Is the Wine Market's "Recovery" Actually a Death Rattle?

Prices are rising and buyers are returning. So why does the industry look more fragile than ever?

Schopenhauer wrote to Goethe in November 1815:

“It is the courage to make a clean breast of it in face of every question that makes the philosopher. He must be like Sophocles’s Oedipus, who, seeking enlightenment concerning his terrible fate, pursues his indefatigable enquiry, even when he divines that appalling horror awaits him in the answer. But most of us carry within us the Jocasta who begs Oedipus, for God’s sake, not to enquire further...”

Rightly, some people might ask: what’s the point of a piece like this? A pessimistic piece, some may call it. For God’s sake, look at the signs of recovery!

The purpose is not to disparage an industry I love and work within, or its participants. On the contrary — it is to offer an argument that takes seriously the forces at play, including the ones that resist that easy optimism.

This is a nuanced topic, and reasonable people can reach different conclusions. But the first step towards solving any problem is to stare it in the face. Choosing instead to write the recovery story — and to set aside the evidence that complicates it — would, I think, be a mistake. Perhaps the surest route to deepening the industry’s problems.

My hope is that this piece sparks debate and, more importantly, encourages the kind of thinking that could lead to a genuine wine renaissance.

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There is a term in medicine called terminal lucidity, which I only know because of Mark Sloan in Grey’s Anatomy. “Terminal lucidity is a surge of energy in a person who is dying,” I read on the Cleveland Clinic website. “Although researchers are still studying what causes it, we know that it’s typically a sign that death is close.”

The wine market, according to the Liv-ex indices, has shown a feeble uptick in prices since last October. Another indicator that “things are finally turning around” is the notional ratio of bids to offers on Liv-ex. This appears to have reached an important inflection point, with bids now surpassing offers. In simple terms, there are now more buyers than sellers — a sign, they say, that demand is picking up and confidence may be returning. WineFi even report that their Trade Price Index has ticked positively for the third quarter in a row, that trade discounts are narrowing along with an improved liquidity.

And yet, I’m not convinced that things are “fine” — or that they will be any time soon.

But why not?!! I keep asking myself when I look at this more encouraging data.

Why are prices rising? Why are liquidity and demand picking up, as market participants suggest? Yes, one answer is that the wine market is slowly recovering. But it could just as easily be something else.

A more likely explanation, in my view, is inventory. Over the past three years, operators have run down stock and are now starting to buy again — cautiously, and not because they want to, but because they have to. There’s a big difference between buying because you can, and buying because you need something to sell to your customers.

This seems especially true in the US. From conversations with US importers and distributors, many stocked up ahead of tariffs, building inventories to last through the end of 2025. That implies they will have needed to return to the market and replenish around the new year.

While this hypothesis may or may not hold, other parts of the industry also tell a less-than-encouraging story.

Hospitality accounts for around 30% of total wine sales in the UK and Tom Kerridge, the Michelin-starred chef turned Whitehall campaigner, says businesses are operating at 110% of costs — in other words, they are losing money. Rising inflation, higher prices, increased business rates and higher employer National Insurance contributions are all taking their toll. Another celebrity chef, Jackson Boxer makes a related point. After Brexit, wines from lesser-known regions — obscure parts of Italy, Slovenia or Lanzarote — that once sat around £30 are now closer to £60. At a time when the cost of living is rising, consumers are far less willing to take a chance on an unfamiliar bottle.

These anecdotal examples are backed up by the data. One in five hospitality businesses is effectively in a “zombie” state, with negative balance sheets and combined shortfalls of £2.6bn, according to Opus Business Advisory Group. In the twelve months to July 2025, there were 3,822 failures of pubs, clubs and restaurants in England and Wales — accounting for 15% of all business failures.

Elsewhere in the market, the picture is no more encouraging.

Many seem to have forgotten (or chosen to discount) that in December 2025, Oeno Group went into administration, effectively wiping out an estimated £76 million of client money raised over a decade. Those clients are unlikely to return to wine any time soon. The industry largely dismissed it as “another crooked wine investment scheme”. But that overlooks the uncomfortable truth that Oeno operated with industry support during the good times, which helped reinforce the perception that it was a legitimate business. And more importantly, despite their “wine investment” label, the underlying premises were never really there. In practice, Oeno functioned much like a merchant, not unlike many others in the market.

A quick look at Companies House makes this so-called “recovery” look far less convincing.

Among the top 30 merchants in the UK, eight have filed their latest accounts late, reporting combined losses of around £22 million. Several auditors have warned that they may not be able to continue as a going concern unless conditions improve or fresh capital is injected. In plain English: some of these businesses may not be around in a year.

One example is Cult Wines, which has come under particular scrutiny. Its auditor warned that the company’s future could be in “significant doubt” without further funding, given a £4.5 million loss and an increase in net liabilities to £21.6 million. Cult Wines has also been flagged by the Advertising Standards Authority for presenting potential returns on wine investments without sufficient evidence to support those claims. More troubling still, the company providing Cult Wines with funding and storage, Coterie Holdings, has recently reported a loss of nearly £8 million. Amid all this, Cult Wines co-founder Tom Gearing is among those pointing to a “recovery,” citing signals such as “returning buyer confidence, improving portfolio performance, and two-sided market activity on CultX” as evidence.

Of course, it is not all bad news. But this is not just about a few smaller, underfunded companies struggling—we are talking about some of the largest and oldest merchants reporting losses, including Fine & Rare, Berry Bros. & Rudd, Bordeaux Index, Goedhuis, and Justerini & Brooks.

