Wine Investment Insights 2024: Turning the Corner Toward Recovery

Almost a year ago, when drawing the conclusion for 2023, we forecasted that price upswings in the first half of 2024 would be overly optimistic, given geopolitical insecurity, inflation, and peaking interest rates, which have led to a lack of liquidity in the fine wine market.

Obviously, 2024 proved to be a challenging yet pivotal year for the fine wine market. While declining prices continued to present short-term challenges, we saw the first signs of improvement as the FED and ECB lowered the interest rate and global inflation stabilized. 

Despite China's economic slowdown, reducing luxury consumption across Asian markets, the number of trades for the wines in the Liv-ex Power 100 list is 7.9% higher than for the 2023 list. However, it's important to note that while the number of trades increased, the volume of wine traded fell by 6.5% during the same period. This suggests that although more individual transactions occurred, the total quantity of wine exchanged decreased, reflecting a market where buyers are cautious about taking on large stock quantities.

This nuanced view highlights that, despite challenges, the fine wine market demonstrates sustained interest and liquidity in fine wine as an asset class.

At RareWine Invest, our portfolio delivered a market performance of -4.65%, significantly outperforming the broader wine market, as reflected by the Liv-ex Fine Wine 100’s decline of -9.1%. While the overall market faced a challenging year, our results highlight the strength of a carefully curated portfolio and our expertise in selecting the right wines.

Admittedly, a negative result may not seem impressive at first glance. However, positioning your portfolio with the right wines during downturns is essential for maximizing returns when the market rebounds. This strategic approach ensures you are well-prepared to capitalize on future opportunities as the market regains momentum.

While declining prices brought short-term challenges, this downturn unlocked significant opportunities, allowing investors to acquire previously inaccessible assets at compelling valuations. Opportunities that many have seized.

Realized Returns in 2024

If two years stained by price corrections have given you second thoughts about wine investment, do not despair. As now may not be the best time to realize luxury investments, we have demonstrated that there are still attractive profits in the market. However, it is essential to note that selling in a bearish market often leads to longer sales processes and lower prices than usual. At the same time, such conditions can present lucrative opportunities for liquid buyers, who can take advantage of favorable pricing and secure valuable assets at a discount.

RareWine Invest is a part of the RareWine Group, which gives you, as an investor, access to RareWine Trading, a top-five wine merchant globally. Valid and global distribution channels, in addition to facilitating the sale, are essential. Otherwise, your investment becomes an expensive collection you might never fully enjoy. Additionally, knowing that you can access your money promptly once the wine is sold is vital. Ensuring prompt access to funds is crucial for maintaining your investment's liquidity.

During 2024, we are proud to have realized 1.707 positions on behalf of our investors, with an average return of 18.7 %. The average holding time for these positions was 3.5 years, which is even below our recommendation of 5 to 10 years. The majority of these sales occurred contrary to our recommendations, driven by macroeconomic pressures that compelled investors to liquidate positions earlier. Also, we have seen a growing trend of investors taking positions out of their portfolios for consumption.

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

Navigating the current market

The interplay between wine prices and rising interest rates became a defining feature of 2024 as non-yielding assets like fine wine become less attractive during periods of high interest rates.

Wine prices peaked in November 2022 but began a steady decline as market liquidity dried up. This downturn was triggered, in large part, by the sharp increase in interest rates that began in May of the same year. Since then, wine prices have shown a clear negative correlation with rising interest rates.

However, this recalibration has created buying opportunities for value-driven investors. For instance, the correlation analysis published by RareWine Invest shows that as interest rates peaked globally, high-priced vintages experienced declines of 10-15%. This trend highlights the cyclical nature of the fine wine market and its potential for liquid investors.

Historically, periods of low or stable interest rates have been associated with upward trends in wine prices. This pattern suggests that lower interest rates boost trading activity, increase demand and liquidity, and ultimately drive prices higher. After years of a hostile interest rate environment, in 2024, it finally appears that leading central banks are easing their grip, indicating light on the horizon.

Click here to read our article about the historical correlation between wine prices and interest rates.

