The wine market is expected to decline in 2023. The good news is? This dip could be coming to an end. In the third quarter, the rate of decline decreased significantly, which is a sign that the downturn could be ending. This edition of Vinovest’s Quarterly Report will include information on whiskey exits and investment opportunities.
TLDR
Let’s make this brief. Here is the 30-second version.
Wine prices continue to fall amid a correction in the market.
The wine market will be favorable for buyers in Q4 based on the performance of wines.
Champagne and Burgundy have excellent harvests, but Italy and Spain are experiencing a decline in yield.
BY THE NUMBERS
The average return on Liv-ex 1000 wines is -2.89%.
$10.9 Million — The total value of the whiskey owned by Vinovestors has more than doubled since April.
$49.462 The price of a Laphroaig single malt cask bought by a Vinovestor in August.
$7.5 Billion The value of Scotch Whisky purchased by Asia-Pacific, which surpassed the European Union in September as the most important export destination for the fine spirit.
WHISKEY AND FINE WINE PERFORMANCE DURING
Fine wine prices rose dramatically during the Covid-19 epidemic. Any investor who purchased at that time would have enjoyed a healthy return, as well as a hedge against inflation or economic uncertainty. Since October 2022, the market has started to correct itself, and prices are falling in all regions. The average portfolio of Vinovestors returned -5.9% in the third quarter, which is the lowest performance since the second quarter of 2022.
This downturn has affected all regions. All major parts saw declines in the Liv-ex 1000 index, which features 1,000 of the best portfolio-worthy wines. Italy experienced the lowest decline of -0.9% while Bordeaux dropped -3.8%, despite high demand for older vintages.
A price correction – defined as a drop of between 10% and 20% – stands out as the leading cause of declining prices. Even a region like Champagne, which has recorded its highest level of trade by value and volume, is still trending downward. Macroeconomic conditions may also be to blame. Tentative buyers have been a theme throughout the year, a potential byproduct of higher living costs and macroeconomic uncertainty.
It can take several weeks or even months for prices to return to normal. These corrections often result in a return to normalcy or a bullish market. The fine wine market has a bullish long-term trajectory, and small downturns in the cycle are normal.
VINOVEST COMPLETES A SECOND WHISKEY OUTLET
Vinovest has completed its second whiskey sale in the third quarter. The casks of high-rye Bourbon were bought for $1413.75 each and sold for $1850 each seven months later. This translates into a return of 30.31% for Vinovest’s clients.
The exit marks the second one as part of our contract with a private buyer. Both casks delivered the same returns over identical hold times. The lone difference was the recipe, with one barrel containing 75% corn, 21% rye, and 4% barley and the other featuring 70% white corn, 20% rye, and 10% barley.
It’s still not too late to start adding whiskey to your collection. Please find out more about our American & Scotch offerings by clicking here.
INVESTING FORECAST
A soft market. A market of buyers. Whatever you call it, many of the trends that shaped wine sales in the third quarter will continue in the fourth.
The market has slowed down. The Livex 1000 dropped only -0.8% last month, compared to -8.7% during the first seven weeks of the year. Does this mean that the decline is over? Perhaps. It will take some time to determine whether or not the stabilization is an indication of a recovery.
So, what’s the cause of this stabilization? There are a couple of possible answers. First, sellers may adjust their prices to align with the bids of buyers more closely. Second, more buyers are entering the market. The wine marketplace Liv-ex has reported increased trading activity in value and volume in recent months.
The market should reward active buyers if conditions remain unchanged, particularly as the dollar and euro have fallen to their lowest levels in six months against the pound. The favorable forex movement increases the buying power of those who have US dollars. Many top brands offer attractive discounts.
Here are some notable wines that have been trading at below their original release price as of the date of publication:
Sellers are not expected to see the same favorable conditions as buyers, with supply outpacing demand. As our Head of Wine, Liz Dowty Mitchell, noted, “In general, I’d recommend continuing to hold your assets if possible since the end of the year is not the best time to sell. There are always exceptions to this, but it will be at the producer level rather than the regional level.”
Looking ahead…Keep a close eye on Burgundy. Experts in the industry predict that prices of top Burgundies will rise in the long run. The region has had a series of small vintages which have reduced its already variable output. Prices should rise due to the tightening of supply and increased global demand, particularly from collectors with high net worth, especially in Asia.
WINNER AND LOSERS OF THE 2023 HARVEST
Autumn is a time of many things. Sweater weather. Football. Jack-o-lanterns. Harvest season is also a great time to celebrate.
The harvest of 2023 was not uniform. Each region had its challenges and successes. Here are some notable winners and losers.
WINNERS
Champagne. The news about the heaviest champagne bunches recorded is making waves in Champagne. The Drinks Business has already hailed the bountiful crop as ” comparable.”
“burgundy. BurBurgundy’s seasonal climate means either a feast or famine to winegrowers. It’s the first this year. The grape production will be higher than the average for the past five years despite mildew, hail, and other problems. BeaBeaujolais’ighbor, Burgundy, did well last year despite the drought.
Napa Valley. The low temperatures in Napa Valley defined the growing season and should delay harvesting by up to three weeks. Producers are excited about the late harvest, and they’re happy with its quality.
LOSERS
Spain. Heatwaves and droughts followed each other to plague the Spanish growing season. According to the Associated Press, “Spa”n recorded its hottest and second-driest spring ever this year.” Pr” duction is expected to drop 12% compared to last year.
Italy. Extreme climate has reduced Italian harvests by 14 percent. The summer heatwaves were a major blow to producers, particularly in central and southern Italy.
Bordeaux. Mildew affected roughly 90% of the vineyards in Bordeaux and dramatically reduced yields. Producers remain optimistic about the quality of this vintage despite the erratic weather conditions, including frost, heat, humidity, and rain.
INVESTORS INVEST A TOTAL OF MILLION IN FINE WHISKEY
Vinovest was founded by Brent Akamine and Anthony Zhang in 2019. They made it easy for anyone to invest in fine wines. In March 2023, the two added whiskey investment. The idea was immediately popular.