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In 2022, the Burgundy 150 tracked by Liv-Ex gained 27% while Champagne prices popped 22% higher, but recession fears are spilling into the fine wine and whisky markets heading into 2023.For the pair of breakout French regions, trading performance throughout the second and third quarters of 2022 offered hints of a slowdown, while auction prices and secondary market returns in Q4 provided confirmation.
At the close of 2022, the bid-to-offer ratio for blue-chip Burgundy wines on Liv-Ex settled near its lowest level in more than two years as the pool of buyers willing to pay inflated prices has seemingly started to dry up. Meanwhile, the Champagne 50 Index, which soared 72% in the last two years as Champagne became the third most-traded region in 2022, delivered its worst month of the year in November as the value slipped -2.5%. Estates within the United States are also facing price pressure as economic uncertainty continues to cast clouds on even the most prominent producers. In April, the lowest price paid at auction for a single bottle of 2010 Screaming Eagle Cabernet Sauvignon was $4,357. In November, the average price paid per bottle across three separate auctions for the 2010 vintage was $3,561.Another American-based producer, the Dominus Estate, has also experienced a sharp decline in valuations: the average price per bottle for both their 2013 and 2015 vintages dropped more than -22% between Q1 and Q4. Whisky hasn't been immune to the market softness experienced across the fine and rare liquid asset market. Between January 2020 and May 2022, the Rare Whisky Icon 100 Index gained 64%, as leading distilleries like Port Ellen and Bowmore realized 2-3x multiples for their 25-40 year productions. After a relentless surge in prices pushed the index to its highest level ever by June 2022, valuations dropped consistently over the second half of the year, and the index posted a -6% return in Q4. Even the most acclaimed distilleries experienced challenges, as Rare Whisky 101's Macallan Index slipped 4% over the last three months.
If you followed the wine and whisky investment market over the past three years and are now watching as returns turn negative, you might be thinking, "it's about time." From COVID-19 and China's zero-COVID policy to US-backed tariffs and a sinking stock market, wine and whisky faced hurdle after hurdle yet managed to persevere with record-breaking sales and never-before-seen rates of appreciation. Even with the declines, prices for blue-chip wine and whisky investments sit well above their pre-COVID valuations, and it would take a significant drawdown to recede below 2021 levels. That said, with growing economic uncertainty and a noticeable slowdown in both auctions and trade markets, 2023 will test asset classes that have experienced little but smooth sailing and calm seas until recently.
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