There is no other investment quite like fine wine
Unlike most traditional investments, investing in fine wine can be both enjoyable and rewarding. This might just be the most rewarding diversification to your investment portfolio.
Investing in premium wine gives you access to the exclusive world of quality & luxury wine which is usually enjoyed only by those who work in the industry.
Better still, history has shown us that investing in wine is considered a stable investment. Promoted by Warren Buffet himself, investing in wine has a low correlation to the stock market itself (according to Forbes ). Wine has weathered several financial storms, including that of 2008 where the Financial Times designated the market for fine wine as “a haven for investors in difficult times”. It has recently also weathered the Covid19 crisis and surpassing Gold, and the Dow Jones Industrial Average in 2021.
In fact, Liv-ex 100’s (top 100 most traded blue-chip wines) past 20-year performance surpassed the S&P500 and a 32% growth in the past 5 years.
A brief history of wine investment
Wine appreciation and collection is no new phenomenon - it has been around for millennia. The ancient Greeks, Egyptians, Phoenicians and Romans were all big traders of wine; Charles II of England famously had Chateau Haut Brion in his cellar. The writings of Thomas Jefferson provide perhaps the first evidence of a premium charged for older wine. In 1787, he wrote that the 1786 vintage for top Bordeaux wines cost 1800 livres per tonneau compared to 2000 livres for the older 1783. Bordeaux has been producing wine for two millennia and the UK has been Bordeaux’s largest export market for at least 900 years.
Fast forward to today, the winemaking techniques have evolved, improving the quality of the wine from unique terroirs, ensuring that their story continues for years to come. The greatest of wine-making regions including Burgundy, Bordeaux, Champagne, California and Tuscany have applied extremely strict guidelines and restrictions to control both quality and yield ensuring the centuries old reputation of unique, quality winemaking remains. Such high standards are their guarantee to remaining within the most prevalent trades on the secondary market as well as keeping them in short supply. Owning & collecting investment grade-wines is not a new 'fad' - it is the fundamental demand vs supply imbalance that has always made the value of fine wines increase.
Research conducted by Ledbury and Barclays Wealth and Management in 2012 indicates that 28% of high-net-worth individuals own a collection of fine wine. Some estimates suggest that it accounts for approximately 2% of the wealth of the world’s most wealthy people.
Supply vs Demand
The fundamental principle of investing in fine wine falls down to supply and demand.
• As quality wine improves with age it becomes more desirable and therefore valuable. However, unlike other luxury investments, wine is constantly being consumed further reducing the actual quantity & consequently increasing the rarity of the wine. This pushes up the price further as consumers seek out rarer & hard to find bottles from specific vintages.
• The ever increasing quality and demand for premium wine further compounds the increase in value of such wines
Climate change has also changed the dynamics of how wine is made today. Decreasing yields and increasing temperatures are changing the current landscape so fast, that tomorrows wines will never be the same - Indeed, according to the Wine Institute, wine production in France, dropped by 12.52% in the years from 2009 to 2012. This means that the best wines are extremely restricted in supply and continue to face increasing demand, which has pushed their value even higher.
Why should I invest in wine?
- The addition of an asset to ones investment portfolio is an important diversification which mitigates risk and reduces levels of volatility. Wine has a low correlation to traditional-market investments
- Physical assets are often perceived as offering a stable store of value in uncertain times. Stock markets can crash, businesses can close, and share prices can collapse – but tangible assets do not cease to exist (unless, in this case, they are drunk and enjoyed). In this sense, fine wine can be compared to real estate, but without maintenance costs, and without being reliant on a single economy. Fine wine can also be moved around and traded internationally.
- Fine wine investments have traditionally held their value in times of economic downturn. During the financial crisis of 2008, the Financial times designated the market for fine wine a "a haven for investors in difficult times'
- Returns on fine wine show a more then healthy average of 13% per annum. Live-ex 100 returns (the top 100 wines) have surpassed S&P 500 over the past 20 years.
- Over the past 10 years, fine wine has outperformed all other 'luxury treasure assets' such as cars, fine art, diamonds & gold. Furthermore, no other asset came close in terms of performance, ease of access, ownership costs and transaction costs
- The demand for fine wine has been increasing over the years, especially due to the soaring demand in Asia. Albeit, a small dip in 2011, the demand for fine wines has been skyrocketing from places such as China and India. However, new emerging markets such as Mexico & Malaysia are sure to keep the demand high, whereas established markets including France, UK and Switzerland show no signs of slowing down.
- Wine is a 'Passion investment'. The latest report by thinktank ARENI Global, The future of fine wine consumers 2021, said: “Looking at the overall numbers, it appears that fine wine occupies a place of prestige in people’s lives, being used for formal occasions, business occasions and gifting. A minority of respondents— less than 30% in each country—said they bought wine specifically as an investment. ”This clearly shows that there is more to fine wine collecting than material returns"
How Has fine wine fared against equities in Covid19-hit 2020?
Below chart taken from Live-EX (December 2020)
Not only have fine wine prices risen, but wine has offered unmatched stability in this year of volatility...
How to invest in fine wine
Private investors can access the market via three main routes:
- Auction houses
- Wine Funds
Vintage82'Ltd offers the service of investing in fine wines as a consulting merchant. The investor will be given the opportunity to purchase cases of of wine through Vinatge82'Ltd from a reputable international merchant. The investor will become the owner of specific cases or bottles of wine and can watch them increase – hopefully – in value, until he or she is either ready to drink or sell them off at a profit.
If the investor/buyer chooses to sell the wine, Vintage82 will typically charge a fee of around 10% to complete assist and complete the transaction. Because the asset will need to rise by more than this before the collector profits, wine is considered a long-term investment, rather than something that can be day-traded.
Storage & Costs
Don't fret, Vintage82 offers to do all this work for you. Investment-grade wines should be stored safely and correctly in temperature controlled warehouses to help protect their value. We work with international reputable partners in Bordeaux who will store the wines under bond (ie: Tax Free & Duty Free) until the wines leave the warehouse to be consumed (or sold off).
Costs would include:
- Storage fee (based on per case basis )
- Insurance fees
- Transaction /brokerage fees
Some of our investors prefer to store all or some of their wines at their place of residence. In this case, Vintage82 will deliver the wines once all the local taxes & freight are paid in full. This is usually the case then the investor may want to consume the wine and thus gives them faster access their stock. However, bear in mind that due to the difficulty in proving wine was stored correctly throughout its life, the value of the wine does not increase at the same rate.
Investing in wine is not simply a transaction - Our clients are our partners. Together we will set off on a journey of wine, passion, and discovery, where we will support you throughout your wine investment experience.
Vintage'82 wine-investors are given direct access to the exclusive world of fine wine!
Whether it is invitations to our small and exclusive wine events, or access to the wine-travel trips of a life-time, investing in premium wine with Vintage'82 is not just a business contract.
All our investors gain the possibility to travel to some of the finest Chateaux and wine houses round the world. Our top tier investors will not only, be able to visit some of the most exclusive wine producers and Chateaux in the world but will be invited to private wine-pairing dinners with owners & winemakers who will be opening some of their finest wines from the personal libraries just for you!