Analysis: Will The Wine Market Continue To Grow In 2022?

Not only in the class of alternative investments, which counts diamonds, watches, and cars but also across the more traditional investment classes such as stocks and gold, wine was according to several analyses among the best investments in 2021. Thus, we also reported, at the end of 2021, increases across the board - not least led by the Champagne category, which for 2021 delivered a full 39.5%, proving to be more attractive than Bitcoins as well. Click here to read the full report.

At RareWine Invest, we are not the only ones to notice the positive price development for wine investors, also Irvin Goldman, CEO of Acker has noticed the development. Acker, a reputable wine auction house based in Delaware and Hong Kong, even predicts that the trend will continue in 2022.

Leaving aside the external macroeconomic conditions affecting the global economy, the expected market development for 2022 is explained in terms of the familiar three C’s: Collectors, Consumption, and Climate Change.

Collectors - Greater Demand Than Ever

According to The Wealth Report 2021, published annually by Frank Knight, we are looking at a population growth of just over 30% by 2025 in the segment of UHNWI - Ultra High Networth Individuals - people with a wealth exceeding $30 million. Irvin Goldman states that 2021 was the year when the rapidly growing global population really started to see wine investing as a real opportunity.

Among the new segments that have become aware of wine investment, the group of people aged between 35 and 44 is particularly highlighted as the most committed. This group in particular has been involved since the beginning of social media and is still among the most active on social and digital media, especially when it comes to wine-related content. Increasingly, this segment is also starting to take an interest in collecting, drinking, and investing in exclusive wines.

This is a trend we also recognise at RareWine Group, where over 60% of our more than 350,000 followers on Instagram are in the age group ranging from 25 to 44.

Despite the worldwide pandemic, world wealth increased by $7.8 trillion in 2021, which has meant that existing wine collectors and wine lovers have also had more money in their hands, allowing them to invest further.

Irvin Goldman also points out that new markets with no tradition of wine investment are starting to take notice of this particular asset class, including major economies such as Russia, India, the Middle East, and Australia.

The strong returns that wine has delivered in 2021 in particular, have also attracted another type of investor, the so-called "crypto investors", who usually do not have the patience to invest in wine. If this group commits to wine investing in serious fashion, we can expect further price increases in the future.

Consumption - More Wine Is Consumed

Covid-19 has changed the world forever. Not least, it has turned consumption, habits, and lifestyles upside down. The consumption of wine by traditional wine lovers has increased and this has only been reinforced by the pandemic.

Global lockdowns caused by Covid-19 have led to more people than ever working from home. As a result, the transition between work and private life is merging. The home office has led to new habits; you can go to bed a little later than you used to. You don't have to get up as early as you used to. You don't have to drive home, etc.

During the pandemic, large parts of the world's population have been cut off from many experiences and consumer goods, resulting instead in people spending money to treat themselves a little more at home, for example by enjoying an extra good bottle of wine or two.

As a result, more people than usual are enjoying the precious drops - even when everyday life returns to normal.

In all the models that forecast the consumption of exclusive wines in the future, the consumption factor has increased. In fact, to such an extent that several models predict a limited future supply due to the higher consumption, concludes Irvin Goldman.

Climate Change - Unstable Weather Leads To Lower Crop Yields

As we have previously reported, the harvest yield for French wine growers is historically low in 2021. In fact, so low that the French Ministry of Agriculture, according to Ritzau, has called the 2021 harvest the worst agricultural disaster of the 21st century - read the full article here. Wine production in 2021 is a good 30% lower than 2020, which in itself was not great.

In the popular American TV news magazine "60 minutes", which is shown on CBS, the public got a glimpse of what the wine world has known for a long time on December 26, 2021. Climate change is already having a major impact on both the quality and yield of wine produced around the world. We are experiencing some of the smallest vintages ever as rising temperatures, extreme weather events, unstable frosts, rain, and devastating forest fires destroy whole or parts of vintages. A sad trend that creates fear for the future productions of the world's best wines.

To improve quality, conversion to sustainable or biodynamic production is increasingly being pursued in the world's leading wine regions, resulting in higher production costs and lower harvest yields.

In short, the already scarce quantities of exclusive wines will only become scarcer in the future, where there is already talk of both Champagne and Burgundy drought, which you can also read more about here.

Conclusion

The headlines of doom should be used carefully - after all, it is still impossible to predict the future. If, however, the 3 C's are to be given a little consideration, then as a wine lover, you cannot avoid being a little worried about the future. Fortunately, you can be comforted by the fact that there are huge quantities of fantastic wine being produced all over the world, which are unlikely to increase in price significantly and even taste good.

However, when we zoom in on the scarce quantities of wine suitable for investment, there is reason for optimism among wine investors. The world economy, combined with the 3Cs, could even lead to a real drought of the best and most exclusive wines. Population growth, more money to spend, increased consumption and the emergence of new segments that have an eye for exclusive wines for both consumption and investment are the driving parameters.

Quite simply, it all comes down to the fact that more exclusive wine is being consumed and there will be less of it in the future. We therefore have a supply-demand relationship that is highly attractive to wine investors - immediately in 2022, but especially in the long term.