News

FINE WINE INVESTMENT: SAFE HAVEN

26th September 2019


There is no doubt that the current Brexit anticipation has caused volatility in many investment markets. With the deadline date fast approaching, it seems the fine wine market has avoided all the chaos and has come out on top.

The current economic contraction that is arising due to ongoing uncertainty has seen many markets fluctuate in their performance. Though most many assume that the purchase and consumption of luxury items will no doubt slow down, the purchase of investment fine wine has seen quite the opposite. The fine wine market has protected itself as an investment vehicle against a downturn due its investment longevity and independent nature.

Luxury goods are first to be affected when a contraction in disposable income comes around. When it comes to other sales of Luxury goods, they would be sure to take an instant impact from any contraction of disposable income. However, when the finest wines in the world are made in limited quantities their demand seems to only ever go up! The average life expectancy of a fine wine is 25+ years, which makes it immune to downturns as over the year’s bottles get consumed, pushing the remaining bottles up in price. A reoccurring example of this is Petrus.

There are over 2,000 billionaires in the world, and over 40 million millionaires, why is this? It is statutorily impossible for Petrus to produce more than 2,500 cases of wine a year. Most vintages have a life expectancy of over 30 years, which means that on average 1,000 bottles have to get drunk, globally, every year, for supply to run out. Three a day.

An investment grade wine is not going to be deemed as valuable if there is a large quantity being produced. Although there may not be restrictions in places such as Napa Valley, it would not make sense as these producers want the value of their highest graded wines to rise. Having continuous availability for these wines will only do the opposite which is why there is self-imposed limit of how much they choose to actually produce.

From time to time consumption of fine wine will diminish, no doubt for a variety of reasons, but statistically it is impossible to know how much is left, as figures relating to market availability don’t exist. All we know for certain is that it is made in very small quantities, is popular with a much wider consumer base than was the case 20 years ago and it improves over time as it ages in the bottle. Collectors even prize antique bottles well past their dates for reasonable consumption because they have increasing value.

At the end of the day no one know exactly what the climate of UK investments will be from one week to the next, but it seems there is a lot of certainty when it comes to the fine wine market.