Fine wine is a viable alternative to traditional investment opportunities. It has grown in popularity over the last few years although history shows to have been a solid investment for many decades.

Pre 1990’s wine

Just twenty to thirty years ago there was little real trade in wine. It was much more difficult to obtain wine from many places in the world. In fact, in many places before 1980 it was actually illegal to sell wine privately. The limit of wine investment would have been purchasing a couple of creates to sell on and fund a holiday. The majority of the market was dominated by wine merchants and it was often rare to locate a back vintage wine. In general prices rose, but they rose slowly. By the beginning of the 1990’s the quality of wine available was increasing rapidly.

1995 – 2009

During this period wine yields were exceptional and the majority of Bordeaux’s rose in price by approximately 200%.  Burgundy wines experienced similar growths whilst wines from the Rhone Valley reached highs of 300% growth in price. Even the bursting of the dot com bubble did not seem to affect the fine wine market. Auction houses reported steady growth in prices every year throughout this period. Between 2005 and 2008 many auction houses reported wine prices doubling.

Bordeaux was the most dominant wine during this period although it faced constant competition from the Burgundy’s and Rhone Valley wines. During this period, Asia joined the fine wine community too. China, in particular was obsessed with the Bordeaux’s.

In 2008, the global economic crisis started to take hold and the sub-prime mortgage / credit markets collapsed. This caused wine prices to drop sharply although Bordeaux and Rhone Valley wines suffered less than the Burgundy’s. It was stated that Burgundy’s lost 39% of their value at this time whereas Bordeaux’s and Rhone’s lost just 15%.

2009 – Present

As the global economic situation stabilized and even showed some signs of recovery the wine market rallied. Between 2009 and 2011 prices climbed back to nearly the same level as before the crash. For a while it looked as though the prices would continue to rise but in July 2011 there was a slow down and a gradual reduction in price again. To date prices are 25% lower than the previous peak value.

The current market slowdown has been affected by several factors:

·         The Far East demand has decreased over the last few years.

·         There is currently too much stock available on the market, or not enough buyers.

·         Many investors have significant value tied up in their wine portfolios but little capital. These investors are looking to release the funds from their wine collections and are adding to the flooding of the markets.

·         The Bordeaux price increase had become excessive and the market is now correcting this issue

·         Several investment funds have been terminated for a variety of reasons and have left a surplus of wine available on the market.

As an ongoing investment wine will continue to be a good choice. Bordeaux with its Chateaux Lafite will always be in demand and other wines are increasing in popularity and price.  Long term the price trend will continue slowly upwards and provide reasonable returns over the years. The market is increasingly transparent and this will be of assistance to future investors.

Investment options

Investors either choose to purchase specific bottles or cases for resale, or they buy shares in an investment fund. The investment fund will pool its shareholders funds and purchase large quantities of wine. For those new to wine investment it is wise to seek the services of a broker or specialized wine merchant; since your experience is limited, it’s best to pay more for some good advice then get scammed.

Proper storage conditions are required for a type of wine to increase in value. Because the product is an illiquid type of asset, it doesn’t involve paying taxes providing that the cases are preserved in bond. As you can see, things have changed a lot over the years. In the 90s, the supply was vast and there were very few experts and investors; as we get closer to 2016, we can clearly see that the supply is running out, which can only mean that prices will increase considering the scarcity of some of the best vintages in the world.