Wine investment: When does wine become an investment?
Fine Wine is an attractive investment, especially in times of crisis. But not every wine cellar discovery has to be valuable, especially since only less than one percent of the world's wines are suitable as investment grade wines. Various criteria determine whether a fine wine is also interesting as an investment. Find out which factors classify a wine as a fine wine and how even new investors can “get a taste for it”.
Link: Investment-grade wines
Which factors influence the quality and value of a wine?
Collectibles and alternative investments such as classic cars, art, diamonds or fine wine serve to stabilize the portfolio, improve returns and reduce the range of fluctuations, especially in times of crisis. The low correlation with the capital market is also positive, as “collectibles” follow their own pricing laws. To find out whether a wine has potential as a capital investment, investors should pay attention to the following criteria:
- wine-growing region
The most important wine-growing regions that investors should know are in France (including Bordeaux, Burgundy, Champagne, Rhone), Italy (including Tuscany, Barolo), California (Napa Valley and Sonoma) and Australia. In Burgundy in France last year, 41 of the 50 most valuable wines in the world grown. This year, land prices there rose again by 8.7 percent. However, the most expensive vineyards in France were located on the Côte d'Or in 2020: One hectare of Grand Cru area was covered with 6.7 million euros assessed, which represented an increase of four percent compared to 2019.
Some wines become special simply because of their origin. For example, because they come from small regions or even individual locations. Such as the Grand Crus from Bordeaux or Pensolds wines from Australia. - winery
Source is a key factor that determines quality and value. The world's most exclusive wineries and châteaus, which regularly produce high-quality wines, include: Mouton-Rothschild, Lafite-Rotschild, Pétrus, Château Margaux, Domaine de la Romanée-Conti, Screaming Eagle and Opus One. - classification
According to wine law, the quality level or classification of a wine must be stated on the label of a wine throughout the EU. However, the names differ depending on the wine's country of origin. In Italy, quality wines are classified with DOC and the best wines are classified as DOCG. The fine drops can be recognized both by the inscription on the label and by the banderole on the neck of the bottle. Wines from France have quality levels ranging from simple table wines to top products from controlled areas of origin (AOP). - Jahrgang
Wine investors are always on the lookout for exceptional vintages or rare editions. In Europe, for example, 2021 was a historically poor winegrowing year, although the low production volume could in turn lead to higher prices for top wines. Due to adverse climatic conditions (long, cold spring, extremely hot summers), there were significant production declines, particularly in Italy (-9%), Spain (-14%) and France (-27%).
But the vintage alone does not make a wine a wine of the century. Many wines only mature into top wines over time. Some wine rarities were also considered lost for a long time and only caused a sensation after their “rediscovery”. - History and stories
Sometimes even unusual stories turn wine into true rarities. For example, bottles that were recovered from the wreck of a ship or were owned by kings or other famous people. - wine critic
Wine critics taste, describe and rate wines and publish their verdict, which can have an enormous influence on the price of a fine wine. One of the world's most influential experts is James Suckling, whose reviews are now highly respected by wine lovers and wine retailers.
Robert Parker has with his”Parker Points” has had a significant impact on the pricing of the wine industry. He and his “Wine Advocate” have established the 100-point scheme, which is still successfully continued today by his heirs to the throne. Studies have shown that a Parker rating higher by one point increases the return on a wine investment by up to 5.5 percent. - Origin and storage
Fine wine is usually stored in a special customs warehouse to ensure optimal conditions to protect quality and value. Storage and a complete guarantee of origin are important aspects when buying investment wines. The filling capacity, the condition of the cork, the original wooden box and the label also have an effect on the price. Ideally, investment wines should therefore be stored perfectly packaged under optimal climate conditions. To really make an investment, you should ideally buy boxes of 6 or 12 and store them in an air-conditioned cellar. This is because fine wine must be kept dark, constantly warm (10 to 15 degrees) and at a humidity of 50 to a maximum of 70 percent.
Drinking maturity: How long can fine wines be enjoyed?
The lifespan of wine is limited and highly variable. Cheap wines mostly get worse when stored for a long time. Top red or white wines, on the other hand, can be enjoyed for a long time and often only reach optimal drinking maturity after two decades. Sweet wines such as Madeira and Tokaji are still edible even after centuries. Wine critics often publish a window of time when ideal drinking maturity is expected. This “drinking time window” is a longer period of time in which a wine has reached optimal maturity in its development and promises the highest possible drinking pleasure.
It is determined by several factors - such as tannins (vegetable tannins). Wines with a high tannin content have better conditions for ripening, as their taste gets rounder over time. Sugar, acidity and alcohol content also play a role in the maturing process, which only gives top wines their complexity and balance.
Drinking maturity is of course particularly relevant for enjoying wine. But even in order to get the best price with Fine Wine in the event of a sale, investors need knowledge of the drinking time frame for their wines. Because when you buy a wine that you have to drink in the next two years, that is not an investment in the traditional sense, but one in pleasure.
Fine wine as an investment
If you prefer to drink wine than wait until it increases in value, you can also consider alternative wine investments. For example in the form of wine stocks or digitized shares on selected top wines with an interesting return perspective.
Since spring 2020, the Fine wine index 100 The London wine exchange Liv-ex (London International Vintners Exchange) is constantly on an upward trend and has grown by around 19 percent compared to the previous year. In the corona year 2021, it even rose by more than 23 percent. With this performance, Fine Wine beat other investment classes such as gold and also some stock indices.
Even if the hoped-for increase in value fails to materialize, investments in Fine Wine remain a solid part of the portfolio mix. Because of its high, intrinsic value and natural scarcity, wine is characterized by lower volatility. Especially as the price of the remaining bottles rises with every fine wine drunk — which often gain in quality and value as they mature.
