The Wine Market in Recovery

After several years of crises, corrections, and uncertainty, a new picture is finally emerging: the first clear signs that the wine market is awakening. The latest data suggest that we may be at the beginning of the next positive cycle.

When global crises hit the wine market – and optimism returns

The past five years have certainly been eventful — generally speaking, but especially in the world of wine — and not always in a good way. Markets barely had time to catch their breath after Brexit and the civil war-like conditions in Hong Kong — two events that strongly impacted the global wine trade, as both are among the world’s most important wine trading hubs — before a global pandemic brought the world to its knees. The pandemic first broke the wine market, then sent it into a historic bull market that richly rewarded wine and spirits investors.

The bull market lasted about 2.5 years and prompted long-time investors to take profits, while new investors benefited from high returns even in the short term. During this period and shortly after, we liquidated thousands of positions for investors, with an average return of 67% and an average holding period of about 30 months.

In addition to enormous human consequences, Russia’s invasion of Ukraine in the spring of 2022 also affected global markets, including the wine market. Energy prices soared — and so did inflation. As a result, central banks raised key interest rates, the bull market gave way to uncertainty, and liquidity evaporated. Since then, we have witnessed an economic crisis in China centered on the real estate sector, banking turmoil in both the U.S. and Switzerland with Silicon Valley Bank and Credit Suisse at the center, a change in the U.S. administration, the “Rose Garden” as a symbol and kick-off for a global trade war, deglobalization, and an AI boom sparking fears of a stock bubble and collapse.

All these events, directly or indirectly, have affected global wine trading and thus wine prices. But amid the storm, light can be seen — and there are strong signs that the wine market is recovering.

The Premise for Rising Prices

RareWine Group consists, among other things, of RareWine Invest, which advises on and facilitates investment in wine and spirits, and RareWine Trading, which serves as the underlying engine that trades rare and exclusive wine and spirits globally, having established itself as one of the largest trading companies within our field.

Historically, RareWine Trading operates with a time lag compared to RareWine Invest and the prices tracked in indices such as the Liv-ex Fine Wine 1000. This means that RareWine Trading was affected earlier when fears of lockdowns began to surface during COVID. Conversely, RareWine Trading also felt the recovery earlier, as buying appetite started to return ahead of the major price increases.

A prerequisite for rising prices is demand and trading activity — and in precisely these two areas, we are currently experiencing the most significant positive movements in several years.

RareWine Trading reached an index level of 115 in Q3 compared to last year. This is noteworthy despite lower prices than during the previously mentioned bull market, which naturally means that trading volume has increased substantially — in other words, higher trading activity than the year before.

Trends like this have previously proven to be early indicators of the subsequent development of the market.

Wine Has Always Made A Strong Comeback

Year zero for the modern era of fine wine price data collection can be set at 2004, when the first data point in the British wine exchange Liv-ex’s broadest index, the Fine Wine 1000, was recorded. The Fine Wine 1000 is the industry’s broadest representation of price movements in the global fine wine market.

Since then, the wine market has experienced several corrections but has always come back stronger. During this period, the wine market has never experienced price increases or declines as dramatic as those seen over the past five years. Similar historical cycles do not, of course, guarantee future price increases — but for now, the negative trend has reversed.

Bid:Offer Ratio and Rising Indices

According to Liv-ex, the bid:offer ratio* is generally trending upward across nearly all of their indices. The Fine Wine 100, a sub-index of the Fine Wine 1000, has risen for two consecutive months and now stands at 0.93 — its highest level since November 2022. The Fine Wine 1000 is at a lower level but also trending upward, increasing from 0.41 to 0.52 over the past month alone. That may not sound like much, but it represents a rise of more than 25%. The stronger increase in the Fine Wine 100 indicates higher demand for the most sought-after wines, as this index tracks a more curated collection of exclusive wines.

Historically, a ratio above 0.47 has signaled sufficient demand to support stability and some price growth. At the same time, it is worth noting that this ratio has also shown a strong correlation with future market movements.

Another interesting observation regarding the bid:offer ratio is that the value of bids on the Liv-ex Champagne 50 index has reached the same level as in 2022. This indicates genuine strong demand, although the supply side remains larger. Nonetheless, this is very good news for champagne investors.

In September, the Liv-ex Fine Wine 100 recorded its first positive movement since the autumn of 2022. According to the latest figures, this increase was followed by another rise in October, bringing the total gain over the past two months to 0.9%.

It may not seem like much, but combined with the previously described positive indicators, it suggests — cautiously — that the market is improving.

RareWine Invest’s Opinion

For the investor who, like us, believes in the fundamental qualities of wine and spirits as assets, this is an exceptionally exciting time — one that may mark the early beginning of a new cycle.

The recent interest rate cuts by both the U.S. and European central banks appear to be taking hold in the economy, resulting in increased purchasing power.

When this is combined with a market full of attractive acquisition opportunities for the risk-conscious investor, it creates extraordinary opportunities to plant the seeds of future growth.