Wine is one of the leading alternative asset classes determined by unique fundamental and risk factors. In the past two decades, wine has outperformed almost all other important financial indices. The reliability of the wine market ensures stability and shows little correlation to other financial markets.
The prospects for the wine investment market are positive as interest in regions outside of Bordeaux (e.g. Burgundy, Italy and the USA) continues to expand and there is only a limited supply.
Investment wine has risen by an average of 14.9% annually over the past 20 years.
Fine wine has outperformed almost every other major financial index over the past two decades. As a top asset class with a plus of 24%, the wine market again achieved double-digit performance last year. The average value of investment wine rose by 11%. Markets with a comparatively low supply remain particularly strong. The Burgundy market, for example, grew by 16.5% due to the global insatiable demand for top wines and a series of scarce harvests, with some goods declining by up to 70% due to frost damage.
"Wine has not only managed to survive the recession and the stock market crash, it has also developed extremely successfully compared to the other asset classes."
Much of the demand comes from Asia. The wine market has seen unprecedented sales in the past few months, with a particularly strong demand for stocks with perfect origins from discerning customers from the Far East, who have developed an increasingly sophisticated taste and an increasing depth of knowledge. This makes it a particularly exciting time for sellers and buyers alike. In particular, the demand for first-class Burgundy is driven more than ever by the small quantities that have been produced in recent years, but blue chips from Bordeaux, Italy and California are still in very high demand.
Blue chip wines are among the most stable and renowned in the world. Only selected Bordeaux, Burgundy and some northern Italian wineries have the honor of being "blue-chip" because they consistently produce the best wines in the world.
"The market is increasingly focusing on producers rather than regions or types of wine."
The Bordeaux region's global impact on the wine investment market remains unmatched. The top goods contribute around EUR 2 billion annually sales. Wine has been traded in the region since the 12th century, and the high-quality wine produced here remains the cornerstone of the industry. Bordeaux wines currently make up around 50% of the wine traded worldwide. The best Bordeaux wines continue to dominate the important wine auctions and their names, with their noble lines and international seal of approval, represent an important currency for everyone who invests in wine.
Château Lafite Rothschild Médoc (Pauillac)
Château Margaux Médoc (Margaux)
Château Latour Médoc (Pauillac)
Château Haut-Brion Graves (Pessac-Leognan)
Château Mouton-Rothschild Médoc (Pauillac)
Without Bordeaux wines, the thriving global wine market that we enjoy today simply wouldn't exist. Its sensual fascination and effect on the imagination speaks an international language, which has led to the fact that the best Bordeaux wines are sought after by collectors from all over the world. Given the rich history of Bordeaux, its lineage and cultural heritage, it is easy to understand why this region is currently so vast in the Far East and has luxury status in the emerging economies of China and Hong Kong. The extent goes so far that the buyers of these two nations form the largest single market for Bordeaux wines. In fact, the interest in investing in wine from this region is so great that a number of famous châteaus have been bought by companies and individuals from the Far East in recent years.
Strong vintages make the difference. Vintages such as 1982, 1989, 1990, 2000, 2005, 2009, 2010 are traded at very high prices, which reflect their high quality. Young vintages like 2018 and 2016 are not as expensive, but still have a lot of concentration and complexity.
Domaines de la Romanee-Conti is one of the most puzzling names in the wine world and arouses the terms exclusivity and desire. Indeed, it is the only Burgundy winery with a cachet comparable to the top Bordeaux producers. Its prestige and historical ties with the kings have made it the most important name in Burgundy, a region that has seen increased demand in recent years and has become a priority for international collectors.
"Burgundy wines have grown by 81% in the last five years, with DRC wines accounting for a quarter of the region's total Liv-ex trade."
The DRC produces seven wines with different increases in value. The most sought-after brands are Montrachet, La Tache and Romanee-Conti. His top wine DRC Romanee-Conti is currently being produced in extremely small quantities (less than 500 boxes per year), which guarantees enormous demand: from 2012, DRC Romanee-Conti is the second most expensive wine in the world on average EUR 9,400 per bottle. At the other end of the scale, Echézeaux is just over EUR 400 per bottle. The strength of burgundy wines can be seen in the fact that they are represented by their own Liv-ex index, which in recent years has consistently exceeded the Liv-ex Fine Wine 50 Index, which tracks the trade of the last Premiers Grand Crus de Bordeaux vintages. The DRC is increasingly playing a major role in numerous auctions, a setting preferred by traders because of their proven origins. Hammer prices regularly break estimates, especially at auctions in Hong Kong.
Of all the wines, Echezeaux has been the best performer, showing over a 250% increase since the end of 2007. Given the overall power of the DRC brand, it is possible that this jump can be attributed to the fact Echezeaux has historically offered one of the cheapest entry points into the DRC brand. Since Brexit, Echezeaux has been the strongest DRC performer; Romanée Conti has been the worst.
