Market Analysis - Other - 7. May 2023

Wine Market Insights Q2 2023

What is the current state of liquidity in the wine market, and what are the future investment opportunities in wine? Here is all you need to know about the wine market

Well into the second quarter of 2023 and we are fast approaching the half-year mark, the global market situation remains uncertain.

The financial world is still shaken by recent events, with the collapse of SVB and the rescue of Credit Suisse shaking investor confidence. As a result, there is a trend away from traditional investments and towards more resilient assets such as bonds, gold, and, most notably, wine.

Of course, alternative investments such as wine and whisky are not entirely immune to market risks. However, their unique market dynamics can still provide some protection in the event of a sudden macroeconomic shock, as evidenced by the collapse of SVB.

We take a closer look at the wine market. Watch the full video or read the article below.

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Current Liquidity In The Wine Market

Liquidity in the market is a common concern among investors of collectibles. And it would be naive to claim that the wine market unaffected by the current geopolitical situation. But in times of economic downturn, the wine market responds with stability, unlike most other markets.

We are only seeing minor price increases or even decreases at the moment. In fact, it is extremely rare for wine prices to fall over a longer period of time, so nothing has changed. Wine is still an asset with a long investment horizon.

In 2019, we faced a similar situation. On top of a record year for wine investors in 2018, the US-EU trade war, civil war-like conditions in Hong Kong and, not least, the Brexit turmoil created problems on world markets, removing liquidity from the wine market. Obviously, this was not the most interesting development for investors at the time, but those who invested before and during this are the ones who are smiling the most today.

Moreover, there is a lower limit to how cheap a wine can get before professionals believe it is too cheap and start to buy. And we have seen some exciting opportunities in the market lately that we did not see just a year ago. It is definitely a buyer's market.

Accessibility Is Key

It all comes down to accessibility. The 2019, 2020, and 2021 vintages are all small yield vintages in Burgundy, and they can all be challenging to source - both now and even more so in the future. Being able to source in quantity is vital. It will always be possible to find a single bottle or case, but the absolute strength lies in numbers. When realising a portfolio, being able to offer larger quantities is the key to attractive selling prices, as this is where you also hit the lucrative professional market.

At RareWine Invest, we also remain firm in our belief in the Burgundy index, including the emerging Burgundy producers who have not yet cemented their name in the wine top. In this category, it is still possible to source attractive quantities at an excellent price starting point for investment. More of these investment opportunities are bound to emerge in the near future.

Furthermore, we continue to believe in the Champagne category, where we also see that the liquidity in the market is still present. Despite growth in recent years, Champagne is still too cheap compared to the best Burgundy or Bordeaux wines, and according to sales figures from RareWine Trading, demand is increasing - especially in Asia.

The Asian Market

According to Bloomberg, a fun fact that shows the liquidity of the market is that casino revenues in Macau are slowly recovering from the pandemic.

Furthermore, Bloomberg says that LVMH's market value has surpassed $500 billion, making it the first European company to reach that milestone - largely due to the strong euro and a booming luxury goods market in China.

Moreover, analytics and consulting firm GlobalData forecasts that the market for wine in China will almost double by 2026. The growth is expected to be driven by China's Millennials and Generation Z as they gain purchasing power and become the wine drinkers of tomorrow.

Moreover, it is estimated that by 2025, China will be the world's largest market for luxury products, according to Bain & Company.

According to the Union des Maisons de Champagne, China was only the 14th largest export market for Champagne in 2021, 93.8% smaller than the US, which is reported to be the largest - and only marginally larger than Denmark with just under 6 million inhabitants.

Which Investment Cases Will Be Trending In The Near Future?

Many investors are naturally curious to analyse future investment opportunities. In addition to the already mentioned upcoming wine producers in Burgundy and Champagne, we are particularly looking towards Italy. Especially the Piedmont region looks attractive from the point of view of both wine lovers and wine investors.

Investing In Italy

If we are to be very specific, we are particularly looking for the 2019 Barolos and Barbaresco from 2020. The neighbouring vintages also look exciting, as we have seen with the 2015 and 2016 vintages from both Barolo, Barbaresco, but also Brunello and Tuscany in broader terms. Italian wines are generally on top these years. They have done a great job of mapping the vineyards in Piedmont - especially Barolo - which we are familiar with from Burgundy. It provides transparency, insight, and not least the opportunity to taste the vineyards against each other.

In addition, the price of agricultural land in the area is too high if we compare it with the price of the wines, just as we predicted for Champagne in 2020 and has since contributed to major price increases.

Recently we have adressed Italian wine as "affordable luxury". More people can afford to consume a bottle of Monfortino or Sassicaia - even in times of crisis, as the best Italian wines are far from being in the same price range as wines from Burgundy or Bordeaux.

We have secured several direct allocations in the area to ensure the best price starting point and sufficient volumes for investment, and to deliver perfectly matured wines to wine lovers around the world in the future.

Knight Frank's 'The Wealth Report 2023' further reported that 39% of UHNWIs* are likely to invest in wine this year and further noted that "[...] interest in alternatives is on the rise and will be where wealth is grown over the coming decade."

[…] interest in alternatives is on the rise and will be where wealth is grown over the coming decade."
Knight Frank – The Wealth Report 2023

Investing In Whisky

In addition, whisky is a category that has shown remarkable performance and resilience over the past 10 years, with 'Fine Whisky' up 373% from 2012 to 2022, leading more investors to wanting whisky in their portfolios.

According to Knight Frank's 'The Wealth Report 2023', whisky is the 10-year leader among passion investments - ahead of art, cars, watches, furniture, and other collectibles. Although 'fine whisky' is specifically referred to as an 'inflation booster', it is important to remember that whisky is more volatile than wine - but we are looking at more exciting investment cases ahead.

*Ultra High Networth Individuals = individuals with wealth in excess of $30m.

If you are an investor and have questions about your portfolio, you are more than welcome to contact your portfolio advisor. If you are not yet an investor but would like to hear more, we would love to hear from you via the contact form below.

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