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Posted in Business + Economy, Mass Communication, Sport + Leisure by expresscheckout on 3 January, 2009

Wine as an Economic Indicator
By Catherine Rampell
January 2, 2009
Economix, NYTimes

Earlier this week I wrote about how consumers appear to be buying less expensive, but more, alcohol. Retailers say their customers have been trading down to less-expensive brands of wine — but buying more bottles total, leading to approximately the same average purchase size at many stores. Why are they buying more bottles at these outlets? Perhaps they’re drinking away their troubles; perhaps they’re dining in more frequently, and trying to replicate the restaurant experience by uncorking at home; and perhaps they just feel guilty about buying a flashy, expensive alcohol brand during a recession, so they spend the same amount of cash on two less flashy bottles. In any case, the moral of the story is that the recession is forcing middle-market consumers to move down-market.

What has become of the high-end oenophiles, though? Surely they’ve been affected by the downturn. Liv-ex, a fine wine exchange, seems to have the answer. Merchants and collectors trade bottles of expensive wines — the kinds that wait in cellars for years or decades, not in the fridge for a few nights — on this London-based market. According to James Miles, the director of Liv-ex, prices have fallen 20 percent in sterling (and 40 percent in dollars, given fluctuating currency exchange rates) since September. But in terms of volume, he said, almost twice as many bottles were traded on Liv-ex in December 2008 as in December 2007. Why? Some wealthier traders might have been hit hard by the economic downturn and are now in need of cash, so they have been selling these luxury goods en masse.

More sellers leads to lower prices, and buyers in developing markets are picking up the bargains, Mr. Miles said. Mr. Miles argues that the Liv-ex 100 Fine Wine Index is a good proxy for how well the world’s wealthiest are doing. “The best correlation I’ve found seems to be with the Forbes billionaire list,” he says. “The index is up when there are more billionaires on the list.” Given current fine wine prices — among other indicators, of course — it seems the billionaire list may be getting a trim this year.

See also: Liv-ex


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