Justin Gibbs and James Miles are a couple of guys the wine industry hates to love. The London International Vintners Exchange, an Internet- and phone-based exchange they launched nine years ago, has injected some transparency into the infamously opaque fine wine investment market.
For a fee, merchants can buy and sell wines at fair, market-dictated prices — a move that has encouraged a few investment funds to get into the game. Prices have soared since Liv-Ex launched, in part due to Asian-led demand. Ten years ago, a case of the Bordeaux red Lafite 1982 was worth 2,450 pounds ($3,946); today it?s worth 25,000 pounds ($40,250).
Liv-Ex resembles an old-fashioned stock market with a commodities-exchange twist: Its 240 member merchants and funds can buy and sell wines–sometimes “en primeur,” still-in-barrel wines that are effectively a wine future–though the buyer always takes delivery, anonymously via the phone or Web, paying a commission of 2% to 3% for each trade. The trades are settled with Liv-Ex, which receives the wines at its 2,500 square foot warehouse, checks their condition and authenticity and ships them. There aren’t any restrictions on what wine the merchants can trade, though around 40% of the business happens on wines from the top five chateaus, Haut Brion, Lafite Rothschild, Mouton Rothschild, Margaux and Latour.
It’s still a tiny business. Operating in a spacious office in the leafy London suburb of Clapham, Liv-Ex only conducts some 2.5% of the $3 billion of sales done by the global wine industry annually, from around 1% of the market in 2000. But it’s starting to have impact.
The Liv-Ex 100 Fine Wine Index–comprised of a select list of wines that have scored 95-plus points out of 100 by leading critics–is used by wine funds to value the collection of wines in their fund. So far in 2009, wines appear to be outperforming stocks. The Liv-Ex 100 Fine Wine index (reported monthly) was up 4.6% at the end of June, from the start of the year, while the S&P 500 was still down 1.3% over that period.
