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 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 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.”
This becomes more significant over the next few months as new wines are released — 2015 Burgundy in January next year and 2016 Bordeaux in April — and sterling nurses a loss of 10 per cent from its pre-referendum price.
Both wines seem strong, reports Tom Cave of Berry Bros & Rudd. "Red Burgundy in particular is being talked about as one of those once-a-decade superstar years for which true Burgundy lovers will pay plenty. Although early reports suggest prices will be high . . . in a vintage as fine as this, wines from all levels will be delicious."
Mr Fowler suggests that these Burgundy and Bordeaux sales are important to watch. "If the quality is there and it sells [to consumers], then it can give the market a kick-start," he says. "If it doesn't sell, though, then it can put us back in said doldrums."
Toby Herbertson, fine wine buyer at merchants Goedhuis & Co, agrees. For him, the 2016 Bordeaux en primeur (wine futures) campaign will be the bellwether. "Bordeaux takes up the majority of the market . . . and a bad en primeur campaign can really put the mockers on things."
It is not a scene of total despair for wine merchants. According to Jamie Graham of Brunswick, a case of 12 bottles of 2005 Chateau Lafite Rothschild that was selling in January 2016 for about £3,600 is now worth around £4,650, while a case of 1996 Chateau Mouton Rothschild that was £5,800 in January is now £8,800.
Mr Herbertson is divided between fear and hope. "Long term, who knows what's going to happen, especially if in a post-Brexit world we find trade tariffs imposed?
"But we shouldn't be too alarmed. Sterling is going up and there's still a reasonable amount of stock."