Wine
Published: 24/11/2023

Invest in fine & rare wine

Slides Learn (44)Rare wine has fascinated investors for centuries. Lifelong experience in this field is of great importance. Investing in wine is very complex, but done right, it can prove to be a very lucrative business.

Rare wine prices have increased by over 135% in the last 10 years and by an average of 16% in 2021 alone. This demand is expected to increase even further as more wine lovers develop in the Asian region.

Why invest in wine?

Rare wine has fascinated investors for centuries. Lifelong experience in this field is of great importance. Investing in wine is very complex, but done right, it can prove to be a very lucrative business. The global wine market size was USD 364.25 billion in 2019 and is expected to reach USD 444.93 billion by 2027. During this forecast period, the CAGR (Compound Annual Growth Rate) is 6.06%.

Corked wine continues to mature after bottling and benefits from an additional price increase over time due to a higher intrinsic value.

Putting a Rare Wine portfolio together is a journey that never really ends. However, what the right composition should look like is just the beginning. It is important to stay informed about the latest trends in order to make appropriate sales and additions to our selection.

Key factors for wine as an investment:

Region: Choosing the right portfolio mix is similar to choosing on the stock market. We should avoid putting all our eggs in one basket and therefore diversify our portfolio across different wine regions. To this end, we should always keep a few classics from regions such as Piedmont, Tuscany, Bordeaux, and Champagne in the portfolio. But it is also important to diversify not only across regions but also across countries and to include wines from Spain, Portugal, Switzerland, and Austria, for example.

Quality: The first step towards success has been taken with the selection of wine regions for our portfolio. Now comes the main part of the research. Not every producer within these selected regions maintains the same quality standards. It is estimated that only 0.1% of the world's wine production reaches investment quality. Therefore, it is of utmost importance to select award-winning wines from top producers.

Storage: It is not enough to store carefully selected wines in an ordinary cellar if you expect serious returns. The importance of professional storage of wine is the key requirement to obtain world-renowned quality labels. Many auction houses won't even accept the wine if they feel that the storage requirements have not been met.

In September 2023. we exited our first wine investment case. 

Rationale for exiting the investment opportunity:

Originally, the investment horizon was projected to span 9 to 11 years. However, the prices of the two bottles have exhibited remarkable performance since their release and have already reached the optimistic scenario of year 6 to 7. In collaboration with our expert Rare Wine Invest, we have made the decision to capitalise on these profits at this time.

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⚠️ What are the risk factors to consider?

Damaged bottles: The handling and storage of the wine bottles are crucial in maintaining their fundamental value. However, in case of unforeseen events such as human errors, a fire, or natural disasters, the casks can be damaged or destroyed.

Counterfeit bottles: Due to the popularity and exclusivity of premium wine bottles, counterfeit pieces are not uncommon on the market. As the popularity of the category increased, the issue will become even more paramount.

Oversupply of wine: Wine is governed by the laws of supply and demand. It is possible that the supply will increase in the future if the Domaine decides to do so. However, the more established domaines have been very conservative and successful while matching the supply with the demand and avoiding any reputation damage. Additionally, the demand for fine wine has been increasing significantly both domestically and abroad, thanks to several emerging economies.

Legislation: Legislation is a significant risk that every investor must understand. There are some extreme examples in history, such as American Prohibition in the 1920s, where alcohol has been banned completely. Other more recent examples include various tariffs and quotas in international trade that can affect exports and therefore the global demand.

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Aurelio Image CEO

Aurelio

CEO & Co-Founder