Author: Andrew Helps

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Fine wine as a value and growth asset

Fine wine value and growth asset

Fine wine offers the benefits of different asset classes. As a long-term investment, due to the inherent premise that it gets better with age, fine wine would traditionally fall under the ‘value asset’ category. This is especially true as investors tend to buy and hold wine for decades before selling at a premium. 

However, since fine wine is a highly sought-after and depleting investment, it shows tremendous growth characteristics too. Over the past year, fine wine has delivered strong returns, with some bottles increasing in value by as much as 550%. This makes it more akin to growth assets. 

Could fine wine be considered both a value and growth asset?

Value assets have intrinsic value and are usually undervalued

When investors talk about value and growth assets, they are generally referring to publicly-traded stocks. This could mean huge blue-chip corporations like Coco-Cola, Microsoft, or Tesla, or it could be little-known and up-and-coming stocks. Generally, the market is extremely efficient and so finding an underpriced stock is hard work. Those who dedicate time and research to discovering these undervalued assets are known as value investors. 

Warren Buffet is perhaps the most famous value investor of all time. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price,” he declares. For Buffet, seeking intrinsic value is the only real way to invest. Perhaps that is why he is such a fan of fine wine investments. Buffet has reportedly said that every portfolio should have at least a 1% allocation to fine wine. 

The value of fine wine can’t be measured the same way as a stock

To understand whether an investment offers good value or not, investors usually need to crunch a lot of numbers. But the process is a little harder outside of the stock market. Unlike traditional stocks and shares, analysts would be hard-pushed to calculate the price-to-earnings, debt-to-equity, or price-to-book ratios of fine wine. 

Firstly, this is because bottles, casks or barrels of fine wine do not offer “earnings” in the stock market sense. Bottles cannot pay dividends, and so buyers instead collect all their returns when they sell the asset.

Secondly, prices are variable. As fine wine is usually traded privately or through prestigious auction houses, the final sum is not always predictable – especially if you have two or more extremely passionate bidders in the room. As a result, bid-ask spreads are significantly greater than you’d find on the stock market. 

Finally, forecasting these values can be unreliable because in some cases wine prices are not always publicly available. However, as industry leaders, we do have a lot of this information. If you would like to get an insider idea of the latest auction results and performances, check Wine Track. 

While we may not be able to scrutinize the value of fine wine in the traditional sense, we can analyse the general trends and characteristics. From here, we can see how they hold up against traditional value stocks. 

Fine wine shares many of the long-term characteristics of value investments

As an asset class, fine wine behaves like a value investment. Some of the main characteristics are the “buy low, sell high” strategies, the long-term investment horizon, and stable financial returns. 

  • “Buy low, sell high” strategies 

Value stocks are generally underpriced on the market, meaning investors expect to make profits over time as the asset realises its true worth. This is remarkably similar to fine wine investments. Many purveyors will purchase the wine en primeur before it is even bottled to secure the best price.

At the time of writing, wines such as Domaine d’Auvenay have already delivered returns of nearly 8,500% over a ten-year period. This shows the incredible power of buying wine early, and holding. 

  • Buy and hold over the long-term

As the adage goes, fine wine gets better with age. High-quality Bordeaux, for example, takes 20-30 years to mature. Successful investors will generally buy and hold fine wine over the long-term. 

This approach mirrors the “value” philosophy perfectly. As Buffet himself warns, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes”.

  • Steady returns

Stability is another key characteristic of value investments. These assets should be able to sail through all kinds of market storms with minimal or zero disruption. Fine wine has delivered exceptionally stable returns over the last year, holding up against recessions and incrementally gaining value despite stock market chaos. 

Fine wine has compelling growth attributes too

On the face of it, fine wine seems to be a value investment. It is a steady long-term asset which gains value over time. Yet, despite its famous stability, this investment has also delivered some impressive short-term returns and it is an alternative asset, which push it more into the growth category. 

  • Fine wine is an alternative asset 

Investors looking for growth assets tend to accept volatility risk, as part of the trade-off for superior returns. Because of this, they are more inclined to look away from the reassurance of the stock market to find new revenue streams. Increasingly, unlisted property, private equity, hedge funds, high yield credit, long-duration bonds and alternative debt are finding their way into growth funds and portfolios.

