BFM Business Interview | Does the war in Ukraine affect the wine market?

The crisis in Ukraine has obviously brought about repercussions on a huge scale, and it’s too soon to fully measure the scope of this seismic shift on the geopolitical landscape. Tangible shockwaves have already been felt, though, across a range of international industries. Angélique de Lencquesaing spoke to Cédric Decoeur about how things look on the wine market.

Note: this interview took place on Thursday 10th March 2022

Cédric Decoeur: Is Russia an important market for French wines and fine wine more generally?

Angélique de Lencquesaing: Before getting into the details, I’d just like to stress that there is good reason to talk about the wine market, even if it might seem incongruous in a time of crisis. In France, wine is an industry of 500,000 jobs and 30% of the produce is exported. After the aeronautical sector, wine is the country’s biggest exporter.

Russia is, in fact, a historical market for French wine, especially Champagne. The sales figures themselves are more symbolic than anything else, but French cuvées hold a cultural importance in the country. In 2021, French wine imports into Russia represented €198M, a sum that should be contextualised, as the country is France’s 15th export destination for wine and spirits. By comparison, the US imports €4 billion worth of French wine per year.

So will Champagne be the region hardest hit by the crisis?

In terms of volume, you’d be right to make this assumption. But, again, it’s all relative. Russia represents 1.5% of Champagne exports. Once more, there is more of a cultural effect at play, as certain Champagne houses carry a longstanding top reputation in the country. For example, Roederer’s Cristal cuvée was first created for the Tsar Alexander II; a transparent crystal bottle with a flat base that would make any attempt at poisoning more obvious…

How about other prestigious regions?

Russia imports around 7,200 hectolitres a year from Burgundy, making it the region’s 18th market for volume and 17th for value. And considering the rarity of these wines, we can safely say that if they can’t be sent to Russia anymore, they’ll undoubtedly find buyers elsewhere…

As for Bordeaux, the amount exported to Russia is inferior still, at around 2,000 hectolitres a year (the region’s 50th export destination in volume and the 60th in value). By comparison, Bordeaux sends 240,000 hectolitres a year to the US!

On the auction market, what’s the share of Russian clients like?

At iDealwine, purchases from Russian and Ukrainian clients made up 1-2% of sales last year. For us specifically, issues concerning this part of the world are very limited. But obviously the problem reaches much further than this.

Beyond the question of buyers, the uncertainty that could weigh on the market at large in the mid-term is something we’re watching very closely. The impact of a deceleration, or even a crash, on the stock market would have huge consequences for wine prices.

Are you seeing this already? A kind of hesitation or even decreases in value?

It’s really too soon to say.

In times of crisis, fine wine tends to come into its own as a safe investment. We saw this in 2008, in 2011, and more recently at the start of the pandemic.

Since the beginning of the year, there’s been a certain dynamism on the wine market, and values have thus far held up as events have unfolded. For example, last week’s auction closed with 62% of lots sold, and 82% of expected value reached. Not every bottle finds a taker, of course, but prices have remained high for the wines that do go under the hammer.

A couple of months ago, you mentioned an overexcitement at auction, is this behind us now?

Looking at the gap between volume and value sold, it doesn’t look like this phenomenon is slowing down. Certain domains are still centre stage, with iconic bottles skyrocketing. This isn’t new – a steep upward trajectory began at the start of the pandemic – and we’re seeing it continue. As is often the case, wines at the top of the hierarchy are protected, whilst lower quality cuvées and vintages suffer.

Are there still some options for investment opportunities?

If you’re looking for wines to drink, looking for ‘intermediary’ vintages is interesting at the moment. For an investment, it’s important to look out for dips in value, which can even happen to the most coveted bottles. And that goes for every region! It takes a bit of research, as you have to follow the value of specific wines as they evolve month after month. It’s worth your careful observation, though; when you spot an opportunity, seize it!

Is iDealwine doing anything to help Ukraine?

We’re hosting a charity auction to raise funds for humanitarian aid in Ukraine. Laurent Forti, Honorary Consul to Ukraine in Aquitaine, contacted us and we were only too happy to help. The wines up for auction are donated by estates, wine producers and private collectors, they’ll be online for bids from the 30th March, and proceeds will be given to Ukraine Amitié, a charity that’s helping civilians on the ground. Some prestigious estates have already donated bottles, and the sale promises to be full of treasures for a good cause.

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