Market Analysis - Other - 24. August 2023

Analyzing The Fine Wine Market: Navigating Value And Realities

2023: A shift in wine market dynamics. Inflation reshapes investments. Explore the evolving landscape.

Following a couple of years where it seemed like the sky was the limit for wine investors, 2023 has brought some corrections from the extreme price levels. Liv-ex reports a decline of over 10% for Burgundy and Champagne, while Italy is down by nearly 4% year-to-date. Inflation has subdued purchasing power, resulting in the current scenario where supply and demand dynamics are altered. This article delves deeper into the market mechanisms within the wine investment landscape, underscoring the reasons to remain steadfast in the original premise that wine investment is a long-term endeavor.  

Understanding The Actual Valuation Of Wine

The world of fine wine investment is a landscape that hinges on nuance and complexity, where value is a vital indicator reflecting the current supply dynamics, all hinged upon trading data provided by third-party entities such as the esteemed British wine exchange, Liv-ex, and the renowned 

Our investment platform's price indications are rooted in simple data like those mentioned above, serving as a compass for prospective investors. However, it is imperative to recognize that these indications are not definitive market values. In reality, the market's tangible pulse differs from these data-driven approximations. The ebb and flow of day-to-day transactions can introduce fluctuations in data, sometimes deviating from the actual market worth.

In times of low and declining market activity, new and updated price points are also reduced, complicating consistently maintaining a meaningful market assessment.

In light of this, we approach the valuation of your wines with a deliberate human touch. When the time comes for you to actualize a position and initiate a sale, our team of specialists undertakes a meticulous assessment* of your wines. This personalized evaluation is designed to provide the most comprehensive guidance for an efficient sale, considering the intricacies that numbers alone cannot encapsulate.

In a market where supply outpaces demand, the key lies in identifying an appealing price point that aligns profitably for both the professional buyer and the seller. To facilitate a successful transaction, the sale price must be positioned below the prevailing market value, allowing room for the professional buyer to also yield profit from the deal. However, this does not imply a depreciation of the wine's inherent value; it simply underscores the significance of timing the sale correctly. Hence, exercising patience in sales is pivotal to harnessing the potential of securing optimal prices for the bottles.

Another significant factor to consider is the trade of wines between investors. Both new and existing investors frequently engage in positions, while others seek exits. The price must reflect fairness for both parties, impacting the ultimate assessment when a position is realized. Everyone aims to buy at the market's lowest price and sell at its highest. Navigating this tension requires a grasp of strategic maneuvering.

In a realm where subtleties play a pivotal role and the intersection of data and reality can be intricate, we stand committed to ensuring that the journey through the fine wine investment landscape is marked by clarity, insight, and results. 

*In 2022, a global tier-three consultancy and analytics company concluded that RareWine Invest is best in class for evaluating customers' portfolios, demonstrated, among other criteria, by a median valuation difference of ~0% compared to Liv-ex market price.

Navigating The Dynamics Of Wine Market Liquidity Amidst Geopolitical Realities

The concept of liquidity is a prevailing concern within the realm of collectible investments, and it would be an oversimplification to assert that the wine market remains impervious to the intricacy of the current geopolitical landscape.

Now, we are observing some price corrections in the wake of 2 years of significant increases. It is worth noting that sustained declines in wine prices over extended periods are an anomaly. Wine endures as an asset characterized by a long investment horizon; therefore, there is no reason to panic about valuation in the short term.  

As mentioned in our assessment of the second quarter of 2023, parallel circumstances were evident in 2019. Following a remarkable year for wine investors in 2018, the emergence of the US-EU trade dispute, the turmoil resembling civil unrest in Hong Kong, and the palpable reverberations of Brexit collectively injected turbulence into global markets, thereby affecting liquidity in the wine market. While undoubtedly a less favorable turn of events for investors at that juncture, those who had ventured into investments before and amid these challenges have emerged as the triumphant beneficiaries today.

Furthermore, it is pivotal to acknowledge that there exists a threshold beyond which professionals deem a wine too economically attractive to ignore, prompting their proactive acquisition. Recent market dynamics have unveiled intriguing opportunities that remained veiled a year ago.

Unveiling Wine Market Dynamics: A Closer Look At Champagne

Over the past couple of years, Champagne has emerged as the focal point of fervent interest within the wine investment sphere. This enthusiasm is undoubtedly well-founded, given its staggering 38.2% return within two years, as evidenced by Liv-ex Champagne 50. As the best performer, Champagne is thus the most susceptible to market corrections.

The current trajectory of the wine industry holds within it intriguing revelations. Champagne, in particular, maintains its prominence as the most traded wine in both value and volume throughout the initial half of 2023.

Liv-ex's findings illuminate an enduring interest in Champagne, a resilience witnessed despite a momentary downturn of 10.4% in the Liv-ex Champagne 50 index during this specific phase. 

An element of fascination surfaces as Dom Pérignon 2013 emerges as the frontrunner among the most traded wines in the first half of this year.

Noteworthy contenders include Bollinger La Grande Année 2014 and Louis Roederer Cristal 2008 & 2014, capturing attention through their prominence in bid placements from January to June. The allure is further heightened by the revelation that Louis Roederer Cristal 2014 and 2015 don't merely secure positions among the upper echelons of the most expensive wines; they also lay claim to being the most actively traded within this category.

Equally significant is the remarkable surge in price for Jacques Selosse Millésime 2009, charting an impressive ascent of 43.1%. This phenomenon underscores the sustained allure and enduring value of the ever-evolving world of fine wines.

The complex interaction between market dynamics and consumer preferences molds the wine landscape, showcasing the convergence of trends and tradition while value discovers its resonance.

Conclusion: Stay True To Your Initial Investment Strategy

Evidently, the market sentiment currently tilts in favor of buyers, underscoring a 'buyer's market' scenario. The offering in the market right now does not invite selling.

In the intricate interplay of market liquidity, and macro-economic and geopolitical intricacies, we are steadfast in our commitment to charting a course that nurtures your investment journey with perspicuity, prudence, and an astute understanding of the factors at play. Essentially, the symphony of investments and realities harmonizes to create a melodic score that resonates with seasoned and strategic investors alike.


Get in touch with RareWine Invest

Fill in the form and we will get back to you as soon as possible