 As an alternative asset, fine wine seems to fit snugly into the “growth” category. Yet, unlike these investments, fine wine is generally not volatile. 

  • Exceptional short-term returns 

Wine can, however, deliver exceptional short-term returns. Over just five years, fine wines such as Hubert Lamy have seen values increase by 1,223%. This is an extraordinary performance. To put this it into context, it took value stock Coco-Cola 24 years to deliver returns like this. 

Some fine wines are even demonstrating market-beating returns in extremely short timeframes too. Some brands like Hubert Lamy have enjoyed increases of over 450% in just three months. If you’d like to explore the greatest gains and losses in the industry, Wine Track is a useful resource. As you read, please remember that experts do not recommend investing for less than five years. 

Fine wine offers the best of both worlds 

Fine wine is a fascinating alternative investment because it seems to offer the best of both value and growth without the downfalls.  

Fine wine is a buy-and-hold asset which increases in intrinsic value over several decades, while offering historically-superior returns. It also holds up well in recessions and fights back against inflation. These are all classic characteristics of value investments. 

Meanwhile, some bottles have proven to be extremely lucrative over the short-term. These boosts in value are likely to continue as climate change ramps-up demand for scarce flavours. High gains in short periods of time – especially from alternative assets – are usually more commonly associated with growth investments. 

Therefore, fine wine is an incredibly versatile asset, suitable for different kinds of investment strategies. Whether you’re looking for value, growth or both, fine wine could help you reach your goals faster. 

Explore your investment options

 

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Collectable Assets to Help Shield Inflation and Boost Diversification

Collectable Assets
Collectable Assets

The “60% stocks and 40% bonds” rule is outdated. While this approach may have offered stable and diversified returns several decades ago, in today’s difficult economic climate it’s not enough. This is where collectable assets come in.

To preserve and grow wealth, strategic investors must hedge their portfolios with alternative sources of value. One way to do this is with collectable assets. As a unique form of asset class, collectables offer investors extraordinary diversification and inflation-shielding properties – perfect for today’s economic storm. What’s more, many of these assets – like jewellery, classic cars, and art – can be enjoyed while they hold their value.

In this article, we’re looking at the six most popular collectable assets globally[1], and what to consider as you explore your options.

Art

As with most collectables, original art is about more than simply the financial return. Art is a passion asset – it represents a unique timestamp in our history, emotions, and popular culture. But there are great investment benefits too.

Original art is unique, and – just like with fine wine – rarity is highly prized. Famously, Leonardo di Vinci’s “Salvatore Mundi” was auctioned for a record-breaking $475 million[2].

Importantly, original art is also inflation-resistant. This is an excellent quality for the current economic climate. Unlike cash or bonds, the investment return will not erode over high-inflation periods because it has intrinsic value. Instead, market demand is driven by the artist, story, quality of the work, whether it represented a new technique, mindset or time, the materials and of course, the way it looks.

However, this doesn’t mean art is immune to volatility. The art market has trends and bubbles too. In 2018, for example, the resale market for art by Damien Hirst was declared a “bloodbath” as the hype ended and investors lost millions[3]. Before diving in, pay close attention to any potential risks in the market.

Research from Unbiased found that overall contemporary art has delivered annualized returns of 7.5% to investors since 1985[4]. Another index, created by Masterworks suggests blue-chip paintings (the crème de la crème of art) increased in value by 13.8% each year since 1995[5]. However, each artwork is unique and so individual returns vary significantly.

In today’s market, NFTs (non-fungible tokens) and sustainable processes are trending strongly in the art world. The average collector invested $46,000 in digital art last year and would be willing to pay more for environmentally-friendly works[6].

Whisky

As well as an appreciation for the craft and heritage, there are compelling investment benefits to whisky. Firstly, like all the collectable assets on this list, it is a great hedge against inflation. This helps to offset some of the losses from cash, debt, and bond instruments.

Secondly, it’s a booming market, as whisky has become popular. Just like fine wine, this has largely been fuelled by younger investors.  In 2021, the Knight Frank Luxury Index even named this liquid gold as its best-performing asset class[7]. Over the previous decade, Scotch whisky racked up impressive returns of 428% on average. In July 2022, one rare bottle pulverised all records, going for a whopping £16 million at auction.

