Growing global attention for Californian wines

Leading California wines have gained more collector’s attention in the United States and around the world in recent years as prices have continued to climb.

Over the past 10 years, California’s share of the global wine trade has grown from 0.1% to 7.1%, making it the largest region in the world outside of France and the United States. Italy, according to exchanges recorded on Liv-ex, a company based in London. global wine trade market.

The growing share of world trade reflects a string of strong vintages, stellar scores from influential critics and expanded distribution across Europe, according to a recent Liv-ex report titled “A Golden Era for the Golden State: Inside the Californian fine wine market “. ”

The US-based Wine Market Journal, which tracks wine auction values ​​and market information, shows that the value of its wine auction indexes for cult California wines – wines prestige produced in small quantities mainly in Napa Valley – increased by 29% compared to mid-2019 to mid-2021, compared to a 17.5% increase in value for the French Premier Cru de Bordeaux over this period, and nearly 19% for the French red Burgundy. The indices follow baskets of representative wines.

“California wines are gaining strength and recognition among rare wine collectors, especially in Europe,” says David Parker, owner of the Wine Market Journal.

The performance of the fine wine auction market offers a more nuanced view of the secondary market outside of the wine trade, as it shows that American wines, overall, had sales of only US $ 600,000 per year. last auction in Europe, for over US $ 29 million. each in sales for Bordeaux and Burgundy, according to the Wine Market Journal.

In the US, Burgundy and Bordeaux remain the top auction sellers – with sales of US $ 109.7 million and US $ 52.7 million, respectively, in 2020 – but US wines are a solid third in popularity, achieving US auctions of US $ 35.6 million in 2020, the group reported.

Of the top 20 fine and rare wine retailers tracked by the Wine Market Journal, quarter-to-quarter sales are roughly equal for US, Burgundy and Bordeaux wines.

Parker, who is also CEO and owner of one of those retailers – the Benchmark Wine Group in Napa – said sales of US wines last year benefited from 25% retaliation on some wines from France and elsewhere in Europe as part of a long ongoing air dispute between the United States and Europe.

In June, the U.S. Trade Representative and the European Commission agreed to suspend tariffs related to the dispute for five years while they sought a compromise.

Whether California wines can continue to garner sustained interest as the state battles drought and fires is a question raised by Liv-ex, who noted that some estates have had to cut production from their vintages. 2020 – or cancel them altogether – due to fires or smoke damage. to their harvest, said Liv-ex.

“California growers face challenges related to climate change, the effects of which are bound to impact commerce and collectors at every step,” the report said.

Although worrying, Parker sees the fires as a sporadic problem. As with insect infestations, these are “nature hazards that you face,” he says.

Parker also notes that high-quality grape farmers tend to reduce added water consumption to plantations to zero once the vines are established.

“The more they make, the better the quality of the grapes,” Parker says.

Exorbitant prices

For now, Californian wine prices are the second most expensive behind French Burgundy based on the average price of major estates, according to Liv-ex. The average market price of a case of California wines included in the Liv-Ex 1000 Index of 1,000 World Wines was £ 12,418 (US $ 16,907) in July.

It may be well below Burgundy, the top region, which averages £ 37,042 a case, but it’s also close to double the third-highest in terms of price – the Right Bank de Bordeaux – with an average case price of £ 6,488, according to the report. noted.

The prices of the best California wines are skewed somewhat by Screaming Eagle, a small production of Napa Valley Cabernet Sauvignon which is perhaps the ultimate cult California wine, which has an average market price of £ 30,957 a case, according to Liv-ex. Opus One and Dominus, which both produce Bordeaux blends in Napa, cost closer to £ 2,600 a case, Liv-ex said.

On Liv-ex’s secondary market platform, where wines are traded between wineries in 43 countries, California wine trade has grown 809% over the past five years to include 200 wines.

Attention was first given to cult wines produced in small quantities and which tend to attract top marks from wine critics. These wines include Screaming Eagle, Opus One and Domius, but also Harlan Estate, Scarecrow, Colgin, Joseph Phelps and Sine Qua Non from Central Valley California, Liv-ex said.

Today, these wines continue to dominate, as do other reds from Napa and Sonoma, although Ridge Monte Bello, of Santa Cruz, Calif., Is the top performing label followed by Liv-ex, on the rise. 76.6% over the past five years. against a 40.7% increase for Screaming Eagle.

One of the reasons for the growing attention to California is the high marks the wines have received from international critics, Liv-ex said. So far this year, 50 vintage California wines from 2018, with an average market price of £ 12,000 a case, have received perfect marks of 100, Liv-ex wrote in a July post.

Overall, Californian wine prices on the Liv-ex secondary market have been marked by “low volatility and slow but steady increases” since 2003, the benchmark year of the Liv-ex California 50 index.

The index, at around 320, has increased 38% in the last five years to July and 220% since December 2003 (from a base of 100). The index tracks five of the most traded producers over the previous 10 physical vintages, using the median price between the highest direct offering and the lowest direct offering in the market, according to Liv-ex.

While a good performance, the index is lower than the 280% increase in the larger Liv-ex 1000 index (which does not include all 50 California wines) and the 247% increase. Liv-ex 100, which is weighted towards Bordeaux. But Liv-ex points out that there are other California wines that are currently not tracked by the indexes whose prices have risen sharply, including Bill Harlan’s Headland and Stag’s Leap Wine Cellars, Cask 23, both of Napa.

Despite concerns about the effects of climate change, the Liv-ex report concludes: “Modern and brilliant, the region is not losing momentum anytime soon.

About Michael Brafford

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