Understanding The Wine Market Dynamics


Embarking on a journey through the captivating world of the wine market unveils a landscape with complexities and fluctuations. This article delves into the intricate dynamics that shape the wine market, offering insights into its ever-evolving nature and the strategies essential for success. From shifting trends to geopolitical influences, we explore the forces that animate this enigmatic realm, providing you with a tool to navigate the currents of wine investment. 

First, when investing through RareWine Invest, you get access to our investment platform, myRareWineInvest. Here, you can follow the performance of your portfolio and gain insights about the wine market. However, it is vital to understand the price metrics that characterize wine.


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 wine-searcher.com. 

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.

New and updated price points are reduced during low and declining market activity, complicating consistently maintaining a meaningful market assessment and vice-versa in times of high and rising market activity.

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.

Relevant data include price, development, trade volume, availability, quantity, packing, provenance, brand, drinking window, market activity, etc.  

Choosing positions where the supply can not meet the future demand is essential for any wine investor. However, in the early years after a bottle of wine is released in the market, supply can outplace demand - a scenario also seen during global economic downturns. The key lies in identifying an appealing price point that aligns profitably for both the professional buyer and the seller at any time. 

Depending on the types of wines chosen for your portfolio, there can be significant variations in investment strategy. For instance, acquiring larger quantities of Italian wine at a relatively lower bottle price is considerably more accessible, while obtaining large amounts at low bottle prices in Burgundy is nearly impossible. Consequently, this leads to distinct scenarios in terms of price evolution. Diversifying risk across various positions and regions is advantageous, like any other investment.

*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.


Understanding The Buyers And Their Motives

Understanding potential buyers and their purchasing motives is crucial when selling positions from your portfolio. From the moment the wine leaves the vineyard, it's likely to be traded multiple times, potentially doubling in price many times before reaching the final consumer.

As a buyer, the goal is to enter the process as early as possible, ideally purchasing the wine as the first buyer when it leaves the estate. Due to the allocation distribution model, this can be nearly impossible for the majority, especially when aiming to secure investment-worthy quantities. But fret not; as time progresses and supply and demand mechanisms come into play, the wine's price often rises exponentially in favor of investors in the long run. 

When selling wine, the key is to offer it to as many potential buyers as possible, including professional wine traders, private collectors, and fellow wine investors. The more potential buyers, the better the chance of securing a favorable price.

To facilitate a successful transaction, the sale price must be positioned below the prevailing market value, allowing the professional buyer also to yield profit from the deal when he sells it. The wine will often be traded variuos times before it ends up at the end-consumer. 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.


Understanding The Liquidity In The Wine Market

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 geopolitical landscape.

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.

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. 

Wine can, to your advantage, be included as a low-risk element in an investment portfolio similar to bonds and other capital-preserving assets and can contribute to spreading risk and increasing returns on the investment.


Understanding RareWines Role (As A Broker)

RareWine is one of the world's foremost wine trade and investment companies, catering to investment clients across more than 45 countries.

As intermediaries and facilitators, our primary profit comes from the spread between purchase and sale prices when we first sell the wine, akin to any trading business. When we assist an investor in facilitating a later sale, we earn a small percentage of the transaction as intermediaries. This percentage typically ranges from 5% to 10%, depending on the portfolio's size being realized.

The premise of wine investment is rooted in a long horizon, with our recommended minimum being five years. While profits can be realized in the short term, this is more an exception than the norm, as wine prices are influenced by supply and demand. A considerable period often elapses from a wine's market debut to the point where sufficient quantities are consumed to drive up the price. The most significant risk in wine investment arises from having a too-short investment horizon.

Example: If you buy a case of wine today and aim to sell it again tomorrow, the buying and selling prices will likely be identical, but accounting for our commission, you incur a loss. Hence, your investment horizon is pivotal for a successful patient sale.

Collaborating with RareWine Invest offers the advantage of handling the practicalities of building, assembling, and storing your portfolio, along with assistance when it's time to realize your returns.

Through our extensive network in the wine industry, we provide unique access to investment-worthy wines that can be hard to secure, especially in larger quantities. Depending on our position in the value chain and the volumes we can acquire, we sometimes offer investment-worthy quantities at the market's lowest prices. While you may have contacts for better-priced individual bottles, purchasing through RareWine ensures you're buying from the same place and at the same price as professional wine traders.

The wines are stored in bonded warehouses through Nordic Freeport, and we assist with anti-fraud control. Appraising a wine based on data is one thing, but realizing its value in an actual transaction is entirely different.

Through RareWine Trading's global sales channels, we offer a best-in-class solution to assist you in efficiently realizing your investment, unlike many other wine investment platforms. This provides optimal conditions both for purchasing and selling*.

* To ensure transparency when selling your wine or spirits, all trades are revised by a third-party instance (Deloitte), guaranteeing that stated sales prices correspond to the actual sales prices.