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Q2 2022 | Report

Lafite Rothschild barrel room

Our Q2 Report is now available to download. In it, we examine the wine investment trends that shaped the fine wine market over the past three months. The report looks at how inflation and the possibility of recession have impacted fine wine, the success of the 2021 Bordeaux En Primeur campaign, the top-performing regions and the most in-demand wines.

Fine wine proved itself as a stable investment in the second quarter of the year, which was characterised by exacerbated economic pressure. As stagflation worries grew, equities experienced increased volatility and some entered bear markets. Meanwhile, fine wine prices continued their steady ascent and even outperformed safe haven assets like gold. The best-performing wines were blue-chip labels, which attract regular demand, hinting at narrowing focus and increased caution in the current economic situation.

On a regional level, Burgundy and the Rhône experienced the biggest price rises. The top-performing wines can now be seen on Wine Track, our latest tool, which helps you track wines’ price performance over any given period at a wine label level.

In Q2, Champagne and California continued to trade actively, with Louis Roederer Cristal cementing its place as the most in-demand Champagne. The 2021 Bordeaux En Primeur campaign stimulated interest in previous vintage wines, which presented many good value wine investment opportunities. Some of the most successful 2021 releases included the First Growths and their second wines, Châteaux Lafleur, Calon Ségur, Les Carmes Haut-Brion, Léoville-Barton, Ausone and Cheval Blanc.

The third quarter will throw the spotlight on releases from the Rest of the World, with the La Place de Bordeaux campaign taking place in September. Almaviva, Opus One, Vérité, Seña, Catena Zapata, Masseto and Solaia are few of the star names that will offer their latest vintages internationally, with many more new additions. The next three months will also further test the bullishness of the fine wine market.

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Download our brand new quarterly report for your summary of the past quarter in fine wine.

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Fine Wine Investing during Market Volatility & Uncertainty

Stocks index

With an increasing number of investors looking to alternative investments, and in particular fine wine, WineCap’s CEO Alex Westgarth explores why this sector has risen to prominence in recent years in Wealth Advisor. Read his opinion piece in full below:

‘Although wine is mainly known for its leisure benefits, many would be surprised to discover that fine wine investments can provide both stability and returns to investment portfolios during times of market volatility and uncertainty.

Fine wine investing can be a safe haven for investors in times of instability. As global markets experience increased levels of volatility due to factors such as the conflict in Ukraine, the threat of rising interest rates and spiking inflation, investors are exploring different ways to shield their wealth and assets.

We cannot predict what ways the current factors will affect the economy and financial markets and many experts expect volatility will stick around even when these short-term drivers have faded away. Therefore, investing in more stable options, such as fine wine, has grown in popularity in recent months.

Fine wine’s ability to hold its value through times of instability can be seen from historic data. At the start of the 2008 recession, the Liv-ex Fine Wine 1000, which tracks 1,000 wines from across the world, dropped 10 per cent from its peak in August 2008 to a low in December of that year. But by early 2009, it began a steady recovery and recouped all its losses by the end of 2009.

In contrast, the FTSE 100 fell 47.82 per cent and took over five years to return to pre-2008 levels. More recently, the first quarter of 2020 saw stock markets spiral down in the wake of COVID-19. While the S&P Global Luxury Index fell 23 per cent, the Liv-ex Fine Wine 1000 slipped just 4 per cent and had already begun its recovery by May 2020.

How is fine wine able to maintain such stability? As with the very nature of wine itself, the longer you hold on to it, the more valuable it becomes; and in investment terms, the more consistent your returns become. This is because, over the long-term, the demand-supply imbalance is exacerbated by increasing consumption and subsequently decreasing availability, and therefore wines become more desirable due to rarity and improvements in quality as they age.

Furthermore, the fine wine market is self-contained and, to a large extent, divorced from equity markets. This is because the value of the wine market is not determined by a single economy, rather, it shadows the movement of wealth around the world.