Thirdly, whisky is increasingly perceived as reliable. Since Brexit and the war in Ukraine, many investors have turned to whisky as a more dependable and palatable choice of beverage. Naturally, the ingredients come from Scotland, so global grain and raw goods shortages should not hinder production. What’s more, the whisky trade looks set to increase, as the UK government draws up new deals with India.

Just like fine wine, one of the greatest benefits of whisky is that it is classed as a “wasting asset” and is not subject to capital gains tax. If you’d like to find out more about this tax break, you can download our free guide.

To get an idea of the financial returns of whisky, we can look at two indices. The BC20 index reported 14.36% returns for the asset in 2021[8]. And the SWI’s year-on-year historical performance sits at 12.5%[9]. Of course, whisky is a buy-and-hold asset, meaning that investors should not try to “flip” it, but rather hold the asset for years.

Classic cars

Of all the passion investments, classic cars are probably among the most loved. Collectors are often people who would tack magazine cut-outs of Ferraris, Maseratis and Bugattis to their walls as teenagers, and dream of buying the car one day. They tend to be looking to fulfil a lifelong dream as well as investing. Perhaps for this reason, the price tags are usually emotional, and they can make for uncertain investments.

The factors which make a car a worthwhile collectable asset closely mirror the art market. The historic significance of the model, rarity, beauty, racing history or associations with celebrities all add to the value.

HAGI (Historic Automobile Group International) tracks the market with several indices. Their findings show that between 2008 – 2021 the average price increased by 264.49%[10]. However, this doesn’t appear to factor in the cost of repairs, renovations, or storage. Even if you plan to restore a classic car yourself, the associated costs can exceed the end-value.

As you plan your investment strategy, scrutinise the financials of classic cars, including tax implications. For example, selling a classic car for a profit will incur capital gains tax, as well as road tax and MOT. Certain countries also have combustion engine regulations and low-emission zones that could make it difficult to drive your car. What’s more, incoming legislation around petrol cars may affect the desirability of the vehicle.

Diamonds

They’re forever, they’re a girl’s best friend … but are diamonds really a good investment asset? Looking at the Idex Diamond Index, on average, the precious stones have delivered returns of 8% over the past five years[11]. Natural blue diamonds have particularly fared well, with one rare 15-carat blue diamond selling for $57.5 million in April 2022[12].

As with most collectable investments, quality, rarity, historical significance and whether it was owned by a notable person, all make a difference to the value. For jewellery, connections with royalty can especially add lasting value[13]. When considering diamonds, scrutinize the following “Cs”: Carat, clarity, cut, colour and certificate[14].

However, there are some risks for diamond investors too. The market is notorious for its bubbles. Between November 1st 2021 and March 7th 2022, for example, prices suddenly jumped by 17% and then fell back down.

Investors should also be aware that this asset – while not directly impacted by inflation – does tend to stumble following a crisis, although it usually bounces back quickly. This indicates that during a recession is a good time to buy. As the prices tend to drop in the rough diamond market first, investors may be able to use this information to predict trends and inform their selling strategy on the secondary market.

Watches

Watches are a relatively new investment vehicle, and the market is white-hot. They really began to take off during the first months of the pandemic. Between January 2020 and April 2022, the value of used luxury watches jumped by around 115%[15]. According to the Watch Charts Market Index, prices surged from $25,420 on average to $54,461 in less than two years[16].

Today, however, the market is cooling. Prices have dipped back down to $39,397 on average[17]. After this burst, it is also extremely difficult now to access an investment-grade watch unless you have exceptional contacts or a broker. However, with patience and research, it is still possible.

For investors looking for a wearable investment, a classic brand like Rolex, Patek Philippe, Audemars Piguet or Breitling could be a good inflation-resistant option.

Fine wine

Of course, our favourite collectable asset to preserve and grow wealth is fine wine. Unlike diamonds, the value of fine wine does not tend to dip with recessions. On the contrary, after the 2008 financial crisis and the 2020 pandemic, it soared. From April 2020 until September 2022, prices steadily increased by over 40%[18].

Like whisky investments, fine wine also benefits from a generous tax break. Investors are exempt from capital gains tax, meaning they can keep significantly more of their profits. This tax perk applies to very few investments, and certainly none on the publicly traded stock market. It helps investors to preserve, reinvest and grow their wealth faster.

