A version of this article is published by the Financial Times. See also UK wine trade faces up to Brexit.
Professor Kym Anderson is based in Adelaide but his international reputation is such that he is co-founder of the extremely active American Association of Wine Economists. They publish papers called things like ‘Analyzing Barrel Purchasing Decisions on Winery Costs’ and ‘Vertical Differentiation, Perceptions Restructuring, and Wine Choices: The Case of the Gran Selezione in Chianti Wines’.
Last month, urged by the UK Trade Policy Observatory, formed at the University of Sussex in the wake of the EU referendum, he took a break from a holiday in Scotland to present a paper at Chatham House in London entitled ‘Will Brexit Harm UK and Global Wine Markets?’.
The answer, depressingly, is Yes and Yes according to his and his associate Glyn Wittwer’s economic modelling. According to their worst, but apparently most likely, scenario, by 2025 wine prices in the UK are likely to rise by 22%, with consumption falling by 28% and the value of wine imported into the UK falling by 27%.
This, Anderson argued, is not just because of the fall in value of the pound, nor in any major sense because of increased tariffs on imported wines (which are likely to be no more than 10p a bottle and probably lower than increases in excise duty), but mainly because of the UK’s generally depressed economy. He predicts that we Brits will have much less disposable income and wine purchases will be in the front line of likely economies. (Several members of his audience felt he underestimated British thirst.)
According to Anderson, however, Brexit is likely to have a dampening effect, not just on UK wine consumption but on virtually every corner of the global wine market. That famous British thirst, and our mercantile past, has meant that the UK has historically been a massively important market for wine. At the beginning of this century it was responsible for more than 20% by value of the world’s wine imports. This proportion was still 14% even last, Brexit-buffeted, year.
More than a third by volume of all the wine that leaves Australia, New Zealand and the US has been sent to the UK, and Anderson argues that once Brits cut down their imports, those who have been exporting to them will have to look elsewhere and start nibbling away at other markets, making the global wine trade even more viciously competitive.
So, if even only some rather than all of these nasty things happen, how can the world’s wine lovers best counter their effects?
For fine wine, buy older vintages
It has long been the case that mature wine is better value than young vintages. The thrill of the new and, especially, the recently rated, has tended to fan the flames of desire for young wines that are often decades away from maturity. With older, actually drinkable wine admittedly the purchaser needs to be sure it has been stored well, and with famous older vintages there can be questions of authenticity. But from the British merchants and traders who dominate the fine-wine business (and not just in the UK), the value gap between old and new is greater than it has ever been because older wines will have been bought with old, valuable pounds whereas the prices of the young wines currently on offer, notably the 2016 bordeaux being touted, will reflect the weakness of sterling. Many Bordeaux 2016s are being released at prices higher even than the overpriced 2009 and 2010 vintages of the same wine. Crazy!
Sniff out bargains on mature restaurant wine lists
Long-established top-drawer restaurants tend to have cellars based on historic purchases and prices. And prices in provincial establishments, untroubled by city-centre property prices, such as the recently relocated Troisgros, Les Crayères in Reims and thoroughly rusticated Michel Bras in France and the classic Schwarzer Adler in Germany’s Black Forest, can be particularly appealing.
Even in the heart of Manhattan at establishments such as at Rouge Tomate and Rebelle there can be bargains. The mature Italians on lists at Felidia, Maialino and more recently OTTO are exceptional, and prices, especially for really old vintages, can be lower than retail. Nigel Platts-Martin (The Ledbury, Chez Bruce, La Trompette, The Glasshouse) is arguably the London restaurateur kindest to wine lovers but Noble Rot's wine list is of real interest to wine enthusiasts. See also London for wine lovers.
Buy wine from countries with relatively weak currencies
South Africa continues to be the source of some dramatically underpriced and definitively South African wines that, for some unfathomable reason, are not as celebrated and sought after as they should be. Perhaps the Cape wine scene is simply poorly understood, but the weakness of the rand is quite easy to understand. Like Chile, South Africa has enjoyed tariff-free status for its wine exports into the EU, unlike other non-European countries.
Propped up by China’s effect on the mining industry until recently, the Australian dollar’s strength served as a brake on progress of the world’s most enthusiastic wine exporter (and most important supplier of wine to the UK by both volume and value). But as the Australian dollar continues to weaken, it could be that wines such as the country’s remarkably refined Chardonnays will look even more attractive.
Continuing that theme… the quality of English wine is rising very much faster than its price. Many English sparkling wines can more than hold their own against champagne at the same price. There are now 2,000 hectares (5,000 acres) of vineyard in England, more than twice as much as 10 years ago. And for those paying in sterling, English wine is looking better and better value against imports.
Australians and many Asians should buy their fine wine abroad
In countries such as Australia and many Asian nations where duty on wine is levied as a percentage of its value, fine wines are inevitably much more expensive than in countries such as the UK where excise duty is a straight £2.16 per bottle (plus 20% VAT). Many is the Aussie surprised to find the iconic Penfolds Grange far cheaper at Waitrose than back home.
Countries such as Thailand, India and China levy punitive ad valorem taxes on imported wines. The great and glorious exception to this is Hong Kong, where duties were slashed to zero in 2008 and the territory has since become the fine-wine hub of Asia with many a Chinese personal cellar stocked via bottles physically carried across the border into the mainland.
Seek out ridiculously underpriced, and often out of the way, wine lists
All over Europe, and elsewhere, there are restaurants run by wine enthusiasts prepared to share fabulous bargains from all over the world with the similarly minded. They manage to preserve their collections because they are typically, though not always, off the beaten track. See some suggestions below – and feel free to send more suggestions to firstname.lastname@example.org. We would much appreciate more names for this list of recommendations. Walter, incidentally, points out that mark-ups on most restaurant wine lists in Italy are much lower than in, for instance, the UK and US, adding 'I am living in paradise'.
RESTAURANTS WITH SERIOUSLY UNDERPRICED WINE LISTS
This is a far-from-exhaustive list of some of the establishments whose wine-loving owners seem benignly to ignore current market prices.
Le Channel, Calais, Pas-de-Calais
Le Coq de la Maison Blanche, St-Ouen, northern Paris
Auberge du Pot d’Etain, L’Isle sur Serein, northern Burgundy
Les Bouteilles, Nantes, Loire
Restaurant de la Gare, Gewenheim, Alsace
Beaugravière, Mondragon, Rhône Valley
Locanda Aurilia, Loreggia, Veneto
Locanda del Colonnello, Modica, Sicily
Elkano, Getaria, Basque Country
Rekondo, San Sebastian, Basque Country
Villa Más, Sant Feliu de Guíxols, Costa Brava
Bern’s Steak House, Tampa, FL
Blackstone Steakhouse, Melville, NY
Cowboy Ciao, Scottsdale, AZ