This unique characteristic means it is less vulnerable to the fluctuations witnessed in conventional equity markets which ultimately allows people to safeguard their investments and distance themselves from the exposure that traditional investors are often forced to endure. Moreover, the wine investment market provides flexibility as it is less open to fashionable interpretation compared to most other luxury collectables.

Particularly, when market volatility increases or economic conditions go south, investors acknowledge that fine wine can offer great capital preservation, real value growth and a way to diversify a portfolio away from the most volatile assets. Good wine will always be in demand, which means long-term returns will continue to be supported by consistent consumption.’

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LVMH Buys Top Californian Winery Joseph Phelps

Exterior of Joseph Phelps winery and vineyard

The French luxury goods house LVMH has announced that it is expanding its portfolio of northern Californian wineries with the purchase of high-end producer Joseph Phelps. 

Phelps has produced sought-after bottles from Napa and Sonoma for almost 50 years. The winery’s top cuvée – Insignia – was one of Napa’s first Bordeaux-style Cabernet blends and helped the region’s new style of wine to gain recognition in the 1970s.

The purchase means that Moët Hennessey has now deepened its foothold in California where it already owns three other wineries: Domaine Chandon, Newton Vineyard and Colgin Cellars.  

Included in the sale is the Phelps brand, winery and inventory, as well as approximately 500 acres in vineyards in Napa and Sonoma counties. No purchase price was disclosed.   

Moët Hennessy Chairman and CEO Philippe Schaus said that Joseph Phelps is ‘an iconic name and an iconic winery’. ‘It’s important for us that we are acquiring a family business with a legacy and heritage. It’s super important that we keep that heritage.’

For Schaus, Moët Hennessy’s aim is to be able to offer ‘all the different moments of consumption’: from apéritifs, Champagne and fine dining wines to bars, clubs and cocktails. The company’s Cloudy Bay brand covers white wines and its Whispering Angel line offers rosé, but, Schaus commented, ‘we were missing a strong red wine.’

It’s clear than LVMH ‘s purchase of this Napa stalwart fits comfortably into its portfolio, as Schaus declared: ‘Joseph Phelps has been to the Napa Valley what Nicolas Ruinart, Mrs. Clicquot, Joseph Krug and Claude Moët were to the Champagne region and likewise we will continue to develop this new House in the respect of the founder’s heritage and vision.’

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WineCap Featured in The Telegraph

Bottles of wine laid down to age

WineCap featured in the ‘Money’ supplement of Saturday’s The Telegraph. You can read Lauren Almeida’s full article here and find a summary below on how investors are turning to fine wine to protect their savings:

With share prices falling, investors are looking at how fine wines and luxury goods can protect their savings.

Historically, stocks and shares have delivered solid returns over the course of a decade during a bull market. However, with a global recession looming, markets are on a downward trajectory with global stocks down %12 year to date. With inflation at a 40-year high, savvy investors are looking to protect the value of their money through other means.

Rod Peel worked as an engineer at British Gas and is now retired in Bolivia. His portfolio of investment-grade wines are valued at over £1m. ‘I started in 2004, when I received a call from my current broker WineCap’.

‘You only make profits on the wines when you sell them. Otherwise, they sit there gaining hypothetical money. I pay around £1,000 for storage and insurance each year.’

One of the advantages of investments in wine and whisky is that there is no need to pay capital gains tax on profits as they are classified as a ‘wasting asset’ by HMRC.

‘It’s also very fun,’ Mr Peel commented. ‘It’s interesting to learn about the wines. You discover something new every day. I think it’s more engaging than investing in shares.’

Another investor is Cameron Scott, a 78-year-old accountant from Staffordshire who has been building up a portfolio of wines and is nearing retirement.

‘My wine makes up between 5pc and 10pc of my overall portfolio,’ he commented. ‘I like it because I can’t imagine that its value would ever fall to zero and it helps reduce currency risk. My best investment has been in an American wine that I bought seven or eight years ago, Screaming Eagle. It cost a few thousand a bottle, and its price doubled in just three years.’

