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1、MARKET OUTLOOK 2022 CONDITIONS SUPPORT ONWARD GROWTH AFTER SIZZLING CONTENTSFINE WINE OUTLOOK 2022 3THEME 1-FINANCIAL MARKET UNCERTAINTY 4THEME 2-IMPACTS FROM CLIMATE CHANGE 5THEME 3-THE IMPORTANCE OF BEING SELECTIVE 6REGIONAL OUTLOOKS 7CULT WINES|WINEINVESTMENT.COM3FINE WINE OUTLOOK 2022 Fine wine
2、can continue to post healthy performance and carry over a fantastic 2021 campaign into 2022.Economic growth and a deepening supply-demand imbalance point to ongoing price appreciation.The pace of the fine wine rally could moderate,but it should still offer an attractive source of stability and healt
3、hy real returns amid a shifting inflation and macro policy backdrop.Selectivity is key,especially in Champagne and Burgundy where top names posted sky-high returns in 2021.These wines still form strong long-term investment options,but select wines from Bordeaux and Italy and some up-and-coming regio
4、ns and producers now offer attractive relative value.AN ENCORE TO FINE WINES STRONG AND STABLE 2021?Our outlook from a year ago noted fine wines greater growth potential in 2021,and the market did not disappoint.The Liv-ex 1000 index,the widest measure of the market,gained 16.51%through the end of N
5、ovember as the recovery that began in 2020 accelerated.Fine wine posted positive returns in each month,displaying more stability than equity and government bond markets which wobbled at times amid inflation,monetary policy uncertainty,and the ongoing pandemic.We think fine wine holds plenty more per
6、formance potential as we head into 2022.Historically,fine wines growth periods have lasted much longer than the current rally(see Figure 1).Top name Burgundy and Champagne wines posted massive gains in 2021,but the market also diversified,opening the door for other regions and up-and-coming producer
7、s to carry the baton in the year ahead.5003003504004502003 20042005200620072008 200920000192020Index level rebased at 100 on 31 Dec 2003Covid-19 PandemicWine Price Bubble CorrectionGlobal Financial Crisis47 months31 months36 months19 months and counting.FI
8、GURE 1 Current rally has room to runGrowth periods of Liv-ex 1000 index(through end Nov)Source:Pricing data from Liv-ex as of 30 November 2021.FINE WINE OUTLOOK 2022CULT WINES|WINEINVESTMENT.COM4MARKET CONDITIONS FAVOUR HIGHER PRICES The economy is in much better shape than a year ago.Although the n
9、ew omicron variant provides a reminder that the pandemic is far from over,most economies can hopefully avoid extended shutdowns as vaccine rollouts continue,keeping the recovery in place.Within the fine wine market,a supply-demand imbalance should drive price appreciation into 2022.On the demand sid
10、e,reopening hospitality sectors and high savings rates have sought spending outlets in recent months.Although this pent-up demand will gradually moderate,we dont except a sharp drop as economic growth remains healthy.On the supply side,expectations of lower volumes hitting the market in upcoming vin
11、tages is fuelling the imbalance.Here,we address these points in more details as part of three core themes that will drive the fine wine market in the year ahead:a)the shifting financial market backdrop;b)expectations of lower wine supply;c)market expansion to new producers and regions.THEME 1-FINANC
12、IAL MARKET UNCERTAINTY Fine wine forms important diversifier Despite the economic recovery,financial markets are entering a new period of uncertainty,and we expect to see more variable returns across asset classes and sectors in the year ahead.However,this could boost the appeal for investors to div
13、ersify into alternative assets such as fine wine.Even if fine wines absolute rate of return moderates,its relative performance to other assets could improve.Fine wines track record of performing in different macro backdrops is why we think its appeal as a safe place to park cash will remain strong d
14、uring the current uncertainty.Inflation in most major economies is higher than at any point since the global financial crisis over a decade ago and recently hit a 31-year high in the US.Fine wine can provide an excellent inflation hedge because,as a collectible and physical asset,its prices have his
15、torically been driven by internal market factors.Fine wines intrinsic supply and demand imbalance have enabled it to outperform long term inflation rates significantly.THEME 1-FINANCIAL MARKET UNCERTAINTYFIGURE 2 Outpacing inflationLiv-ex 1000 vs OECDs CPI index (G-20 economies)since 2004OECD G20 CP
16、I IndexLiv-ex 1000 Index03003504004502004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Oct-21Index ValueSource:Liv-ex,OECD.org as of 31 Oct 2021CULT WINES|WINEINVESTMENT.COM5THEME 2-IMPACTS FROM CLIMATE CHANGEFine wine also reduces the need to guess
