Californian wine prices rise and fall - Sterling vs Dollar

December 14, 2022

Wines from Burgundy continued to trade high this week after a new trade share record was broken by the region, showing the continuous demand for Burgundian wines.

Wines such as Domaine Armand Roussea, Domaine Bizot, Domaine de la Romanée-Conti and Domaine Méo-Camuzet all showed signs of ongoing demand, as well as other wines from the region, such as De Vogüe and Clos des Lambrays.

Tuscan wines also saw a surge in demand, with prices for bottles from Sassicaia 2019 and various Massetos increasing over the week.

Driven by the ever-expanding Asian market, Bordeaux wines such as Château d’Yquem 2019, Château Lafite Rothschild 2018, and Château Margaux 2000 all experienced a surge in demand – showing no signs of slowing down for the tail end of 2022.

Dollar strength impacts the price of Californian wine

The Federal Reserve’s decision to increase interest rates to combat the nation’s inflation problem has had an influence on the market for Californian wines. Prices for the California 50 index are up 8.2% YTD when priced in Sterling, with this currency swing impacting the price of wines such as Napa Valley Cabernet Sauvignon and Chardonnay.

The appreciation of the dollar against other currencies has had a dampening effect on prices, causing many producers to adjust their pricing strategies and look at alternate markets.

Napa Valley has been a favourite for wine connoisseurs around the world, with its unique terroir producing some of the finest examples of premium American wine. This year, however, increased prices, coupled with the global focus on regions such as Champagne, have seen the USA’s trade share drop from 7.6% in 2021 to 6.1% in 2022.

However, this is not to say that Californian wines cannot compete in the secondary market. The California 50 index continues to outpace both the Liv-ex Fine Wine 100 and Bordeaux 500 index, used as industry benchmarks for investment-grade wines.

Individual estates have also shown the ability to generate a steady return for investors if handled correctly. Both Harlan Estate and Opus One have seen prices rise, 14.1% and 13.1% respectively, and their popularity with collectors has continued to drive demand in the secondary market.

Screaming Eagle, one of the most iconic and sought-after wines in the market, has seen prices rise 5.8% since 2021 despite the post-global-pandemic economic turmoil. The estate’s Cabernet Sauvignon 2019 and Sauvignon Blanc 2018 have proven to be especially popular with collectors, and the estate enjoys strong demand in the secondary market.

Although the strength of the USD has contributed to the high prices of high-end Californian wine, these three estates continue to demonstrate strong pricing power, even in an uncertain market.

Investors looking for a low-risk alternative can continue to invest in American fine wine with confidence, knowing that these iconic estates will help maintain their portfolio’s value.