No longer simply a beverage, albeit one of epic reputation, wine is also a serious investment commodity, increasingly so in the past decade. Wine has definitively shown its capacity to appreciate in value, to the point where the current value of certain wines can far exceed their original purchase prices. In a study written by professors from Cambridge, Vanderbilt and HEC Paris, when used as an investment, wine outperformed traditional avenues such as government bonds, art and stamps. From 2005 to 2015, global wine auction sales more than doubled, to almost $350 million. Now wine even has its own trading exchange—the London International Vintners Exchange, or Liv-ex, founded in 1999 in London with an annual turnover of more than $100 million in trades. Simply put, it’s a good time to have a wine investment in your portfolio.
What Drives Value
Not every collection, however, even if comprised of old or even rare bottles, is investment grade. This determination depends on the collection’s composition. There are a small number of wines in the world that are collectible, and these are the ones most likely to be “investment grade” and increase in value. These are not the only wines worth purchasing, aging and drinking, but they should be the focus of a collector who has one eye on drinkability and the other on value.
Determining whether a wine is collectible or not requires assessing four key factors: quality, provenance, condition, and scarcity. Most investment grade wines are top Bordeaux Chateaux or grand Cru Burgundies, but other wines, such as certain champagnes and wines from Italy and California, can appreciate as well. While what follows is, admittedly, somewhat circular reasoning, such wines tend to appreciate because they have a history of appreciating. In essence, past success can breed future gains in terms of a wine investment.
Some Recent Wine Investment Results
As with any investment commodity, however, appreciation is not linear and uninterrupted (what disclaimer do all of those investment offerings include— “past performance is no guarantee of future results?”). The same is true with wine. That said, investment grade wines tend to show long term appreciation. For instance, if you look at four such wines, Domaine de la Romanee-Conti’s Romanee-Conti bottling (one of the most valuable burgundies) 1990, Krug Clos du Mesnil 1996 (elite champagne), Chateau Lafite Rothschild 2000 (iconic Bordeaux), and Screaming Eagle 2004 (a cult California Cabernet), you will see three of the four having appreciated in value since 2013, with increases ranging from 14% to 74%. The lone loss in this group, the Lafite, underwent a price correction after 2011, when what appeared to be unsustainable Asian interest in the wine turned out to be just that, but since 2015 it has increased over 19% in value. Short term fluctuations are less significant, with the six month change in prices ranging from -3.2% to +0.5%. One-year changes are mixed, with three of the wines having increased from 4.3% to 16.4%—the Romanee Conti lost 14.4% since 2017, after the market seems to have determined that the $18,601 price per bottle (up 33.2% from 2013) had gone high enough, but all four wines have shown appreciation over 2015 prices, with increases in value ranging from 18.4% to 42.5%.
Against this background, it is not surprising that wine collecting has changed from amassing favorite wines for aging and drinking into a speculative enterprise, at least for some. There will always be those who claim to eschew considerations of appreciation, but most wine collectors occupy a middle ground, indulging their passion for wine while keeping an eye on the bottom line. As long as wine continues to appreciate in value such considerations will remain relevant. The advent of wine investment has ushered in a new phase in the annals of wine collecting, and it does not seem likely to change dramatically any time soon.