‘But overall I view it as a long-term investment. I don’t sell many, because I’d like to pass my wine down to my beneficiaries, rather than cash in now.’

Both Mr Peel and Mr Scott highlighted that they had found it hard finding a trustworthy broker in wine. ‘It is not a fully regulated market, so there are a lot of rogues out there,’ said Mr Peel.

Keen to find out more about the benefits of wine investment? Download our free guide.

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Is Fine Wine Inflation-Proof?

Two men looking at a laptop drinking glass of wine

Rocketing inflation is no longer creeping toward us. It’s striding. Currently at 9% in the UK (jumping from 1.5% in April 2021)[1], inflation rates are set to hit a crisis point. And worried investors are understandably looking for solutions to hedge their exposure.

Investing in wine is one of the most effective inflation hedges because of three main reasons:

• The performance of fine wine is uncorrelated to global markets
• Fine wine is a scarce asset, becoming rarer over time
• The growth of fine wine has been exceptionally stable, even more so than gold

In this article, we’ll explain the inflation-shielding qualities of fine wine as an investment.

The performance of fine wine is uncorrelated to global markets

For many investors, the bulk of their assets will be in marketable securities – publicly-traded stocks, bonds, or currencies. Famously, for generations, the rule of thumb has been to invest 60% in stocks and 40% in bonds. But this style of investing has a huge downside, which many are now coming to terms with. Even with diversification, entire asset sectors and classes are still affected by the same market turbulence.

Inflation is one such market shock. Even at a rate of just 3%, the entire value of cash will erode after just 24 years[2].

At the current rate of 9%, outpacing inflation will be an uphill struggle for investments in bonds and currency. The stock markets – although slightly more resilient – will also feel the force of inflation. As businesses grapple to remain competitive with soaring prices, stagnant wages, and less consumer spending, all sectors are likely to be affected in some way.

Fine wine investments, however, do not derive their value from the broader markets. And shocks like inflation have almost no effect on their worth. This is because the price of the fine wine is determined by a niche, insider group of passionate investors. As the supply and demand come from within, fine wine is almost entirely uncorrelated to the global markets. Interestingly, fine wine continues to grow in value despite market turbulence and soaring inflation levels.

Other value drivers for fine wine include qualities that are personal to the bottle. For example, the brand of wine, the quality, and how it has been stored. None of these drivers have any direct link to the wider markets. While all of them give investors a lot more control over the value of their investment.

Fine wine is a scarce asset, becoming rarer over time

There are many ways to define value, but one of the most enduring is the scarcity of an asset. When there is less supply than demand, the value usually goes up. Fine wine is one of the purest examples of this.

Unlike other treasure assets such as gold or precious stones, fine wine naturally depletes over time as people drink it. Some bottles are so rare they are known as Unicorn Wines. One example is the legendary 1945 Domaine de la Romanée-Conti. The wine is famed for its iconic flavours and complexity. But the fact there are so few left in the world drives up the price exponentially. Only 600 were produced and there are almost none left today. In 2018, two such bottles were sold at auction for over $1 million[3], beating all records along the way. This bodes extremely well for long-term investors.

What are the most expensive wines in the world?

There is a clear trend showing how fine wines have increased in value over time. This is great for hedging against inflation. The Liv-ex index is one of the ways investors can track this steady increase. Since it began life in 2004, the fine wine market has grown in value by a staggering 315% (as of the end of 2021). Adjusting for inflation, the real value has grown by 125%. This is compelling growth, especially for those looking to outpace the 9% rates of inflation.

Which wine looks the most promising for 2022?