That said, some businesses are improving. Berry Bros. & Rudd has significantly reduced its losses, while others continue to perform strongly even in this environment: Corney & Barrow reported profits of around £6 million, alongside solid results from Farr Vintners, Wilkinson Vintners and Hallgarten. Even those reporting healthy profits have done so against contracting turnover of between 5% and 50% over the past three reporting years. In other words, it has been a difficult period for the wine trade—there are no two ways about it.

Taken together, the scale of this malaise in the British wine trade raises the question of systemic risk. Because most wine businesses are private rather than public, they are subject to far less scrutiny. That often means it takes longer to confront reality—and its consequences—until, of course, banks, creditors, tax authorities, and founders are no longer willing (or able) to pretend and extend. The longer that process takes, the bigger the problem becomes and the more dramatic the outcome is likely to be. And because companies don’t operate in isolation, those interdependencies are likely to ripple through the rest of the market.

Someone recently described the state of the wine industry using Herbert Stein’s words: “If something cannot go on forever, it will stop.”

So what does it mean when it stops?

In practice, it doesn’t necessarily mean a company goes into administration straight away. More often, shareholders and banks are reluctant to crystallise losses, so they extend loans and support for as long as possible. That continues until keeping the business alive becomes more expensive than letting it fail—or until things escalate quickly (cash runs out, suppliers stop cooperating, or a crisis hits) and stakeholders accept there is no way to trade out of the hole.

At that point, the most likely outcome is often what’s known in the UK as a “pre-pack” administration. In simple terms, the company enters administration (a form of insolvency), but a sale of the business has already been arranged in advance. Frequently, the “new” buyer is effectively the same owners or a related party. The result is that the good parts of the business—brand, operations, customers—survive, while the debt, liabilities, and other obligations are left behind. These are effectively controlled restructuring where losses are pushed onto creditors, while the core business continues under a cleaner structure.

It is crucial to highlight that, depending on how the merchant structures its relationship with clients, customers can get caught up in this—as happened in the Oeno Group case. This is because, in some cases, wine is stored under the merchant’s name rather than the client’s. When that happens, customers may find themselves treated as unsecured creditors—and risk losing their wine.

Beyond the trade itself, LVMH, arguably the largest luxury company in the world, has a wine portfolio spanning Champagne (accounting for over 20% of the total Champagne market), Bordeaux, Napa, Mendoza, and beyond. It is often seen as a bellwether for the luxury sector. The group reported a 9% contraction in turnover and a 25% decline in margins in its Wine & Spirits division in 2025. That downward trend continued into the first quarter of 2026, with revenues down 2%—although they insisted this would have been positive if not for the strength of the euro.

What’s more, from a geopolitical perspective, the traditional levers of growth are all under pressure.

Russia is effectively out. China—arguably the engine that drove growth until a few years ago—is now muted. The US, long a cornerstone of wine demand, has become increasingly uncertain. Tariffs may come and go, but what matters is the broader climate of instability—and uncertainty is what stops trade. And beyond that, wider geopolitical tensions are adding further strain. Rising conflict risks, including the US war in Iran, have knock-on effects on oil prices, which in turn impact key luxury markets such as Dubai. LVMH’s Bernard Arnault warned about the risk of conflict escalating into a “global catastrophe”, while his team in earnings calls remains reassuring. And finally, the UK—once the centre-stage market for wine’s secondary trade—is now in a dire state.

At a more fundamental level, businesses that make or sell wine rely on three things: inventory appreciation (wine prices rising), liquidity (constant buying and selling), and access to cheap capital (to fund inventory and, at times, operating losses). The industry keeps insisting that prices are rising and that liquidity is returning—but the third lever is clearly not turning.

In reality, access to credit—let alone cheap credit—has become more difficult. This is a sentiment I have heard repeatedly from merchants. One told me: “There is no consumer crisis. There is a debt crisis.” Another said: “High-street banks have basically become too difficult and expensive to deal with. They have zero appetite for risk and no interest in developing meaningful relationships with start-ups and SMEs. This means start-ups rely on friends and family, crowdfunding and seed investors, and larger and later-stage businesses also look to the diverse world of private credit.”

Many people worry that wine is going out of fashion, particularly among younger consumers—and point to that as the starting point of the problem. Luxury and consumer goods may be facing one of their most difficult periods in the past two decades—arguably even more complex than 2008.

But ultimately, I believe that, at its core, this is a pricing issue and the value chain is broken. The cost of a bottle of wine is simply too high for what the market is willing to pay right now, and the roles—and margins—of many players in that chain no longer hold. You can see this clearly in Bordeaux En Primeur. Once you account for the cost of carry, back vintages are often significantly cheaper than current releases.

Viewing the wine industry in a holistic way like this, it’s hard to see how anyone can argue that “we are going to be fine.” The early signs of recovery — the uptick in prices, the return of bids, the narrowing of spreads — may look encouraging on the surface, but a brief surge of activity does not mean the underlying condition has improved.

Once you step back, the picture is clear: structurally, the industry is under pressure from every angle. Demand is weak and uncertain. Costs are rising. Credit is tightening. Key growth markets are either weakened or unstable. And, most importantly, prices no longer align with what the market is willing — or able — to pay. This is a system under strain, and something will have to give.

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I've tried to examine the evidence and draw some of my own conclusions. I’d love to hear in the comments whether you agree or disagree with my arguments — and, more importantly, whether I’ve overlooked anything.

Thanks, as always, for being here.

Sara

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A version of this article was originally published on Octavian Wine Services’ website. Octavian is one of the world’s leading bonded fine wine storage providers, safeguarding around £2 billion worth of wine across approximately one million cases, including some of the rarest collections in existence.