality is that the vast majority of fine wine – collectable bottles that are built to age – is easy to value. This report outlines the factors that influence the price of fine wine, and how wine professionals can arrive at accurate valuations efficiently.
Why fine wine can be valued accurately
Fine wine is unique among alternative asset classes like art and classic cars. Every piece of art, for example, is different. It can take decades for the same piece to reappear on the market, making valuation challenging despite the emergence of art indices.
Wine is different. Each year, producers make many bottles of the same wine. Some, like many top Bordeaux, are made in significant quantities. Even the smallest producers will make several hundred cases of the same wine each year. As a result, the same products are often available simultaneously from retailers around the world and change hands frequently.
This makes it much easier to arrive at accurate valuations for fine wine than art. The chart shows trading activity for Château Lafite Rothschild 2006 over five years. The grey markers represent trades of the wine on Liv-ex, the global marketplace for the wine trade. The red line is its Market Price, which is widely used for valuations. As you can see, it tracks transaction prices very closely. While fine wine prices are less volatile than those of most traditional assets, frequent changes mean it is important to follow the market and have a reliable source of pricing information at any given time. For instance, the price of Lafite Rothschild 2006 changed on average 8 times per day in 2021.
Lafite Rothschild, 2006
The value of Liv-ex’s Market Price data
The Liv-ex Market Price is the best listed price for a wine in the secondary market. The independent data behind it comes directly from the market and is only available on Liv-ex. Liv-ex obtains list prices from a large group of trusted international merchants amongst its 6+ members. Preference is given to prices from stockholders – a guarantee that the wine is available – over brokers, to cases over single bottles, and to recent prices over older prices.
The algorithm behind the Liv-ex Market Price runs every day, evaluating a pool of over 125 million data points to determine the most accurate prices for around 326,000 wines. The price is standardised to 12x75cl.
Valuations using Liv-ex’s Market Price
Leading merchants worldwide use the Market Price to provide independent valuations for clients. Many also use it to help inform purchase decisions and to decide on the correct prices for sales. It is the price that a buyer can expect to pay for a wine on the secondary market.
Since the Liv-ex Market Price is based on listed prices, it tells you the cost of replacement for a case. If you are a private collector, you need to account for the commission when selling wine to a merchant. You might expect to receive offers 10-15% below Market Price for your wine, depending on its condition. Premiums may be offered for older wines with exceptional provenance.
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Shape the fine wine market of the future
Buying wine direct from the producer is the oldest method, upon which the wine trade and the rest of the supply chain is based. As our survey reveals, this primary market remains the most popular option amongst buyers for two main reasons: guaranteed provenance and the highest potential profit margin. Cutting the middleman out of the three tier-system (producer, distributor, buyer) and going direct – in states and countries where it is legal – often means paying less. Most distributors work on a 28 to 30% profit margin depending on buying power and relationships with the producers.
Most of those surveyed agree that this channel presents them with the ability to discuss price and terms whilst involving less bureaucracy. A buyer from Advisorin, a wine merchant based in Italy, told us that they “like sourcing wines through the producer because of the personal relationship, economic advantages and special treatment”. When asked about their top tip for sourcing wine efficiently, they said:
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