Fine wine must crack supply chain issues to achieve full potential, says Liv-ex chief

Published: 06 November, 2011

The future of the international fine wine market rests on radical changes to the supply chain and accounting systems used by most of the major global players, according to James Miles, head of fine wine trading website, Liv-ex.

He told the Wine Future conference in Hong Kong that most of the accounts and logistics systems that manage post trade transactions are "not fit for purpose" and had hardly changed in the last 20 years.

Until they are dramatically improved the fine wine market will not be able to fully capitalise on the global potential of fine wine trading. Whilst the internet had opened up the world of fine wine to the general consumer, it was now being held back by inefficiencies in the supply chain.

He said one of the biggest issues facing the fine sector lay in the number of times a bottle of fine wine may be shipped or passed on before it is ever opened. Even though 80% of fine wines will not be drunk for 10 years. Why not, he asked, set up central depositories for fine wine that can house the wine throughout its transactional life rather than constantly moving it around and great and wasteful cost.

He said the fine wine consumer now has instant access to as much information about a particular wine as the traders or producers meaning the fine wine market had never been more "transparent".

The low barrier to entry to the fine wine market had opened the sector up to markets all over the world, none more so than the lucrative and booming Asian market.

Trading in fine wine, he said, had quadrupled since 2004 to $4 billion. The prices for the top wines had gone up by 22% in the last 10 years.

"We are only scratching the surface" of what is possible in the next 10 years, he added. But this will only be possible if the market was able to "unlock" the level of inefficiency in the fine wine supply chain.

The "revolution in transparency" in fine wine through the internet would be surpassed if the sector can crack its inefficiencies in the supply chain.

He hoped that the L-Win wine tracking and registration system, developed by Liv-ex could be part of that solution providing an instant record of where a wine was in the supply and distribution chain.

"We need supply chain processes that are bespoke to the fine wine trade."

The potential in fine wine was there for all to see with the average bottle of wine traded on Liv-ex in the UK at around $400 compared to $2 before tax and VAT for commercial wine.

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