 

The growth of fine wine is exceptionally stable, even more so than gold

Wine has been on a steady upward trajectory for some time now. In 2021, the collectible saw record gains and topped the Knight Frank Luxury Investment List. Some performed exceptionally well. Cases of Domaine Bizot, Vosne-Romanée, Aux Jachées, for example, soared by a whooping 414% over the past twelve months[4]. And an incredible 3,004% over five years[5].

By contrast, the worst-performing wine on our books – the Château Croizet-Bages 5eme Cru Classé, Pauillac – fell by just 23% over twelve months. And it’s already increasing in value, again. Over a five-year period, the brand has increased in value by an average of 29%.

Discover the biggest risers and fallers this month

This illustrates the promising risk and return outlook for fine wines. Overwhelmingly, wine as an investment has shown growth.

In recent years, the strong performance of fine wine has even caused economists to question if the asset is more steady than gold. For centuries, gold has been considered an inflation hedge. Demand for this asset – and therefore value – has tended to spike during times of market turbulence. However, the flip side of this is that the precious metal can also tumble when the environment calms. Fine wine, to date, has not suffered this volatile fate. Investors in wine tend occasionally buy more during times of turbulence, as we saw in 2020. But there are no signs of mass sell-offs later. Arguably, this makes fine wine even more stable than rock-solid gold – an impressive feat!

How can you hedge against inflation with fine wine?

Shielding against inflation is just one of the many delicious benefits of investing in fine wine. To name a few, fine wine investors benefit from tax perks, compelling growth potential and improved diversification. What’s more, they also support a much-loved industry, filled with passion. And, with fine wine investments, they can even help to protect the environment.

For the best results, experts recommend allocating a small proportion of your investments into treasure assets like wine.

Getting started is simple and hassle-free. For more information, contact us or explore our tips for investing in fine wine.

[1] Source : Y Charts

[2] Source : CNBC

[3] Source : Bloomberg

[4] Source : WineCap

[5] Source : WineCap

[6] Source : Credit Suisse

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Sussex Sparkling Wine Secures PDO Status

Nyetimber vineyard with rows of vines in the sun

It’s English Wine Week and there’s now one more reason to raise a glass of Sussex sparkling wine. It has just been awarded Protected Designation of Origin (PDO) status from the Ministry for Farming, Fisheries and Food.

A product with a PDO means that it’s made in a particular way and comes from a specified region. It represents a guarantee to consumers that the product they’re buying is the real thing and prevents imitations.

Top wineries including Nyetimber, Bolney Estate and Rathfinny Estate all make wines in the region and will soon have another layer of protection in the form of the Sussex Sparkling Wine PDO that they can add to their bottles.  

Sussex currently has just under 50 wineries and – like many of the extraordinary English sparkling wines out there – has gained well-deserved international recognition. Its still wines are gaining momentum too. As the region gains accolades, awards and wineries, the only way is up and it continues to produce some of the finest sparkling wine in the world, giving top Champagne cuvées a run for their money.

Another element the Sussex PDO highlights is the difference in terroir in English winemaking by drawing a clear line between them and others made in Kent or Surrey.

Simon Thorpe, CEO of WineGB, commented on the new PDO: ‘The approval of a PDO for wines grown and made in Sussex comes at an important time for English and Welsh wines… There has never been more interest in and demand for our wines and the reputation they have gained in both domestic and international markets is based on high quality viticulture and winemaking excellence.’ 

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The Biggest Wine Investment Trends in 2022

Rolling hills of a vineyard in the sun

The fine wine market has seen immense growth and broken numerous records in the past year – here we outline four of the biggest wine investment trends to watch in 2022.

Bordeaux investment wines

Bordeaux remains the most important region for investable wines globally. It attracts the greatest liquidity, meaning that its wines, particularly the classified Growths, see consistent levels of trade. Bordeaux is a staple in most investment portfolios, and the annual En Primeur campaign draws attention from collectors and trade year after year.

2022 sees the launch of the 2021 vintage, which critics have largely claimed exceptional for dry and sweet white wines. Many of the new releases offer great value for money but there is also a plethora of exceptional older vintages like 2019 which are already enjoying serious price growth. A category to watch this year is the second wines of the First Growths, which benefit from the same technical expertise as the Grand Vin but represent a lower-priced alternative. These wines tend to deliver some of the biggest return on investment.

Strong competition from Burgundy

On the global fine wine market, Burgundy has emerged as Bordeaux’s strongest competitor. For the first time in 2022, Burgundy has even taken a greater share of the UK fine wine market than Bordeaux. Demand is greater than ever but so are allocations.

Driven by scarcity, early investors in the sector have seen increases of over 2,000% in some wines. Over the past two decades, Burgundy’s leading index, which tracks the price performance of the 150 most sought-after wines, has risen over 740%. Today, the trend is to seek value – and stock – within Burgundy’s appellations, as the region continues to give investors reasons to want more.

Vintage Champagne 

The start of the year was all about bubbles. Vintage Champagne led the charts in our Q1 wine market report – a trend that is set to continue. Looming shortages due to the 2021 grape harvest, which was one of the smallest on record, have only increased global demand and pushed up prices. Consistent returns, stability, brand appeal and unparalleled distribution are just few of the other reasons why Champagne is very much in vogue in 2022.

The rise of other wine investment regions

The ongoing broadening of the fine wine market means that there are plenty of investment opportunities to discover outside the aforementioned French regions.

One such example is California. A string of good vintages in the past decade and high critic scores have elevated the region’s share of the fine wine market from just 0.1% to 7.6% over the past decade – a theme that is set to continue.

Italy is another success story. More Italian regions outside the pillars of Tuscany and Piedmont are delivering value and stable returns.

Want to discuss these wine investment trends in more detail with an expert? Schedule a call with one of WineCap’s investment advisors.

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Free Wine Investment Tool ‘Wine Track’ Launches

Laptop displaying Wine Track page

We’re delighted to launch Wine Track, the most comprehensive index available. It enables you to identify the right, undervalued wines to buy and sell across the global market at the right time and price.

Our in-house technology collates and analyses Liv-ex and Wine-Searcher data, along with over 400,000 wine prices a day collected independently from 250 leading wine merchants across the globe, helping you navigate fine wine markets with confidence.

We’re proud to have also developed our own bespoke scoring system: the Wine Track critic score. It aggregates more than 100 wine critics’ scores from 12 worldwide publications to produce a simple and transparent score that marks each wine out of 100. This helps you reference a wine’s quality at a glance, as some critics use different scales to grade wines.

To demonstrate just how powerful Wine Track is, we’ve identified that Chateau de la Tour, Clos de Vougeot Grand Cru, Vieilles Vignes – at £1,794 per case – represents a real opportunity for retail investors to diversify their portfolio. This wine is from the same vineyard in Burgundy as Domaine Leroy, Clos de Vougeot Grand Cru – at £65,816 a case – and has an almost identical Wine Track critic score: 93.8 points compared to Domaine Leroy’s 94.7 points. While Domaine Leroy’s price is driven by its excellent reputation, Chateau de la Tour offers better value and accessibility.

Our tool monitors over 75,000 investment-grade wines from 1990 to the present day, enabling you to track how prices have changed over any given period.  

Wine Track is testament to the hard work of our development team and we’re proud to launch this free tool that harnesses the latest technology. Our data-led investment decisions are the reason our customers continue to experience positive returns. 

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Champagne Lanson to sell on La Place de Bordeaux

Lanson's Le Clos walled vineyard

Le Clos Lanson is set to become the second Champagne ever to be sold on La Place de Bordeaux, one of the world’s oldest marketplaces. The single vineyard expression – and Champagne Lanson’s top cuvée – follows Champagne Philipponnat’s Clos des Goisses onto the historic marketplace.

La Place de Bordeaux is over 800 years old and is a distribution system that consists of around 300 négociants (distributors) and courtiers (middlemen) who buy and sell wines from Bordeaux châteaux. Historically, La Place only sold wines that were made in Bordeaux. However, in 1998 the marketplace opened its doors to its first non-Bordeaux bottling: Viña Almaviva’s 1996 vintage, a joint venture between Château Mouton-Rothschild and Chile’s Concha y Toro. In subsequent years, more and more non-Bordeaux wine producers have been invited to sell on La Place. Think Napa’s Opus One, Australia’s Penfolds Grange and Argentina’s Catena Zapata.

The advantage of selling wines on La Place is its access to global markets and experience selling into Asia, especially China. Négociants have salespeople around the world primed to sell high-end wines. Lanson’s president, François Van Aal, commented on this new approach:

‘This distribution method will enable our icon cuvée to reach a larger amount of wine lovers and collectors around the world, while strengthening the awareness of our Champagne house which is already present over 80 countries’.

Le Clos Lanson 2009 will be the first expression sold on the platform. This top cuvée is produced from 100% Chardonnay grapes harvested from a one-hectare, walled vineyard in the heart of Reims. Only just over 7,000 bottles, along with some magnums, were produced of the 2009 vintage.

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The Wine Investment Market: What You Need to Know

necks of wine bottles

The wine investment market is characterised by its stability, increased diversity and high returns, which are particularly valued when traditional markets underdeliver.

Long considered a niche, the global fine wine market has considerably grown in size over the past two decades and has attracted more and more investors. This, in turn, has contributed to greater price transparency (making it easier to discover the price of a wine) and market liquidity (making it easier to sell it), which have facilitated the trade of fine wine. The more wines that have been in demand, the more prices have risen, creating something of a virtuous circle.

But the fine wine market is not without its intricacies. Below we examine the importance of market data, the returns you can expect from wine investment and the reasons why the market is growing.

What is the ROI on wine?

Fine wine prices are currently at record levels so there is arguably no better time to be involved in the wine investment market. The globally recognised Liv-ex Fine Wine 100 index, which monitors the price movement of the 100 most sought-after fine wines in the world, has risen 307% over the past two decades. The broader Liv-ex 1000 index, which tracks 1,000 wines from around the world, has seen even greater returns: 361% since its conception in 2003.

Individual wines have risen by different amounts, like the First Growth Château Mouton Rothschild 2000, which has appreciated over 800% in value since release, or Domaine de La Romanée-Conti Romanée-Conti Grand Cru 2010 – up by over 1,000%. Such rare fine wines impress with their stellar performances, but there are other more widely available alternatives that can deliver your desired return on investment (ROI). There are currently over 12,000 different wines that can be considered investment worthy.

While ROI is dependent on the wines you choose to invest in, there are additional factors such as provenance, storage and the time of buying and selling that will affect your profits. Reliable market data can help you make informed investment decisions.

Is wine a risky investment?

Wine is a low-risk investment. Physical assets like fine wine are stable sources of value in times of uncertainty. While stock markets can crash and share prices can collapse overnight, tangible assets do not cease to exist. As a low-volatile investment, fine wine delivers stability and consistent returns. It is a proven way to strengthen and diversify an investment portfolio. Additionally, wine is not reliant on a single economy and it can be traded internationally.

Fine wine also tends to perform well in inflationary environments due to its inherent tangibility and scarcity. It is a combination of investment and luxury good, which benefit from rising global wealth.

Is wine a good investment? 

Fine wine has a proven track record as an investment. A quick look into the history of the fine wine market shows how it has delivered stability and returns during the 2008 financial crisis, Brexit, the Covid-19 pandemic and other global events that have shaken equities.

As a passion investment, fine wine benefits from global demand. Wine is, after all, one of the oldest beverages in the world and its appeal has never waned. Its inherent value only adds to the strength of the fine wine investment market.

Interested in speaking to one of WineCap’s investment experts, now you know the wine investment market’s fundamentals?