17、 the direction of central bank policy,which is important as the US Federal Reserve and other central banks are planning to rein in the massive stimulus measures in place since early in the pandemic.This should send bond yields higher(yields move in opposite direction as prices)and could destabilise
18、some sectors of the stock market as valuations are sky-high in many places.Fine wine has also benefitted from the global stimulus,and demand will likely normalise over the long term as the stimulus is withdrawn.However,demand should remain strong amid the improved economy.As a real asset,fine wine h
19、as proven relatively immune to swings in macro policy.THEME 2 IMPACTS FROM CLIMATE CHANGELower production levels add to market imbalanceClimate change and extreme weather is deepening the supply-demand imbalance.While warmer average temperatures can benefit some cooler climate regions by helping gra
20、pes ripen consistently,unusual weather is also disrupting production and threatening quality in some places.Investors and wine collectors will need to increasingly consider the market impacts of weather disruption.A dramatic example of this came in spring 2021 when frosts across France and elsewhere
21、 in Europe came after budburst on the vines.Damp,humid weather and other irregularities have also contributed to the forecasts for lower supply for the 2020 and 2021 vintages.France,by far the largest source of investment-grade fine wine,could see its 2021 output drop by 22%-27%versus the average ov
22、er the previous five years1.Burgundy levels could fall by 50%compared to five-year averages.Italy,too,expects a lower output.Elsewhere,wildfires in California could cause many leading estates to not release a 2021 vintage due to smoke damage.0054.849.2201847.542.2201949.146.72020(provisio
23、nal)44.534.22021(provisional)Wine production volume,mhlFranceItalyFIGURE 3 Lower volumes on the horizon Annual wine production volumes in France and Italy (millions of hectolitres-mhl)Source:OIV First Estimates 4 Nov 2021,International Organisation of Vine and Wine1Source:Agreste as reported by http
24、s:/www.devizu.news/vin-production-2021/CULT WINES|WINEINVESTMENT.COM6THEME 3-THE IMPORTANCE OF BEING SELECTIVEAnticipation of lower volumes during next years 2020 Burgundy and 2021 Bordeaux en primeur campaigns is already creating a more competitive landscape for both new releases and physical back
25、vintages.If the cooler 2021 growing season also hurts quality in some places,expect the price pressure among select back vintages to increase.THEME 3-THE IMPORTANCE OF BEING SELECTIVEMaturing market strengthens fine wines foundations Selectivity within the fine wine market will take on greater impor
26、tance.Many wines posted towering growth rates in 2021 that cannot sustain for the long term.This does not mean we expect prices to decline but just that certain producers and wines will now offer better relative value than others.Although selectivity can be difficult amid the fierce competition,espe
27、cially in red-hot Burgundy,we are confident looking at the whole market can reveal many growth opportunities.For example,finding undervalued physical back vintages will likely be central to generating alpha for investors.Cult Wine Investment has long stressed the potential of up-and-coming producers
28、 and wine regions.Although big returns in 2021 came from top Burgundy and Champagne producers,we also saw increased diversification with Liv-ex reporting a record number of individual wines(10,798)traded on its platform by the end of October,already surpassing the previous record from 2020.Italy and
29、 the US saw their trade shares rise in 2021(Figure 4).We also expect more top wines from emerging regions such as Spain,South America,Germany and even English sparkling wine to gain traction with global fine wine collectors in the years ahead.With more choice comes more opportunity,but these less es
30、tablished regions and wines can be more volatile.Therefore,we approach these areas of the market with a research-based approach taking into account wine quality,relative value,demand trends and other factors on a wine-by-wine basis.FIGURE 4 Shifting regional trade share Average 2021 monthly trade sh
31、are vs 2018-2020 average 10.0%20.0%30.0%40.0%50.0%60.0%BordeauxBurgundyRhoneChampagneItalyUSThree year average(2018-2020)Average trade share YTDEmergingmarketsSource:Liv-ex as of 31 October 2021.CULT WINES|WINEINVESTMENT.COM7REGIONAL OUTLOOK Bordeaux remains a cornerstone of fine wine investing.The
32、upcoming 2021 EP will again form a key focal point.Difficult 2021 growing season could hurt volumes,meaning EP prices again could come higher than buyers would like.Select back vintages and producers in Cult Wine Investments Quality-Price-Ratio Competition will be fierce for 2020 vintage EP early ne
