Wine investment has historically been the preserve of either the wealthy, the aristocratic or those with large country house cellars. The profits would subsidise future purchases and reduce the cost of consumption. Recently however these profits have brought more investors into the market looking solely for capital growth.
The rise of fine wine investing coincides with the popularity of American wine writer Robert Parker who rose to fame following his championing of the great 1982 Bordeaux vintage. His 100 point system brought perceived objectivity to wine buying and allowed for easy comparisons in value. Nearly four decades later, whilst other wine critics have entered the market, there can be no doubt that his ‘Parker Points’ are still the single most influential factor for investors in fine wine.
Historically, wine investment has been dominated by the Bordeaux First Growths (Premiers Crus Classés) and Right Bank equivalents, the second growths and a few other top properties, totalling no more than 30 or so names. These wines have a good track record of investment performance, in some cases going back centuries, and equally importantly, enough production to sustain a ‘liquid’ secondary market. In addition to Bordeaux, a small number of Burgundies fulfil these criteria with no more than a handful of wines from other areas.
Simple supply and demand is a compelling argument for investing in fine wine. On the supply side, with limited vineyards, land availability and appellation constraints, the best chateaux are never going to increase production significantly. In fact the trend is for producers to reduce their yields each year as they strive for ever-higher quality. Meanwhile, demand globally is rising as new markets emerge and fine wine is added to the portfolio of luxury products desired by the growing population of millionaires. Furthermore, each time they open a bottle, supply is lowered still further and upward pressure on prices increases. The data below from Liv-Ex shows that over the fifteen years to end 2018, the fine wine market out-performed equities:
As wine merchants we are able to discuss wines and vintages, their potential quality and market conditions, but we are not registered by the FSA and so are not qualified to give investment advice per se, other than to remind customers that of course wine prices may go down as well as up. However we would be happy to try and answer any questions you may have.
Finally, and importantly, wine has traditionally been regarded as a 'wasting asset' by HMRC and may therefore not attract Capital Gains Tax. For current legislation and further details of any tax implications please speak to your financial adviser.