Investing In Wine, the New Art Collection of the 21st Century
Have you been to bids were they auction fine wines? You begin to wonder why the wine is more expensive than the collection you know today, or why it is priced at such a high amount. You see, the thing about wine is that the longer the stay the better the taste, and people are ready to pay a thousand folds for it.
The interest in people willing to pay for it has made it one of the most interesting forms of alternative investment. While you might not understand, there are companies whose job is render the service of selling these wines. They collect the pricing data based on year, coordinate the trade and the exchange of the investment wines.
You might not understand how much these wines are sold for, but in 2019, wine auctions were done at Christie's auction house, and certain wines such as the 12 bottles from Burgundy, in France were sold for over $305,000 giving the single bottle price to be at $25k+. I am mentioning this because the bottle had been sold before in 2011 for between $97k -$116k for the 12 bottles. So this means that the person who bought it in 2011 just kept it in a very safe place so it can be sold later in the future for a higher amount.
While the market looks like it doesn't exist or it is small, According to “Investing in Fine Wine Is More Lucrative Than Ever.” by Bloomberg.com, on the 19th July 2018, the market was valued at $5 billion. This value does not stand close to the total private equity for the same year which stood at over $800 billion but the wine secondary market still has the billion dollar mark.
Investing in this business doesn't start with buying anything you see on shelves, because only around 250 wineries produce these investment grade wines, and in other to get a winner, certain characteristics would be looked at such as the origin of the wine. You see, if it is from France, then you have hit the first tick. Wines from the vineyard of Bordeaux account for about 60% of all investment wines being produced, followed by wines from Burgundy, then the USA (which is not really valuable), wines from any other region, just serve it on the table for people to drink.
For Bordeaux, the red clay soils used to grow the grapes they use is one of the reason why is sort after, also, the region do not joke with wine production. Before you begin to beat yourself over why your country isn't listed as a luxury wine producer, it started from 1855 when Napoleon Bonaparte III decided to classify Bordeaux wine in France so the world can know of its finest wine, he decided to classify them as into different classes with the Crus ranked for 1 to 5 for red wines. So when you hear the word a premier crus, it means it is part of the highest classification of wines.
This classification was based on vintage reputation and the price they were being traded for but over time changes have been made to the classification where certain wineries were elevated to first crus. While we mention location and age when it comes to wine, having a rating from wine critics such as Robert Parker can cause a wine price to spike or tank.
Taking about investing in wines, it is important that I reiterate that most wines you see are not investment grade wine, they are consumption grade wines so do not go to the store looking for cheap wines that you can keep, you will be so surprised at the failed result that if you are able to keep it well.
Reference
- https://worldoffinewine.com
- https://advisor.morganstanley.com
- https://invest.cultandboutique.co.uk
- https://www.forbes.com/advisor/investing/how-to-invest-in-wine/
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