Like all the collectable assets on this list, fine wine is also extremely inflation-resistant. As the market is quite closed and determined by passionate investors, it is not directly impacted by the ebbs and flows of the wider economy.

Better still, unlike newer whisky and watch trends, fine wine is one of the oldest investment assets. Over centuries wine has proved its place as a valuable source of wealth growth and preservation. Today, it is even more stable than gold.

Invest with passion

Perhaps most importantly of all, fine wine is a revered and much-loved product. Who could imagine a world without a sparkling Moët Hennessy Champagne, or a beautifully bold Bordeaux?

When you invest in collectable assets, you are not simply making a financial decision. You’re helping to preserve and cherish that which you love about life. Whether it’s a vintage Porsche or a stand-out piece from your favourite artist, your wealth can revive your most meaningful moments in history. With investments like fine wine, you can also help to preserve and nurture the planet for future generations too.

If you’d like to discover more, getting started with WineCap is simple and straightforward.

[1] Source: Knight Frank

[2] Source: Art in Context

[3] Source: Art History News

[4] Source: Unbiased

[5] Source: Masterworks

[6] Source: Art Basel

[7] Source: Knight Frank

[8] Source: Braeburn

[9] Source: Insider

[10] Source: Investopedia

[11] Source: Idex Online

[12] Source: Forbes

[13] Source: Bloomberg

[14] Source: New Bond Street Pawn Brokers

[15] Source: Watch Charts

[16] Source: Watch Charts

[17] Source: Watch Charts

[18] Source: Liv-ex

 

 

 

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Is Fine Wine the New Gold?

is fine wine the new gold
Is Fine Wine the New Gold?

For more than 6,000 years gold has been revered and collected by people hoping to store, preserve and even grow their wealth. But in recent times, the stability of gold has been called into question. Prices have been on almost as much of a journey as the stock markets. Whether it’s because Central Banks are buying record amounts of the precious metal, or because investors are trading emotionally, the asset is no longer such a dependable source of alternative value.

In this article, we’re taking a closer look at gold’s investment performance over the past year, and how it compares to fine wine.

Gold is becoming more volatile

Investors have been on a tumultuous journey. Over the past year, the price of gold plummeted by -21% between March and October[1]. Then it rose again by +15% from November through to January. At the time of writing (January 2023), one ounce of gold costs $1,868[2], but economists are already predicting further movements ahead.

Performance of gold over the past twelve months

Over 2023, a range of factors is likely to influence the price of gold. The mild global recessions, geopolitical uncertainties and continued high inflation levels will probably increase its value. But on the other hand, pressure on commodities and the gradual easing of inflation could bring the prices down. Over the next year, it’s unlikely that prices will remain stable.

Gold is becoming increasingly correlated to the stock market

As gold usually rallies in a recession and falls during periods of prosperity, investors have traditionally added this to portfolios as a hedge. When the stock markets are down, they look to their gold investments to buffer some of the losses. However, over the past few years, something strange has happened. Instead of gold going up when the markets go down, the two are starting to correlate.

Fine wine delivered returns that were uncorrelated to the market

By contrast, over the past year fine wine have exhibited the very characteristics that investors usually look for in gold. Performance has been stable, steady and – best of all – uncorrelated to the stock market. The graph below shows the comparison of fine wine (green), gold (red) and the S&P 500 performance over the past year.

Unlike gold, the fine wine index (Liv-ex 1000) didn’t demonstrate any periods of correlation with the wider stock market during 2022. Overall, wine steadily trended upwards, slightly increasing when the wider markets plummeted and slightly dipping when the wider markets soared. This makes fine wine an exceptionally stable diversifier for investors. Not only did it hedge portfolios over 2023, but it also helped to smooth out overall volatility.

If you’d like to analyse the performance of fine wine, you can find the prices for regions, bottles, wines and more on Wine Track.

Is fine wine the new gold?

While it may not be exactly true that fine wine is the “new gold”, over the past year this asset class has been significantly more stable and less correlated to the wider market. It’s provided investors with a more calm and smooth positive performance than gold, throughout the economic storm.

Like gold or property, fine wine has intrinsic value and compelling inflation-resistance. As a tangible asset, it will almost always be worth something – unlike stocks, bonds or cash which could crash. But different from gold, the kind of buyers who invest in fine wine are not cut from the same cloth as stock market investors.

