Ep 10: TNWG Wine Times - Changes in the UK Wine Industry and the Power 100

?? First and foremost, Happy New Year to all!

?? Secondly, there was BIG news in the UK Wine Industry on the eve of the New Year. For the UK, having left the EU, it has given the opportunity to revamp the wine industry to what could be a significant development for the English Sparkling Wine industry.

?? The basis of the reforms are to keep the UK moving ahead with further sustainable practices and attempting to reduce business headwinds (reduce, sadly not eradicate). Do not forget, that the UK acting as a global wine trading hub is a wine market which is worth over ￡10 billion last year!

Within the UK itself, as has been mentioned many a time in our 'The Andy and Olly Show' Podcast, has now over 900 vineyards in operation and hectares under vine, whilst small in comparison to many countries across the globe and in Europe, has now QUADRUPLED since the year 2000! ??

WineGB reported in 2023 that we are due to receive the largest ever grape harvest (not necessarily the best vintage but still the largest), which according to them is circa 20-22m bottles (50% bigger on Britain's previous record year in 2018).

So what are the changes?

1. English Sparkling no longer has to use the a-typical shaped stoppers (some suggest mushroom shaped) and foil covers on bottlenecks that are so synonymous with sparkling wine across the globe (and especially in Champagne). How does this help? Cheaper, simpler and more sustainable alternatives are options to reduce wastage and costs.
2. 'Piquette' - this is a French term, which explains stretching the grape pomace to extract any residual alcohol, sugar and flavour left in the skins by adding water and on occasions, sugar too. In the EU, this process is banned but with the wiping out of restrictions in the UK, this offers potential new revenue streams and ability to tap into the 'low and no alcohol' drinks which are on the rise (see my last episode as a growth trend in my view in 2024).
3. Administrative costs will also be reduced, as the UK government has wiped out the requirement for imported wines to have the importer address on the label. Again, another cost saver.
4. Probably the most known change is the announcement that businesses will be able to sell prepacked still and sparkling wine in 500ml and 200ml sizes as well as the new 'pint' sized wine quantity. For me, this is a great idea in certain sectors - not least the English Sparkling area, where the consumer may believe that previously it was out of their price range. This should open the door to an increase consumer base, of what is a fantastic product and hopefully this will entice further support and sponsorship as a result.

What is the Power 100?

Moving slightly away now to the Fine Wine Industry and the Power 100. The Power 100 is the annual top 100 wines which have the most powerful brands in the fine wine market and published by Liv-ex . It is produced alongside The Drinks Business Magazine as a snap shot in time of the changing landscape of the secondary market.

As a market place, typically the Power 100 would be where the 'flight to quality' would see money move towards in a bad trading year (for those in banking, the AAA type rated government bonds, for those not - the safest type of investments within the asset class).

What we saw in 2023 was a correction in the majority of the fine wine index and marketplace as a whole after significant gains over the past few years, especially in the 'boom' categories such as Champagne (Champagne 50 Index was down 19.4% y/y). As a result, investors looked at curtailing their optionality in other names and stuck to the Power 100.

There were however some movers and shakers as is always the case and below are the wines which made it into the Power 100 having not been in the previous year - as potential areas of interest for 2024:

The overriding themes to the Fine Wine Market were as follows:

• Burgundy continued its dominance as the primary region with the most wines in the Power 100, although decreasing a touch from 29 to 37.
• Bordeaux rose from 25 to 30 within the Power 100. The largest piece of evidence of flight to quality, in the most liquid market.
• California lost 5 wine producers to the Power 100 list from 2022 to 2023.

So does this mean the bubble has burst on Fine Wine Investing?

• Far from it. Burgundy do not forget rose 68.4% (Burgundy 150 index between Jan 21 and Oct 22) and this correction still leaves you well in the money as the investor.
• Even in 2023, Burgundy had the largest risers and fallers in the Power 100 and this despite a poor run of form over the 12 month period.
• The brands that remained above market trend were those that were typically high value wines (i.e. the top 1% of fine wine) - which is where I recommend a focus when investing - the top 1% of fine wine investment because it is the brand as well as the quality.
• Incidentally, had you looked at the top 10 in the Power 100 only, you would have most likely have been in the money on the year.
• Top 10 in the Power 100 in 2023 were as follows: 1) Domaine Leflaive, 2) d'Yquem 3) Meo Camuzet, 4) Opus One, 5) Joseph Drouhin, 6) Cheval Blanc, 7) Gaja, 8) Henri Boillot, 9) Angelus, 10) Leroy (prev 1 in 2022).

??? LATEST DRINKS INDUSTRY ARTICLES ???

How Darts Sensation Luke Littler proves pubs matter

?? Now I was wondering how I was going to get the World Championship of Darts into this week's edition, given it was so eventful this year and congratulations to both Luke's who took part in the final.

For those who didn't see the tournament or the final last night, it was taken by storm, by a 16 year Luke Littler. His debut in the tournament saw him overcome past champions to push his opponent all the way in the final. Incredible at such a young age and one who will no doubt be running the sport for years to come.

However, the message today and linking it to the drinks industry is just how much the 'pub culture' and the survival of public houses in the UK can bring so much more than just a social environment for all to support.

Keep supporting local businesses!

OTHER DRINKS INDUSTRY HEADLINES

US Wine Market Dips 2% By Volume, but Sees First Value Increase Since 2020

Treasury Wine Estates sued over Dracula Wine

Is 2024 the year for Next Level Cava?

All the Medalists from the Low and No Alcohol Wine Masters

Top 10 Alcohol Free Wine Brands in the UK

?? MARKETS IN BRIEF ??

On the week (as at 11:10, 04/01) changes:

EQUITIES: ?? FTSE 100 down 0.04%; ?? DAX down 0.06%; ?? S&P down 1.8%; ??Nikkei 225 up 0.001%; ?? Dow Jones down 0.07%;

COMMODITIES: Brent Oil flat; Crude Oil flat; ?? Gold down 1.5%; ?? Silver down 5.5%; ?? Copper down 2.1%

BONDS (in yield terms): ?? UK 2yrs higher 0.118%; ?? UK 10yrs higher 0.197%; ?? German 10yrs higher 0.1545%, ?? US 2yrs higher 0.054%; ?? US 10yrs higher 0.145%;

?? The first week back after the holiday season and markets are trying to comprehend not IF the key Central Banks will cut interest rates but WHEN and by HOW MUCH.

?? Bond yields have risen on the week on week picture as you can see above, this on the back of the market potentially getting carried away with a cutting cycle of epic proportions.

?? Outside influences to be weary of include the Middle Eastern geopolitical situations with oil front and centre and shipping routes 'all at sea' (sorry couldn't help it).

?? With interest rates looking to fall though over 2024, locking in mortgage rates later in the year are looking better than they once did but savings rates will be coming down too, which opens the door to alternative assets like Fine Wine once more, which in part, felt the pain of savings rates being elevated throughout 2023.

More from me next week, as always feel free to DM, message or email feedback / questions or topics of interest that you want to be covered in the Weekly.

Follow my adventures of Wine Exploration on my Instagram here for those who have interest in recommendations and videos on exploring different wine regions too.

?? Have a great start to 2024!

Cheers

Andy a.k.a. The Northern Wine Guy