Recent media coverage has highlighted a declining interest in wine among younger generations, particularly in France. However, a closer examination reveals a more nuanced reality. While it is true that younger consumers are moving away from lower-priced, mass-produced wines, their preference for high-quality wines remains robust. This shift toward quality over quantity suggests that the fine wine market is not only resilient but may also experience growth in the future as it aligns with evolving consumer preferences.

On another note, the International Organisation of Vine and Wine (OIV) reported that 2024 wine production hit its lowest level since 1961, forecasting just 231 million hectoliters, a 2% decline from 2023. France's production alone fell by a staggering 23%, driven by poor weather. This set a grim tone for availability and future price trajectories. Such circumstances have reaffirmed the long-term investment appeal of fine wine, particularly as demand exceeds diminishing supply.

In fact, the 2024 harvest yields in Burgundy were among the six worst in 100 years, as were those in 2017, 2019, and 2021. Climate change has become a brutal reality for wine producers, leading to a diminished future supply of fine wine in the long run. Click here to read our article on the 2024 harvest in France

Recent trends on Liv-ex indicate a growing number of sellers adjusting their offers to meet buyers' expectations. In today’s market, seller-triggered trades consistently fall well below Market Price. This decline in Market Prices has opened opportunities for strategic buyers to secure fairly priced wines, highlighting the evolving dynamics of supply and demand in the fine wine market.

Timing is critical to investing in less liquid markets, as the bid/ask spread is typically much lower than we currently witness. This can sometimes make wine prices appear to be declining more than they are, presenting an opportunity to enter at a lower price point. This favorable spread can be particularly advantageous for investors seeking to diversify their portfolios with the stability and growth potential that fine wine offers.

Considering the current market conditions, our core recommendation remains consistent: adhere to the fundamental principles of wine investment, emphasizing its nature as a long-term asset. Patience is key, as the buy-and-hold strategy continues to be the most effective approach in navigating this market and maximizing potential returns over time.

Burgundy (-6.51%)

The most significant price fluctuations in 2024 were observed among the most expensive wines, reflecting both growth and decline. Having solidified its position at the pinnacle of the wine elite, Burgundy experienced another year of corrections, much like 2023, logging a performance of -6.51%. This follows years of unprecedented growth, including 34% in 2022 and 18% the year before. Recent recalibrations are unsurprising, given the extraordinary rise in recent years and the momentary lack of liquidity in the current market. Despite the negative return, our ability to carefully select wines once again proved its value, as the Liv-ex Burgundy 150 recorded a far steeper loss of -15.2% in 2024.

Despite the setbacks, Burgundy’s reputation as a cornerstone of fine wine investment remains intact, driven by strong long-term demand and ongoing supply challenges exacerbated by climate change. Liv-ex reports that Burgundy brands dominate the 2024 Power 100 list, holding the top five spots for the number of unique wines traded. Burgundy continues to dominate the Liv-ex Power 100 list, with 30 producers hailing from the region. This marks the fourth consecutive year as the best-represented region, a testament to its enduring influence and prestige, even amidst a modest setback.

This market recalibration has presented compelling investment opportunities in Grand Cru Burgundy wines. Additionally, rising demand for Premier Cru and Village-level wines is gaining traction as yields continue to struggle. Also, the region is entering a new era, with a generation of young, ambitious winemakers making their mark. These producers, often inheriting centuries of expertise and benefiting from more substantial financial backing, advanced technology, and a global shift toward organic and biodynamic practices, are well-positioned to elevate Burgundy’s reputation further. The common denominator for the aspiring generation is an uncompromised focus on quality over quantity.

Also, we have seen better-than-anticipated scores for the 2023 vintage, and the first quality indications for the 2024 low-yield vintage are very promising.

Over the long term, Burgundy stands out as a desirable investment, achieving an impressive 537% growth over 20 years, according to the Liv-ex Burgundy 150. This performance surpasses Gold at 513% and the S&P 500 at 429%, solidifying Burgundy's position as a top-performing asset in the same period.   

Champagne (-4.59%)

Like Burgundy, Champagne experienced significant momentum in 2021 and 2022, followed by corrections in 2023 and 2024, with only a few exceptions.