Fine wine is generally bought and sold in exclusive private markets, far away from public trading forums. The asset is also usually purchased and treasured by passion investors, who tend to hold it for decades. By contrast, more people seem to be “flipping” gold and property, which ramps-up volatility.

So, is fine wine the new gold? Not really… If you’re looking for stability, alternative returns, and uncorrelated market value, we think it’s superior.

[1] Source: Monex

[2] Source: Monex

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Latour 2015 Released

Latour 2015 released

Last week we saw the release of the much-anticipated newest vintage of Pauillac’s revered first growth, Château Latour 2015. Having renounced their involvement in the yearly en primeur campaign back in 2012, the acclaimed producer focuses on releasing wines on their own terms after several years of aging, a strategy that reinforces the exclusivity of celebrated vintages such as this. This is the first “prime” vintage of Latour to come onto the market since 2011.

In the years immediately following their withdrawal, trading volumes of Latour on Liv-ex reduced, as was to be expected. However, since new vintages began to release in 2020 trading volumes have increased, with price performance also improving as the greater volumes available leads to more eyes on the brand.

2015 saw excellent conditions thanks to a hot and dry early summer followed by a cooler, damper August shortly after. With healthy, uniform fruit at harvest, critics were quick to declare it as one of the best vintages of the century so far. Adhering neatly to Jancis Robinson’s rule of fives, whereby vintages divisible by five are often of excellent quality, the vintage has shown remarkable tannic structure and power in similar, left-bank wines. Latour 2015, however, offers even greater longevity and will likely develop into a serious wine of quality and value over several decades.

Decanter Bordeaux expert Georgie Hindle rated the vintage at 98 points, describing it as “still youthful and quite serious but there’s something so appealing about it.” As the youngest vintage available on the market, coming in at a price below the much-hyped 2009 and 2010 vintages, Latour 2015 represents a very exciting prospect for investors given its iconic reputation and impressive performance in the past.

As a whole, Bordeaux offers fantastic value this year, considering the rising prices of Burgundy and Champagne, and with new measures coming into effect regarding capital gains tax thresholds, a well-priced vintage such as Latour 2015 that will likely perform well could be an excellent addition to any portfolio.

If you’d be interested in adding Latour 2015 to yours, do not hesitate to get in touch. Keep an eye out for email offers soon.

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Fine Wine as a Wasting Chattel

Fine Wine as a Wasting Chattel

From April 6, the British government will move to reduce the deficit through a number of measures, including very significant changes to capital gains tax thresholds. However, investors may find that “wasting chattel” investments could be a worthwhile solution to this.

From the new financial year 2023-2024, the threshold for paying capital gains tax (CGT) will be slashed, from £12,300 to £6,000 this year, and then again to £3,000 the following year – a full 75% fall. This added tax burden will inevitably eat into investor returns. However, the category of investments known as “wasting chattel” is exempt from CGT altogether, meaning that any gains made on these investments will allow investors to keep more of their profits.

Wasting chattel investments are assets with a predictable useful life not exceeding 50 years and can include things such as art, furniture, vehicles, and most importantly, fine wine. These may provide investors with a tax-efficient way to profit.

If you’re looking to balance out tax losses and protect your portfolio against inflation, then allocating more of your portfolio to wasting chattels may be a smart move. Collectible assets such as fine wine are often inflation-resistant and have a long history of good returns. They can therefore provide a much-needed buffer against the current economic environment; helping ensure the long-term success of your portfolio and the security of your financial well-being.

In these difficult economic times, adaptability is paramount, and it is essential for investors and portfolio managers to remain flexible by considering all investment tools and vehicles. Wasting chattels kick back against the upcoming tax hits, and can be an excellent option.

If this sounds like something of interest to you, why not schedule a consultation with WineCap? Our wine investment experts would be only too happy to guide you through the process.

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Chinese Wine Imports on the Road to Recovery

Chinese wine buyers, tasting wine

Chinese wine imports have begun their revival as borders reopened to international travel following three long years of Covid restrictions that isolated the world’s most densely populated country.

As families reunite and look forward to a much needed period of recovery, the wine trade breathes a collective sigh of relief after surviving 2022, the year that saw the wine industry “hit rock bottom in both import and domestic market[s]”

An article, published by China’s leading wine news site Vino Joy News, examines the potential for a rebound in Chinese wine imports which dropped significantly in 2020 due to the successive lockdowns of the pandemic. The decline in corporate activities and cultural gatherings which usually drive crucial sales peaks saw revenues affected drastically. Experts are positive that the recent lifting of Covid restrictions will rejuvenate the market akin to the swift recovery of the restaurant industry since December’s relaxation of pandemic constraints.

The key factor driving this optimism is the increased demand for better quality wine from China’s increasingly affluent middle class. This is set to be further boosted by the recent relaxation of import tariffs, making wine more affordable for Chinese consumers. This year’s Spring Festival has seen revenues spike which suggests that other events like the Mid-Autumn Festival and National Day will have a similar effect.

Though there is a potential for the relaxation of Chinese food and beverage standards this is unlikely to affect the fine wine market, and overall the long-term outlook for Chinese wine imports remains very promising.

A key indicator of the market’s recovery will be the upcoming Chengdu wine fair in April, an event considered “a bellwether of China’s drinks industry” and likely a strong reflection of the country’s enthusiasm for fine wine.

With any luck, this will be the year that sees this major player in the fine wine market return to form.

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Bordeaux 2020 in Bottle

Bottles of Mouton Rothschild 2020

A number of key critics have delivered their thoughts on the third and final of the vintage triumvirate – Bordeaux 2020. The wines are characterized by lower alcohol levels, tension, and precision as a result of the warm and dry conditions with well-timed rainfall.

As the wines continue to become available in bottle, attentions have refocused on this vintage thanks to the unusual circumstances that surrounded it. With summer ripening and harvest taking place in the thick of the Covid-19 lockdown, restricted access to the estates meant that the growing season and processes took place relatively quietly and without the usual commentary. En primeur tastings were undertaken either remotely, or under tightly controlled conditions.

More recent tastings have revealed, however, that Bordeaux 2020 might be the champion of the three. Antonio Galloni concluded in his report, titled “Saving the Best for Last”, that “2020 is a great modern-day Bordeaux vintage. From the standpoint of both peaks and overall consistency, it surpasses 2018 and 2019.” Neal Martin notes in his report that “Overall, the 2020 vintage delivers the goods. It seals the trio of great Bordeaux vintages, albeit sculpted in a modern style” referencing that of the three vintages that encountered warmer conditions “by 2020, they knew a hell of a lot more than in 2018”.

Both praised Pauillac’s Lafite Rothschild and Mouton Rothschild, as well as the “epic” Château Margaux, powerful Montrose, and Pétrus, which Neal Martin proclaimed “an absolute killer”.

Jane Anson was fortunate enough to be one of a handful of people able to experience en primeur in Bordeaux itself. In her Bordeaux 2020 vintage overview she mentions the significance of a more focused year. Where producers could be fully dedicated to winemaking alone, this “allowed estates to put the spotlight on their own processes, and perhaps question certain accepted practices, or double-down on others.”

Anson also notes that Bordeaux 2020 has seen only limited trading so far, but that it is likely to pick up the pace soon as more wines become available.

Bordeaux 2020 looks to be a vintage with a lot to offer, and potentially one of those rare occasions where the third in the series is considered the best. At WineCap, we see excellent performance potential here and will be in touch with new offers on this promising offering soon.

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Digital Advancements Bring a New Generation of Wine Investors

Digital Advancements in Investments

NFTs (Non-Fungible Tokens) and fine wine may seem like an unlikely pairing. After all, wine is one of the very oldest investments, while NFTs are among the newest digital advancements. The markets couldn’t be more different either. While 20-somethings snap up digital tokens in the metaverse, 60-somethings traditionally dominate the fine wine universe at auction houses. But it’s precisely this titanic clash of old and new which is firing up the market so vigorously.

Like a jolt of electricity, a surge of digital advancements is jump-starting the established wine industry … and it’s bringing floods of eager new buyers along with it.

Vineyards get a taste for blockchain

Over the past year, esteemed vineyards have started to sell NFTs with bottles attached to them. Just like a certificate or receipt of purchase, but far more secure. When the investor is ready, they will redeem the NFT for the physical bottle. In the meantime, it’s usually stored securely for them.