33、xt year.Getting in early while also looking at physical back vintages is essential.Supply-demand imbalance stems from global buyers looking to get in on red-hot market alongside expectations of lower supply of future vintages.The spread between these top-echelon producers and Tier 2/Up-and-coming wi
34、nes widened in 2021.We think some Tier 2/Up-and-coming Burgundy wines could catch up in 2022.category offer some of the most exciting growth opportunities.Bordeauxs trade share dropped below 50%for the first time in 2020 and averaged 39.0%through November 2021.This decline stems from the rise of oth
35、er regions and producers rather than any material decline in Bordeauxs appeal.Iconic and Tier 1 Burgundy wines posted some of the highest returns in all fine wine in 2021.While names like Leroy and Domaine de la Romane Conti remain some of the safest long-term investments,their short-term performanc
36、e could ease.REGIONAL OUTLOOKSBordeauxBordeaux 500 index YTD 2021 Return:9.24%2022 Cult Wine Investment outlookBurgundyBurgundy 150 index YTD 2021 Return:27.18%2022 Cult Wine Investment outlookCult Wines Producer CategoryAverage Return%through Q3Iconic28.6%Tier 115.5%Tier 23.8%Up-and-coming7.9%CULT
37、WINES|WINEINVESTMENT.COM8REGIONAL OUTLOOKFIGURE 5 The scarcity of Champagne Number of offers per month of select leading Champagnes0500025003000-27.9%Dec-20Jan-21Feb-21Mar-21Apr-21May-21Jun-21Jul-21Aug-21Sep-21Oct-21Number of offers on Wine SearcherSalon,Le MesnilPol Roger,Sir Winston Chu
38、rchillMot&Chandon,Dom PerignonLouis Roederer,CristalTaittinger,Comtes de ChampagneBollinger,La Grande AnneSource:Wine Searcher as of 30 November 2021 Champagnes status as a core investment region has arrived,meaning its long-term outlook remains bright following a stellar run.Recent vintage releases
39、 have come in lower volumes,increasing the demand and scarcity of back vintages.However,with YTD returns exceeding 33%,the pace of the rally should moderate.Very strong post-pandemic demand and availability will likely normalise over the course of 2022.Champagne Champagne 50 index YTD 2021 Return:33
40、.78%2022 Cult Wine Investment outlookCULT WINES|WINEINVESTMENT.COM9 Rhones relative value vs top-level Burgundy producers has improved.Many of the regions wines could form a prominent source of alpha in 2022.Rhone Rhone 100 index YTD 2021 Return:12.49%2022 Cult Wine Investment outlook Italy has esta
41、blished itself as a core fine wine investment region,led by Tuscany and Piedmont wines.Increasing interest from Asia has helped firm Italys status as a key global region.Italy saw a 15.4%average monthly trade share in 2021(end of Nov),according to Liv-ex data.After a jump in 2020,Italy maintained it
42、s higher trade share even after the repeal of US tariffs in March,from which Italy enjoyed an exemption.Liv-ex reported a higher number of individual Italian wines traded so far in 2021,which is a good sign for onward growth potential.Italy Italy 100 index YTD 2021 Return:11.52%2022 Cult Wine Invest
43、ment outlook Rhone remains a consistent source of healthy gains even if it has been overshadowed by the sky-high pace of price appreciation in other French regions.Chile continues to offer higher quality wines and represents an exciting region for the long-term.Up-and-coming producers in Spain,such
44、as Remirez de Ganuza and Telmo Rodriguez,are boosting the growth potential of the regional market.Australias trade share has declined under the burden of Chinese import tariffs.While tariffs remain an obstacle heading into 2022,the situation could create relative value opportunities over the long te
45、rm in certain Australian wines.Rest of WorldRoW60 index YTD 2021 Return:19.02%2022 Cult Wine Investment outlook California and other Rest of World wines hold many long-term growth opportunities,although will likely see more volatility of returns than more established regions as liquidity is typicall
46、y lower.California boasted more perfect 100-point critic scores in 2021 than other regions.This,alongside cult status and low production volumes of top producers will keep prices elevated.Damage from wildfires and smoke in recent years is further hurting volumes,adding price pressure on physical bac
47、k vintages.REGIONAL OUTLOOKUK OFFICEThe Clockwork Building,45 Beavor Lane,London W6 9ART:+44(0)207 1000 950 E:SINGAPORE OFFICE9 Battery Road,#09-01 MYP Centre,Singapore 049910T:+65 6909 8170 E:HONG KONG OFFICE1001B 2,Kinwick Centre,32 Hollywood Road,Central,Hong KongT:+852 2818 0899 E:Co.Reg No.6350591US OFFICESuite 1116,200 Park Avenue SouthNew York,NY,10003 T:+(914)491 8417 E:CANADA OFFICE110 Cumberland StreetSuite 333Toronto,Ontario,M5R 3V5T:1 855 808 CULT(2858)E:CHINA OFFICE2441 CITIC Square,1168 Nanjing West Road,Shanghai 200041T:+86 21 6085 3559 E: