Author: Desislava Lyapova

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The rise of fine wine as a stable and sustainable investment

A version of this article written by WineCap’s CEO Alexander Westgarth was first published by Forbes.

  • A popular alternative investment, fine wine can plug the gaps left by struggling assets, helping to steady and raise performance across a whole portfolio.
  • As a tangible asset, fine wine delivers stability in uncertain times.
  • Part of the rising demand for fine wine can be attributed to environmental factors.

Between April 2020 and September 2022, the average bottle of fine wine rose 43.5% in value. While the fine wine market has dipped and corrected since, the general trajectory has historically pointed upwards.

Since 2004, Liv-ex data shows that the average bottle price tag has risen by 329.9%. While it can be a good investment, better still, fine wine is a great means to plug the gaps left by struggling assets, helping to steady and raise performance across a whole investment portfolio. Earlier this year, WineCap conducted a survey where we found that 92% of U.S. wealth managers believe demand for fine wine will increase over the next year. This is for three main reasons, and below we outline how to best take advantage of this asset’s potential for stability, sustainability and profitability.

Stability in uncertain times

We live in uncertain times. In the last year, businesses have had to cope with rocketing energy bills, inflation and interest rates. In times of hardship, people want something solid. This is why tangible assets like property, gold or fine wine tend to feel more precious during market downfalls. WineCap found that 56% of wealth managers invest in wine to add stability to portfolios across different market conditions.

It is not only wine. Across the entire investment landscape, there is an increased demand for reliability. In the past few months, gold prices have been rallying too. When the gold prices go up, this often indicates that investors are looking to preserve their wealth and shield it from market shocks.

At the same time, investors have been shying away from bullish investments like technology stocks. Apple, for example, has suffered significant dips. Microsoft shareholders have endured wobbly turbulence (though, at the time of this writing, the company is beating financial expectations). Likewise, the tech-heavy Nasdaq Composite has been on a rocky ride over the past months.

As the choppy waters continue, many investors want steady ships to ride out the storm – not fancy speedboats. With its historically low volatility, fine wine delivers just that. Unlike stocks or bonds, fine wine prices do not tend to fluctuate massively as the market operates with its own dynamics. Regions like Champagne are currently seeing high levels of demand, not only because of the quality of the wines but the stability the region has historically offered.

Similarly, wines from Bordeaux, Tuscany and the Rhône may be more solid. However, not all fine wines are made the same. Extremely rare and highly coveted wines from Burgundy, for instance, can make a great investment but remain a riskier asset if stability is what you are after.

Demand for environmentally friendly assets

Our survey also found that investors are prioritising environmentally friendly assets, and 56% say they invest in fine wine because it is a sustainable asset class with a low carbon footprint. This trend is hardly surprising; 2023 has been the hottest summer on record.

Dozens of wildfires are actively blazing through the USA. Meanwhile, elsewhere, the excess water caused by melted ice caps means that flooding and torrential rains are washing away entire communities. In August, flash floods tore through Pennsylvania, killing five people. Naturally, investors are keen to put their money into assets that will mitigate some of the climate risks.

Part of the interest in fine wine can be attributed to environmental factors. Vines promote healthy soil quality and nourish pollinators, which are essential for biodiversity. A hector of vineyard soaks up a respectable 2.84 tonnes of carbon every year. The best winemakers use age-old sustainable practices. Many will even opt for a pony and cart rather than disturb the terrain with a tractor.

Some well-known organic producers include Burgundy’s Domaine Leflaive and the Bordeaux Fifth Growth, Château Pontet-Canet. While not officially certified, Burgundy’s Domaine de la Romanée-Conti also follows organic and biodynamic guidelines. Meanwhile, some producers are reducing bottle weight in pursuit of sustainability such as Burgundy négociant Albert Bichot, which has reduced the weight of their bottles from around 700 grams to 450 grams.

Climate-conscious investors can keep an eye out for wineries investing in a greener future.

Strong returns

According to our survey, almost half of the investors choose fine wine because they want strong returns. Historically, fine wine has offered generous returns over long periods without sacrificing quality or environmental qualities. Access to historical data, critic scores and current prices can help an investor identify whether a wine represents a good opportunity. Things to look out for include brand prestige, price per point, investment appreciation over different time frames and drinking windows. One can also get help from experts who understand the intricacies of the market, utilize the latest technology and closely follow the trends.