Since blockchain cannot be altered or tampered with, some wineries are using the technology to guarantee quality and combat fraud. In recent years, counterfeit bottles and scammers have plagued the industry, costing wine investors upwards of 2.7 billion euros a year[1]. Using certified NFTs reassures buyers that the bottles they’re paying for are indeed the ones they’re getting.

Some vineyards, such as Màquina y Tabla, use this technology to sell wine en primeur[2] – or as wine futures. The international nature of NFTs lends itself well to this. Within the blockchain, investors can check exactly what chemicals, conditions and processes were used to make the wine. They can closely scrutinize the sustainability levels too.

Some experts are even suggesting that the default currency of fine wine could soon become crypto as the pound continues to encounter volatility.

New investors enter the wine market

The emerging NFT space couldn’t be more different from the traditional wine market. At the time of writing, most NFT investors come from India, Vietnam, Hong Kong, Singapore, and Brazil[3]. The age demographic is different too. Most NFT investors are between 18 and 34 years old.

While most NFT investors are true digital natives, they’ve also grown up in a snowball of recessions. This makes asset-backed digital investments like fine wine a welcome and intriguing option. Unlike most other NFTs, it’s something you can touch, with intrinsic value.

At the time of writing, this new breed of wine NFT investors seem keen, and they have money. Penfold’s 2021 NFT famously sold within just 12 seconds[4]. And in summer 2022, an NFT linked to an exclusive champagne bottle went for an eyewatering $2.5 million[5].

Additional income streams will benefit vineyards

As well as the new clientele, there’s another compelling reason why vineyards may be keen to sell NFTs with bottles attached. Perhaps it’s the strongest incentive of them all. Each time the NFT is traded, the vineyard can opt to get a small cut of the price.

Over time, as the wine NFT changes wallets, these incremental profits can stack up.

Extra streams of passive income will surely be very welcome to vineyards, as the industry grapples with climate change and forest fires. Producers can use the revenue to continue adapting, experimenting, or simply making up a cash shortfall – all of which is good news for wine investors.

Vineyards are keen to develop and invest in the NFT space. Some of the most famous wine families, including the houses of Rouzaud (Champagne Roederer and Château Pichon-Comtesse), Reybier (Saint-Estèphe’s Château Cos d’Estournel), Moueix (Videlot) and Perrin (Château de Beaucastel) poured a whopping 6 million euros into Winechain, a new wine NFT platform. It surely goes without saying that they’re likely looking for a return on their investments.

Vineyards can be more creative with NFTs

Trading NFTs online also gives vineyards a chance to include the kind of extras and luxuries that investors enjoy. There is almost unlimited room for creativity.

Château Angélus, for example, also include digital artwork and virtual wine-tasting sessions in the fine wine NFT package. The art appeals to NFT investors keen to build on their collection of unique digital assets. They can showcase these in their metaverse home or sell on to others. The wine tasting, of course, appeals to almost everyone.

New Zealand-based vineyard, Hello Fam, took things even further. This vineyard partnered with Graham Norton – voice of Eurovision and host of the One Show – to offer NFTs for their limited edition “HeDevil” wine. The NFT includes two bottles, physical artwork, and one lucky buyer got to attend a virtual tasting with Norton himself.

Unlike traditional bottles and barrels, vineyards can truly tailor wine investments and experiences around buyers. This opens the door to new potential, new markets, and new possibilities.

Investors should be wary of risks

While there is a world of possibility around these new digital advancements, there are drawbacks too.

The world of NFTs moves fast… a little too fast. With all the hype and possibilities around these digital advancements, it can be easy to get carried away. But – as always with investing – it’s important not to get swayed by the market noise.

As the oracle of Oklahoma, Warren Buffet, famously said, “The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd nor against the crowd”.

Before diving into the fast-paced world of NFT wines and metaverse investments, investors should consider their long-term strategy and conduct careful analysis. Although vineyards create authentic NFTs, there are likely to be fakes around.

What’s more, NFTs are traded using cryptocurrency, so investors cannot buy and sell them with fiat money like pounds, euros, or dollars. This comes with its own set of headaches. Firstly, these digital coins are famously volatile. In March 2022 – an especially bad time – the value of Bitcoin fell by a colossal 60%[6]. Over 2023, some experts are predicting a further 40% drop[7]. The second largest cryptocurrency, Ethereum, has also been on a rollercoaster. In December 2021, a single coin was worth $4,624, fast-forward one year and it’s $1,296 – less than a third of the value[8].

