PART III – What to expect, both during the crisis and afterwards?
Part III takes a closer look at what might be next not only in the short term, but also post crisis.
Auction houses remain aggressive in their pricing but are being cautious as the volume of product at auction is roughly 10% of what it would typically be this time of the year. It’s unclear when, and at what volume, the market will stabilize. The next series of auctions will start in mid May, with the majority happening in June. These auctions will all be held online and will provide a good sense of how hard the markets will be hit by continued uncertainty and global financial turmoil.
What is Next?
This is a unique and unprecedented time that has no clear endpoint. But we can try to make parallels to other crises including the 2008/2009 recession. Wine and whisky are typically not correlated to the general markets so during that recession they initially maintained consistency. The biggest buyers at the time were the Chinese and they infused the market with cash to keep the Chinese economy stable. The wine market did not see a crash until 2011 when China put austerity measures in place. The big difference today is that the market has opened up to a larger global audience, regionality of wine has expanded, and online sales have flourished.
There are signs that we may have a meaningful bounceback, with BI Fine Wine & Spirits reporting that volume of sales for high-end wine and spirits in China saw a 25% jump in March as the Chinese markets began to reopen. There has not been a live auction in Asia since a January 11th Acker sale in Hong Kong, so there is hope that we can see a strong return. There is also a void in the Bordeaux market as futures sales were canceled. This lack of sales may lead to pent-up demand as markets open back up.
Post Crisis
Once the crisis is over or at least contained, what can we expect to see? That is difficult to say now, but there are encouraging signs that the market will maintain strength or, if it does temporarily falter, see a significant bounceback as buyers regain financial confidence. However, there is a good chance there will be paradigm shifts, especially with regard to purchasing. Consumers that were reticent to purchase or bid online in the past are now seeing how convenient it is, and those habits will likely persist after the crisis. Since about 80% of auctions accept online or absentee bidding, the wine and whisky market should benefit from this transition immediately and bolster their offerings online with ‘live’ online sales. Acker has proven the viability of such formats with a live online sale in Hong Kong on March 28th that earned $2.5 million in sales.
Wine producers will also have to re-evaluate sales strategies. Smaller producers that are currently struggling and have historically relied upon DtC and Restaurant sales need to expand their online presence and club members, as it will be a while before tasting rooms become well attended again. For larger producers, there is an opportunity to refresh their imaging and reconnect on a personal level. Well-established companies like Frescobaldi in Italy have been producing wine since 1308, thirty years before the bubonic plague! They counted Michelangelo and Henry VIII as clients, giving them a unique perspective on how to adapt and maintain relationships with clients and partners along the way.