The term "super-Tuscan" refers to a number of Italian wineries in the traditional Chianti region of Tuscany that rebelled in the 1960s and 1970s against the dogmatic regulations of the Italian wine authorities and produced a number of innovative and highly valued wines, which are among the most expensive and valuable investment wines in the country. Traditionally, the Italian regulatory authorities have obliged producers to include a proportio
of white grape varieties in the Sangiovese blends typical of the Chianti region and to use only local varieties.
The seeds of change were planted by the venerable Antinori family, who have been producing wines in the region for more than seven centuries and began experimenting with French grape varieties from the 1920s. Cabernet Sauvignon was the first to be experimented with a lot, but Merlot, Cabernet Franc and Petit Verdot soon followed. Innovative techniques adopted from France included replacing raw wooden fermentation tanks with stainless steel tanks and maturing in small barriques.
The first commercially produced "Super Tuscan" was Sassicaia from Tenuta San Guido, which was launched in 1966. Others soon followed, but the wines met with resistance and were often forced to call themselves "vino de tavola" under Italian law. However, this classification could not stop the dynamic that had already started. The sales arm of the Antinori company quickly started to sell its own Tignanello and Tenuta San Guidos Sassicaia in Europe and America and quickly found success. A number of renowned prizes and awards from wine critics and authors brought the Super Tuscan into the spotlight. Robert Parker himself sealed fate when he gave Sassicaia his "perfect" 100-point score in 1985 - which led to rapid price increases.
The Italian authorities swallowed their pride in 1994 and changed the law to recognize Super Tuscans and their "subversive" Bordeaux blends. To this day, many of the best Super Tuscans keep their VdT status as badges of honor. Many Italian producers have since adopted Bordeaux varieties and techniques to achieve "Super Tuscan" status, although the most powerful and reliable investment wines remain Sassicaia, Ornellaia, Masseto, Tignanello and Solaia. All of these wines are made from Bordeaux grape varieties that are either mixed with the local Sangiovese or avoid it entirely - like Masseto, a highly valued blend of Merlot from individual layers.
These five wines together form the Liv-ex Super Tuscan 50, an index that has consistently exceeded the Liv-ex 50 (the index for the strength of first crops from Bordeaux). Today these wines win due to the growing interest from the Far East, where these wines do very well, especially at auctions and in limited large formats. Globalisation and the influence of gastronomy have made Italian wines increasingly popular.
Super Tuscans are increasingly appreciated, not only thanks to a number of fantastic new vintages, but also as part of a diverse wine investment portfolio that compensates for any volatility in the fine wine markets in Bordeaux or Burgundy.
In the course of the positive market development for fine wine in recent years and the subsequent price increase, the perfect origin has become an increasingly critical factor to ensure that wines reach their maximum value at the time of sale. This is demonstrated by the success of the latest ex-cellar chateau auctions, where wines in all vintages were 50-100% above their market value thanks to their proven flawless origins. It is therefore vital for investors to do everything they can from the time of purchase to maximise the potential sales value of their wines.
Professional storage of investment quality wine is absolutely essential to maintain its value. The value of investment wine depends on its condition. For this reason, these high quality wines have to be stored under premium storage conditions, which is of crucial importance for resale and profit recognition.
There are four main aspects to creating the best storage conditions:
Ideally this should be kept between 70% and 80%. A damp atmosphere prevents the corks from drying out, thus preventing the wine from evaporating to a harmful degree and increasing the unevenness (gap between the cork floor and the wine). If the humidity is insufficient for a certain period of time, the cork can shrink, allowing air to enter and damage the wine through oxidation. Excessive moisture and moisture can damage and spoil the labels. Better than if the wine is spoiled by insufficient moisture!
Temperature and air quality
The temperature should ideally be kept between 12 ° C and 14 ° C. Avoiding seasonal and severe temperature fluctuations is key, as this can adversely affect the ageing process of wine. A warmer cellar simply means that your wines will mature more quickly, whereas the opposite is true if your cellar is below the ideal temperatures mentioned above. It is also advisable to avoid strong smells. These can penetrate corks over a certain period of time and even spoil the wine.
Light and shocks
Basements are usually underground for a reason. Natural light can accelerate the ageing process in wines, especially red wines, because it accelerates the breakdown of the color compounds. Vibrations should also be avoided, as they can trigger chemical reactions in the wine that destroy the molecular structure by stirring sediment. This in turn will cause the wine to age prematurely.
This goes without saying. As the value of rare wines increases, their appeal to burglars and thieves increases. The safety of your best bottles is therefore extremely important, as is adequate insurance coverage.
Investment wine can ideally also be stored in an air-conditioned environment in a professionally managed customs warehouse. The storage of wines in customs warehouses means that value added tax (VAT) can be avoided since the wine is not intended for consumption. Furthermore, no import taxes are payable for international transactions.