The process of mining and trading cryptocurrencies – and by extension – NFTs is also reportedly detrimental to the environment. By contrast, fine wine investments are usually quite sustainable, and so NFTs could undo many of those important benefits.

Another consideration consideration of digital advancements in the industry is that cryptocurrency has been banned in nine countries, including China. This means that the waves of Asian investors entering the wine market, are probably coming through the traditional route.

The value of fine wine is likely to increase … But at what cost?

The new generation of buyers is likely to increase the market value of fine wine. As any economist will tell you, when demand outstrips supply, prices go up. It’s excellent news for today’s investors who may find that they can sell bottles for higher prices with greater liquidity.

However, investors who are looking to buy into NFT wines themselves should exercise caution. The space is still new and emerging, and regulations are being discussed as we write.

The environmental impact of NFTs and cryptocurrency on vineyards is already raising some eyebrows. Climate change alters the value of fine wine more than almost any other factor. While the marketplace welcomes new buyers and innovations, the integrity of fine wine must always come first.

Find out more about the latest fine wine trends and prices.

 

[1] Source: EU IPO

[2] Source: Club Enologique

[3] Source: Finder

[4] Source: Decanter

[5] Source: NFT Evening

[6] Source: CNBC

[7] Source: CNBC

[8] Source: Yahoo Finance

 

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News

Antonio Galloni’s 2019 Barolo Report

2019 Barolo

In his new report reviewing 2019 Barolo releases, Antonio Galloni has showered this “stellar vintage” with praise, noting that even though the summer brought intense heat, opportune rain and instinctive decision-making on the winemakers’ part led to wines that “don’t taste like wines from a warm vintage at all.” Following an inconsistent 2018, this return to form might very well signal a new cycle of strong to exceptional vintages for this storied appellation.

Those who value Nebbiolo’s complexity and finesse will be enthralled by the 2019 Barolo wines and their powerful, tightly-wound structures, which currently have the sort of youthful austerity akin to vintages like 2016, 2005, and 1999.

A relatively dry winter and typically warmer-than-average temperatures marked the start of the year before colder conditions and rainfall saw bud break delayed by two weeks. Though persistent rain threatened a repeat of the previous year, thankfully it turned out to be quite benign. The summer months were met with warmer weather balanced with rainfall and cool nights which led up to an ideal, slightly later harvest.

Among the stars are Vietti, with Barolo Ravera earning 100 points from Galloni, citing its energy and tension as exciting characteristics. Giacomo Conterno’s Barolo Riserva Monfortino comes in just behind at 97-99 points showing incredible refinement for its relative youth, and showing plenty of tannin and structure. Also, following the sad passing of Luciano Sandrone, both Barolo Le Vigne and Aleste scored 97 points and were praised for their energy and potential development.

WineCap sees a real opportunity in Italy at the moment and the wines of Piedmont in general. Keep an eye out for offers coming over the next few weeks. Many of these wines are not available yet, but rest assured that when they are, we will be certain to let you know.

Read more about Why Fine Wine Might be a Better Investment Than You Thought.

Categories
Report

Bordeaux 2020 | Vintage Report

Barrels in a Bordeaux cellar

Our Bordeaux En Primeur 2020 Report is available to download. Discover our wine investment experts thoughts on 2020, a vintage that has widely been heralded by prominent wine critics as excellent and the third in a row of top Bordeaux vintages. Find out which Bordeaux sub-regions and producers they feel delivered top class wines that are worth seeking out. 

As with the two vintages that preceded it, conditions in 2020 favoured producers with multiple plots of different soil types due to the abundance of both sunshine and rainfall. Right Bank clay soils were better able to retain water and thus sustain the vines. 

Although Bordeaux En Primeur 2020 is undoubtedly a fantastic vintage, investors are advised to be selective and search for relative value rather than being led solely by critics’ scores. 

Through careful study and data analysis, WineCap provides insight into the wines that we feel present both value and opportunity for capital growth. With our bespoke, industry-leading graph and analysis tools we have concluded that the wines selected in this report are attractive prospects and that any carefully built investment portfolio should consider 2020 Bordeaux.

Click the button below to download our Bordeaux En Primeur Report. Do not hesitate to get in touch and speak to one of our wine investment advisors to reserve your allocations.