'Generational shift' likely to prompt 'fundamental changes' to the way fine wine is sold

There needs to be a fundamental change in the way that fine wine is sold in future as the industry faces a “generational shift”, according to industry experts.

Speaking at Liv-ex’s recent members event, Max Lalondrelle, managing director of fine wine at Berry Bros. & Rudd, argued that “there is something fundamentally wrong with the way we are selling [fine] wine at the moment.”

He argued that over the last twenty years, operators in the fine wine market had learnt “to sell wine by price”, which has eroded trust with buyers when vintages later appear on the secondary market below the price they originally paid for them. This collapse in buyer confidence had gone hand-in-hand with the impact of global economic and geopolitical issues.

“As an industry, we have to find a way to sell a large amount of wine to fewer people, and this is what has led us [a an industry] using pricing as a way to entice people and investment,” he said.

There is, he notes a “huge pool” of fine wine in storage across Europe, but fewer customers. As a result, we need to ask “what is the direction of travel from here? Do we stay put and we wait for consumers to grow back in and enjoy what we’ve done over the last 25 years, or do we fundamentally change the way we sell wine?” he said. And while it might be better in six months’ time, “it might not – so we need to be prepared as an industry.”

“It’s about touching consumers who will buy the wine fundamentally very differently in about 15 years’ time,” Lalondrelle noted. “We have a journey to get there and we’re not there yet.”

He said he was confident that twenty years from now, selling in bond wines and by the case of 12 or six, “might be a thing of the past” as the new generation “doesn’t want to consume the way their fathers and grandfather used to consume”.

“It’s definitely something that we need to consider going forward.”

Selling on product, not price

Merchants and fine wine platforms “need to go back to selling the product”, he argued, rather than “discounting” past vintages.

Evgeny Chichvarkin, founder and owner of Hedonism Wines, who was also on the panel agreed. He pointed out some fine wine companies have KPI systems whereby they have to sell certain amount by the end of the year or alternatively need cashflow to buy a new vintage, meaning that they are prepared to sell at a loss towards the end of the year. “The market is quite wobbly, and if they want to sell something very quickly, they have to drop the price quite dramatically,” he explained.

The panel also discussed the impact of London losing a proportion of high net worth individuals following changes to the non-dom rules in the UK, which Chichvarkin said had been having an effect – causing Hedonism to actively look for partners in Dubai. Lalondrelle however, noted that this had not affected much of its customer base.

“The biggest effect that we have in terms of sales is the top end of our customer base, who maybe spent £100,000 pound on wine {before] and suddenly they are only spending £50,000 – so it’s nothing to do with the fact that they’ve actually moved elsewhere, it’s just they haven’t bought as much as they used to,” he said.

Generational shift

Simon Farr, founder of Cru World Wine argued that although there are signs that the secondary market is becoming more stable after the volatility of the last few years, and sentiment is improving, “unlike a lot of the downturns we’ve had since the last 30 years, I think we are at a secular shift.”

This generational shift in the market, “a demographic destiny” was marked by the baby boomer generation, who helped fuel the fine wine boom, no longer buying wine to lay down.

He noted that the boom was further “turbo-charged” by “the rest of the world getting rich and getting an appetite for it”, with the supply and demand dynamic pushing it further, followed by a long period post the 2008 crash which had seen “a great moderation, where essentially money didn’t cost anything”.

“All of those things are coming to an end at roughly at the same time,” he said. “And I think that those externalities will mean that we’re now going to move into a very different kind of market.”

“We will recover. I just think it’s going to be different,” he said. “You can write a list and you can send out offers and all the rest of it, but in the end, it makes much more sense to get people to come and visit and to have an opportunity to taste things and to understand the story.”

In it together

Matthieu Jullien, CEO of LVMH Vins d’Exception, said that the industry as a whole was “in this together” and the chateaux, producers and others along the chain had been complacent in “not always telling the story”, or focusing solely on their part of the distribution chain.

“We only have two tools to sell one, open bottles and tell our story,” he said. “We really need to focus on opening the bottles and offering incredible hospitality, going out in the market and opening bottles.”

Jullien said he saw a lot of optimism in the world however. “It shouldn’t be lost that there are many places in the world where people are eager to do business,” he said. “It was quite clear to me at Wine Paris, in India and Hong Kong, about the number of conversations around ‘what can you offer? We need more stock. We need opportunities’,” he said, implying there was a latent “energy of wanting to do business”.

Farr agreed that despite there being “a bit of a crisis of confidence about how we do things”, underneath, there are very interesting trends. He pointed to the success of hybrid-concept in the indies and off-trade for example, and noted that this should be expanded across the on-trade. “We need to sell much deeper into the spectrum of choice,” he said. “We need to get people to engage as they seem to want to do. Young people want to try things. We just need to create formats where it’s much easier for them to do that and to and also to make it affordable.”

Lalondrelle also pointed to the huge untapped potential of women as collectors and investors, saying BBR, was actively trying to attract more women and a younger demographic into fine wine and the world of collecting.