The Vine & the Investor
A growing market, a reliable commodity that becomes more and more scarce over time and a passionate investor class that are always coveting the next item. With such a dynamic market, is it any wonder that wine investment is one of the most reliable returns on investment of all commodities?
The Rising Popularity of Wine Investment
Wine investment has become more and more popular globally since the financial crash of the previous decade. It is seen to be a reliable place to invest and diversify for those worried about the fluctuations in price of precious metals and the like. There are many reasons as to why there has been a significant upsurge in wine investment in the UK, some that are global in nature and others that are somewhat unique to Britain.
Investment is informed by supply and demand. The housing market in the UK, for example, has surged purely because property, particularly in London, is at a premium. With not enough new housing being built, the price of existing property goes up. The same can be said for wine investment. Although the market is flooded with new wine each year, it is a consumable, which means each vintage trends towards rarity. If the vintage is a particularly fine one, the price goes up considerably.
It is this reason that wine investment is currently outstripping other areas, including other markets that continue to grow, such as the aforementioned property market. Compared to others, such as gold and oil, the wine market is stable, which points towards fine wine becoming a sound investment for the future. In fact, since the late 1980’s the average annual return on investment tops 12%, with the yearly global market worth topping £6bn!
Wine as Art
Wine not only mimics art in the way that it is carefully cultivated, subtle and subjective, “I don’t know about art but I know what I like” as the saying goes, but there is also a lot of crossover in regards to investment. The uniqueness of a piece of art, it being one of a kind in most cases, makes it a highly prized and highly valued item. Wine follows the same concept, with collectors who are just as passionate.
There is also another parallel. A famous artist’s signature on a piece is a seal of approval, a guarantee, forgeries aside – another parallel, that the piece is valuable. The same goes for the history of winemaking. A world-renowned producer is essentially the artist, the wine, their painting. The producer’s signature, label in this case, is the guarantee, the ever increasing price tag, the return on investment.
Wine to Invest in
Not all wine is created equal. In fact, very few wines can be considered collectable, including many fine wines. The beauty of wine is that it is hard to properly recreate, in the case of fine wine, impossible. Each vintage is itself unique, the culmination of years of cultivation, the age of the vines, the climate, the weather within the climate that season, the terroir, the grapes and the fermentation and storage that follows. Even something as left-field as bottling and labelling can have an effect.
Chemistry is unique, which in turn naturally produces rarity and uniqueness, and this is the beauty of viticulture, whether you are interested purely as an investor, a collector or a connoisseur.
Age obviously plays a part, with many Old-World wines among the most expensive in existence. Bordeaux, for example, is an inherently collectable region for wine, with so many unique blends, vintages and Chateaux that go back many centuries. It is also fashionable, in the sense that it has a reputation that is second to none, making it a reliable investment for the future.
Other Old-World regions are similar, Burgundy and Champagne, for example, but there are relatively new examples that are becoming more popular with investors, such as the Super Tuscans and New World fine wines that are gaining both popularity with general wine drinkers and fine wine connoisseurs alike.
Unique and Historical
The ultimate collectable wine, however, has to be those that have significant historical connections. It is in this area, however, that controversy can occur. For example, one of the most expensive wines that ever sold was a stunning, hand blown, dark green bottle of 18th century “Lafite”. The bottle in question was said to be owned by Thomas Jefferson, former President of the United States. The controversy still rages today as whether this was actually part of Jefferson’s collection, but in the case of wine investment, it has done little harm to its value, which is said to be in excess of $160,000.
This is but a fraction of the value of what is said to be the world’s most expensive wine, however, the Screaming Eagle Cabernet 1992. The most prestigious New World wine, it is a one-off production from the enormously prestigious Napa Valley region. It sold at a charity auction in 2000 for a jaw dropping $500,000.
Long Term Investment
While such bottles are well beyond the reach of most, fine wine investment, as a general rule, is not and the future of wine investment is increasingly bright. This is partly down to the fact that what have become known as BRIC, which is Brazil, Russia, India and China, are heavily investing in all things wine related, particularly fine wine.
This has led to a steady but significant increase in the price of these highly collectable bottles. As a result, wine investment should be seen as a long-term endeavour, with the view that it is something worth keeping a hold of for at least 5 years, sometimes much more.
Fine Wine is Always Unique
Wine investment is not the same as other commodity markets as it can be low, medium or high risk, so it should be considered carefully with a well-defined outlook and long-term plan. But with some care, and a little knowledge, wine investment is among the most reliable returns on investment out there. Just be sure to avoid the temptation to consume the product and the chances are, with a little patience, your investment will reap great rewards.