Champagne under RareWine Invest's administration closed 2024 with a decline of -4.59%, outperforming the broader category represented by the Liv-ex Champagne 50, which fell -10.6%.

The category experienced its steepest declines early in the year but stabilized in the latter half of 2024. Notably, older vintages from several Grandes Marques recovered during this period. Pricing for new releases appears less predictable compared to more established vintages. As a result, we’ve adopted a more conservative approach by limiting the inclusion of new releases in our investment offerings. While opportunities undoubtedly exist among new releases, data consistently show that the most significant potential currently lies in the better-priced established vintages.

While smaller, grower Champagnes have risen in prominence in recent years, the Grandes Marques remain icons of Champagne, combining tradition, innovation, and accessibility. The Grandes Marques represent volumes, consistency (in both taste and trade), and accessible prices. Crucially, the Grandes Marques are regularly opened and drunk. They are, in short, reliable and liquid. Some of the most recognized Grande Marques are Krug, Bollinger, Taittinger, Louis Roederer, Moët & Chandon (incl. Dom Perignon), Pol Roger, Deutz, and Veuve Clicquot.

Despite not being considered among the Grande Marques, Salon and Selosse are regarded as some of the finest Champagne producers and celebrated for their single-vineyard, single-varietal, and single-vintage philosophy. Both must be mentioned in the same breath as the iconic luxury champagnes. Despite corrections, they remain desirable for investment in the long run due to their rare nature and exceptional quality.

Overall, Champagne has increased by almost 50% over the last five years and delivered a 414% return since 2004.

Italy (-1.12%)

In 2021, we increased our recommended allocation for Italian wines and separated Italy from the Rest of the World category, with strong performance and growing justification in the numbers. Today, our recommended exposure to Italian wines is 15%.

Italian wine is undergoing a remarkable resurgence, driven by a new generation of talented winemakers attracting international acclaim like never before. In regions like Barolo and Barbaresco, we see a meticulous mapping of vineyards akin to Burgundy, alongside a growing focus on organic practices and single-vineyard cuvées. These trends resonate strongly with modern wine consumers seeking authenticity and terroir-driven quality.

Similarly, Tuscany is experiencing a golden era for iconic wines such as Brunello, Chianti, and the Super Tuscans. Over the past decade, both Piedmont and Tuscany have produced some of the finest Italian wines in history.

By January 2025, Italy's growing prominence in the fine wine market is unmistakable, as reflected in the 2024 Liv-ex Power 100 rankings, where Italian producers secured 22 spots - an impressive increase of ten compared to the previous year. This surge brings Italy closer to Burgundy and Bordeaux in terms of both investor interest and price performance.

While renowned names like Sassicaia, Masseto, Tignanello, Ornellaia, and Gaja continue to dominate, new entries such as Stella di Campalto, Soldera Case Basse, Solaia, Fontodi, and Casanova di Neri have joined the ranks, further cementing Italy’s position as a powerhouse in the global fine wine market.

Despite the market's reduced liquidity caused by the challenging geo-economic conditions of recent years, Italian wine under RareWine Invest’s management demonstrated remarkable stability, declining by only -1.12% in 2024. This performance significantly outpaced the Liv-ex sub-index Italy 100 - the most comprehensive measure of Italian wine market performance - which fell -6.8% over the same period.

What makes Italian wine particularly exciting is its future potential. Compared to their French counterparts, Italian wines remain significantly more affordable - a trend that was true a decade ago and continues today. This accessibility not only attracts a broad range of consumers but also leaves ample room for price growth, making Italian wine a compelling investment opportunity with untapped potential.

Bordeaux (-0,27%)

Once again, the Bordeaux En Primeur campaign struggled to generate substantial interest with the release of the 2023 vintage. This was particularly true for wines where older, more established vintages offered better value.

Simply put, this year’s En Primeur campaign faced significant challenges. With cellars already stocked with back vintage Bordeaux and weak demand, a considerable stock overhang has emerged, prompting an ongoing clearance effort. For over a decade, collectors have seen little profit from buying En Primeur, and now merchants and négociants are facing shrinking margins as the market searches for a sustainable clearance price.

