Credit crunch squeezes
1st December 2008
By James Barter-May -
Due to the credit crunch property and stock market
prices have fallen considerably. Also this week the international
art market appeared to crumble and now sales of wine, are finally
feeling the full effect of the credit crunch, with the biggest fall
in prices for seven years, down 12.4 per cent in October, according
to the Wine index. Although for some time wine sales was supposed to
be a safe haven for investors.
Every modern vintage came under pressure last month, but the most
expensive Bordeaux first growths from 2005 have seen the biggest
fall, with prices collapsing 25 per cent from the peak of the market
The relative large price drop is a mirrored pattern during the
recession of the early 1990s. After the Asian crises of 1997 and
1998, wine prices corrected by 25 to 30 per cent.
In the past, prices have decreased gradually over a period of a
year. However this time they have crashed by 16 per cent in four
months, with two thirds of that fall in October. The volume of wine
sales recorded in October has dropped considerably from the previous
month’s record levels.
Unlike in the housing market, those with cash to spend have been
buying bargains at the heavily reduced prices. It is noted that
Champagne has had an extremely good month, as the rush for bubbles
defied the gloomy economic outlook.
The sales in restaurants i.e. the average bottle spend have fallen
by 40 or 50 per cent over the past six months. It is noted that
sales in supermarkets have risen to about 25 per cent as customers
choose to seek bargains and drink them at home.
For those wondering what their cellar is worth now, there are some
sips of comfort and happiness. The Fine Wine industry is like any
market, it is governed by laws of supply and demand, and there is a
finite supply of the best vintages. For example “Only 20,000 cases
of Mouton Rothschild first growth are produced each year and
obviously there are more than 20,000 people in the world who would
like to own one.”
However, with many investors having had their fingers burnt, perhaps
now it is time recommend to investors stop trading wine like
mortgage-backed securities and instead get out the corkscrew.