The optimism of fine wines prepares for reality
A new report on the world of fine wines shows surprising optimism in the face of global economic realities.
The global fine wine sector is healthy and will remain so despite the current economic upheaval – at least in its own eyes.
A recently published report suggests that 90% of those polled – all involved in the high end of the global wine industry – were taking a bullish view for next year, even as economists warn of more headwinds for households over the next 12 months. .
The Gérard Basset Global Fine Wine Report 2022 – produced by the Gérard Basset Foundation – surveyed 943 “global players in the fine wine market”, including 56 Masters of Wine, 32 Master Sommeliers, 72 Advanced Sommeliers and 250 WSET diploma holders on the how they predicted the coming year for fine wines and the responses were optimistic; 60% said the outlook was positive, while 30% described it as “very positive”.
Only 4% opted for a negative outlook, while the remaining 6% were neutral.
To be fair to respondents, they were asked about their forecasts at the start of the year, when the global economic outlook was significantly more optimistic than it is now. Respondents were particularly convinced of the overall strength of the fine wine market, the growing demand for fine wines, the increased quality of fine wines consumed around the world, and increasing levels of investment in fine wines. The economic recovery from the disruption caused by Covid has also been a reason for optimism given by many.
Interestingly, the main reasons given for a negative outlook seem more prescient in hindsight. The slow post-Covid economic recovery, unfavorable geopolitical outlook, global warming and rising energy prices were the main reasons given for a negative outlook. All were there, as it turned out.
A story of two markets
However, the report also focuses on the fine wine market and this is a different beast to the broader ‘consumer’ wine market – people who buy supermarket wine will be tightening their belts buying cheaper supermarket wine ; they never bought cases of Masseto anyway, although they might have bought a bottle for a special occasion. How long many people will still be able to enjoy this little madness is uncertain.
The confidence of the fine wine sector in the solidity of its market is solidly founded. Premium wine prices have been performing wildly in secondary markets over the past five or six years, with some (okay, Burgundy) showing outrageous levels of price inflation. There also appears to be a sufficiently sustainable market currently to continue buying these wines, so perhaps the Pollyanna-ish approach to the industry can be forgiven.
However, if there are Pollyannas in the fine wine business, there are more than a few Cassandras in the wider wine industry. In the United States, the world’s largest wine market, the Silicon Valley Bank Industrial Sentiment Index fell sharply this month, from -2.08 last year to -15.76 today . Rabobank suggests a “softening” of the global superpremium market in 2023. Wine Economist blogger Mike Veseth also has a good article pointing out the perils ahead.
Shifting the focus further, JP Morgan CEO Jamie Dimon predicts a US recession next year, while the IMF warns of reduced growth next year. Obviously, this won’t affect everyone equally, but even some of the wealthiest in society are likely to limit their spending.
One interesting thing that emerges from these conflicting opinions is that there is now a clear divide between the wider wine industry and the “fine wine” industry. One side can expect its core market to come under pressure as the cost of living squeeze makes people think much more carefully about their discretionary spending, while the other is betting on a much smaller cohort of wine buyers who are effectively recession proof.
What the coming months of economic and geopolitical turbulence may well show is that the fine wine optimists are right and the world of wine is splitting in two, with a gap likely to widen in the future; that even the “fine” and “consumer” wine markets are no longer part of the same whole.
Or the future might just show that when the prestige rubber hits the road to reality, there might be a spectacular blowout. Watch this place.
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