In stark contrast to most wine investment funds currently engrossed in Bordeaux En Primeur, we have opted out and strongly advise investors to exercise caution. Bordeaux accounts for no more than 5% of our recommended portfolio composition, though we acknowledge there are still suitable investments to be found among the established icons. 

The Liv-ex Bordeaux Legends 40 index declined by -9.5% in 2024, highlighting the broader Bordeaux market's challenges. In contrast, the carefully curated Bordeaux selections under RareWine Invest's management demonstrated remarkable stability, delivering a near-flat performance of just -0.27%, effectively weathering the year’s market turbulence.

Click here for a more nuanced perspective on the Bordeaux En Primeur 2023.

Rest of the World (-3,32%)

The Rest of the World category, which encompasses wines from regions such as Napa Valley, Spain, Rhône, and Australia, as well as Scotch and Japanese single malt whisky, delivered a mixed performance in 2024. While the broader market faced challenges, RareWine Invest's portfolio demonstrated more resilience, declining by just -3.32%. This was a significant outperformance compared to the Liv-ex Rest of the World 60 Index, which fell by 9.7% over the same period.

Napa Valley remains a cornerstone of the Rest of the World category, driven by iconic producers like Screaming Eagle, Harlan Estate, and Opus One. While demand for high-value Napa wines has softened slightly due to global economic conditions, the region's reputation for producing consistent, world-class wines has remained relatively stable. RareWine Invest’s Napa selections benefitted from a focus on vintages with proven demand, allowing for minimized losses despite broader market pressures. Top Napa wines will likely see renewed demand as global markets stabilize, particularly in Asia and North America.

Also, rising interest in terroir-driven wines and expanding international recognition is expected to drive long-term growth for areas such as Spain and Rhône.

Most notable is the whisky category, though. We are experiencing a growing interest in whisky from collectors, consumers, and investors alike, which may very well be due to the category's general performance. Despite a non-event year for whisky with a performance of -1.1%, according to The Wealth Report by Knight Frank, rare whisky is up by 280% in 10 years, outperforming other investments of passion by length, including art, diamonds, watches, and cars.

RareWine Invest’s Opinion

While the past year brought price corrections and continued headwinds, there are reasons to look ahead with cautious optimism. The ECB and FED have signaled that interest rates may decrease further in 2025, with inflation largely controlled. Additionally, strengthening the US Dollar could further support demand from key markets like the United States.

That said, we do not expect a dramatic turnaround in 2025. The fine wine market operates on long-term fundamentals, and assessing performance over a year misses the broader picture. Fine wine is a long-term investment, and we recommend looking five or even ten years ahead to truly capture its potential.

The current bearish market provides significant buying opportunities for patient investors, as prices for many iconic labels are more accessible than in years. Conversely, selling in this market should be cautiously approached, as the conditions remain better suited for buyers than sellers.

The first half of 2025 is likely to be uneventful as markets and investors await clarity on the geopolitical and economic effects of President Trump's return to the White House. Discussions around tariffs on European goods, including wine, could have far-reaching implications for the fine wine market. While it is uncertain whether such tariffs will materialize, this uncertainty could weigh on buyer sentiment in the short term.

Another key development on the horizon is the potential benefits of the Mercosur agreement. This agreement would allow European wine and spirits producers to access a 260-million-consumer market in South America by removing high tariffs and other trade barriers. Eliminating tariffs as high as 27% on wine and 20-35% on sparkling wines and spirits could significantly boost exports and support European producers in the long run. This promising development could create further demand for high-quality European products, including fine wine.

We also see increased trade activity and interest in premium wines and spirits from significant markets such as India and Taiwan, where a rapidly growing middle class is fuelling future growth.

In conclusion, while the fine wine market faces short-term uncertainty, its long-term fundamentals remain strong. Current market conditions present savvy buyers with a rare opportunity to secure exceptional wines at attractive valuations. As we enter 2025, the market’s recovery may begin to show its first signs, albeit slowly. We firmly believe that we have seen the worst and turned the page. For investors with patience and a long-term perspective, this period of recalibration could serve as a foundation for future gains. Fine wine remains a reliable and rewarding asset class for those who stay focused on the bigger picture.