As sterling tumbled on June 24, following the UK’s vote to leave the EU, anything priced in pounds suddenly became much cheaper for international buyers — and wine was no exception. (It is traded in pounds even though it is mostly produced in France.)
Jamie Graham of merchants Brunswick Fine Wines & Spirits reports that callers on that morning from Asia and the US were desperately keen to buy wine and even offered to pay up front to take advantage of the plummeting UK currency. Buyers using euros effectively enjoyed a 12 per cent discount and those using dollars 15 per cent.
“This high demand for fine wines and spirits continued throughout the summer and for the next few weeks beyond,” says Mr Graham. “The initial jump has now died away noticeably, although we are still seeing some interest across all sectors, especially at the very top end.”
Of course, a cheap pound is not good news for UK companies trying to buy abroad. “Sterling fell through the floor after Brexit,” says Mr Graham. “But since it has partially recovered against the euro, it means it’s easier for UK merchants to restock. In addition, sterling remains weak against the US dollar and so wine lovers in the US and in Hong Kong, whose dollar is pegged to that of the US, can still find relative value in the UK if they’re canny.” Mr Graham has visited Hong Kong since the referendum to meet wealthy potential customers.
Amanda Skinner, director of wine merchant Private Cellar, reports strong sales abroad. “After demand from the Far East came to a stuttering halt in mid-2011, there was a lot of overpriced stock out there,” she says. “It has taken some time to sell through the system. Clearly by June 2016, that stock was sold and they were ready to restock.”
The mid-2011 fall came after a decade of Asian-led demand. The Liv-ex index of 100 fine wines rose 265 per cent between December 2003 and its peak in June 2011, when the release of a poor Bordeaux vintage and Chinese monetary tightening took effect. China’s crackdown launched in late 2012 on corrupt “gifting”, which often involved expensive bottles of wine, kept the index subdued.
Private Cellar says its overseas trade sales remain strong. With demand not just for first growths but across the board — mid-range Bordeaux, Burgundy, Rhône and Italy — Ms Skinner thinks that it is bona fide drinkers and not just investors who are buying.
As in other industries, from food to watches, manufacturers will reset prices to match sterling’s new level, says Joss Fowler of merchants Renaissance Vintners. “We’re more currency traders than wine merchants now,” he says. “One could argue that the fine wine market has been in the doldrums for a few years and that this is the beginning of a recovery. This may well be the case but the past few months have been about currency and not much else.”