Monday, March 29, 2010

The Forbes List of Rich People and Wine

Picture: Liv-ex 100 Index of Fine Wine and Forbes List of Billionaires (Source: Liv-ex The Fine Wine Exchange)

The Forbes List of Rich People and Wine

The New Forbes List of the Richest People in the World

The new Forbes list of the richest people in the world is out. This year, the world's billionaires have an average net worth of $3.5 billion, up $500 million in 12 months. The world now has about 1000 billionaires, up from about 800 last year and not much lower than the record of 1125 billionaires in 2008.

Liv-ex 100

At the same time, the index of prices for fine wine is also up again, after having declined sharply following the financial crisis of 2008. In February the London Fine Wine Index Liv-ex 100 again increased by 3 Percent and has again reached 250 points, compared with 264 points in June 2008, at the onset of the financial crisis in 2008. On a 12-months basis, the index has grown by almost 20 percent, in line with the general recovery of financial markets.

Liv-ex 100 and the Forbes List

Liv-ex has published an interesting chart, which plots the number of billionaires from Forbes alongside the Liv-ex 100 Fine Wine Index. The correlation is startling.

Of course, it is not the increasing number of billionaires which is behind the recent strong performance of the Liv-ex 100 Fine Wine Index. But the Forbes data is a good proxy for what is happening on the demand side of the market for fine wines. One major factor of course is Asia, and in particular, China.

Two thirds of the new entrants of the Forbes data come from Asia. U.S. billionaires still dominate the ranks--but their grip is slipping. Americans account for 40% of the world's billionaires, down from 45% a year ago. Of the 97 new members of the list, only 16% are from the U.S. By contrast, Asia made big gains. The region added 104 moguls and now has just 14 fewer than Europe.

Eleven countries have at least doubled the number of billionaires they had a year ago, including China, India, Turkey and South Korea. For the first time China (including Hong Kong) has the most billionaires outside the U.S. with 89.

China biggest non-EU importer

In line with these numbers, China has become the largest importer of Bordeaux wines outside Europe; it has overtaken the US. These numbers, however, need to be put in perspective. 70% of the Bordeaux is consumed by the French themselves, mainly bought via large supermarkets. Of the remaining 30% percent, more than half is exported to other EU countries. China is now the leader of the pack of the non-EU exports, which account for about 14 percent of total Bordeaux output. China bought 13.7 million liters for 74 million Euros, overtaking the United States, which took 11.6 million liters for 139 million Euros. Japan came third, with the same volume as the United States. China’s imports will need to increase by 50% to overtake the UK. This sounds a lot. But doable when you compare it with last year’s growth of almost 100 percent. Bordeaux makes up around 2.5 per cent of world wine production.

The Shares of the 3 Main Regions – EU, US, and Asia/Oceania – in World Output

Within the past 40 years, the shares of the three main regions --- EU, USA and Asia/Oceania --- have converged to around 27 percent, with the US going steady, the EU falling by roughly 10 percentage points and the Asia/Oceania region increasing by this amount. If you do a trend projection, than you end up, say in 40 years, with

Picture: Shares in World Output (Source: Greg Mankiw's Blog)

something like on the left-hand axe, with the only difference that the top line at above 35% is Asia/Oceania and the line in the middle at 15% is Europe. There is a dramatic shift in purchasing power going on and will continue to go on, with implications for the wine market. This is in broad terms the economic set up for the global village in which people consume and produce wine.

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1 comment:

  1. Let's just keep in mind, the Forbes list only include some of the worlds richest people.
    There are a large number of additional billionaires whose fortunes are simply not known. For instance the worlds richest man was until recently NOT Carlos Slim but Moammar Ghadaffi (or possibly Hoshni Mubarak).