Stability, sustainability and profitability

Today’s investors are looking for stability, sustainability and profitability. Different from last year, they are often less prepared to invest in edgy technologies for the future. Instead, many are looking for solid investment results – ideally, ones they can hold. Fine wines fit this demand well. Although it already features in 45% of HNW portfolios, with average allocations of 13%, fine wine looks set to become even more popular. Like a classic vintage Champagne, the market is ready to pop.

Thanks to its diversity and growing attention from experts, producers and enthusiasts, fine wine could be well-placed to meet investors’ changing priorities in the years to come.

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

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Jeb Dunnuck’s top-scoring Southern Rhône releases

  • Jeb Dunnuck recently reviewed two vintages from Southern Rhône – the 2021 in bottle and 2022 in barrel.
  • He described 2022 as a ‘clear step up over 2021’.
  • Château de Beaucastel’s Châteauneuf-du-Pape Roussanne Vieilles Vignes 2022 received 100 points from the critic, and prices for the label have risen 60% in the last five years.

Last week, Jeb Dunnuck released his latest Southern Rhône report, reviewing the 2021 vintage from bottle and the 2022 mostly from barrel.

The critic observed that ‘the time of truly bad vintages is mostly over’ given ‘the advances in viticulture and winemaking’. This is especially true for ‘a region like the southern Rhône, which has so much flexibility with grape varieties and different terroirs’.

2021 – drinking rather than collecting

The 2021 Southern Rhône vintage was marked by devastating springtime frosts, which dramatically reduced yields. A cool, rainy year led to ‘forward and charming [wines], with mid-weight, linear, fresher profiles,’ according to Dunnuck.

Dunnuck said that ‘2021 is not a great vintage’ when tasted next to a top 2019, 2016 or 2010. While he commended the accessibility and finesse of the wines, which would be ‘loved by sommeliers’, the critic noted that ‘it’s not a vintage to seek out or buy in massive quantities for the cellar’.

2022 – checks in ‘behind the greats’

Dunnuck described the 2022s as ‘a clear step up over 2021s’. He noted that the vintage bears some similarities ‘to 2020 and 2011, if not a more linear, mid-weight version of 2009’. For him, ‘2022 looks to check in behind the greats of 2019, 2016, 2010, and 2007’.

However, the critic concluded that ‘the divergent styles throughout the region make 2022 a difficult vintage to describe in broad statements, so it’s a vintage that readers will need to approach on an estate-by-estate basis’.

Dunnuck’s top-scoring wines across both years can be seen in the table below.

Across both years, Jeb Dunnuck found perfection in one wine – Château de Beaucastel’s Châteauneuf-du-Pape Roussanne Vieilles Vignes 2022. Awarding it 100 points, he called it ‘pure Beaucastel magic’. Average prices for the label have risen 101% over the last decade, and 60% in the last five years.

The Rhône’s investment performance in 2023

Prices for the top Rhône labels have been falling this year. Across the Liv-ex 1000 regional sub-indices, the Rhône 100 has experienced the biggest decline, down 18.1%.

However, young vintages like 2019 and 2020 have been in demand. Moreover, some wines from Southern Rhône such as Château de Beaucastel Châteauneuf-du-Pape Blanc have been on an upward trend, rising 32.8% on average.

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

 

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The place of the Bordeaux First Growths in a changing fine wine market

  • Once the dominant force in the fine wine market, the Bordeaux First Growths have lost market share due to its broadening.
  • In the last decade, Château Mouton Rothschild has been the best price performer, up 43.2%.
  • Château Haut-Brion offers the best value, with the highest average critic score and the lowest average price per case.

The Bordeaux First Growths in a broadening market

The Bordeaux First Growths have long been the cornerstone of the fine wine investment market. Back in 2010, they made up close to 90% of all Bordeaux trade by value – at a time, when Bordeaux’s share of the total market stood at 96%.

With the broadening of the market, their share has decreased and they now regularly account for around 30% of all Bordeaux secondary market trade (which itself has fallen below 35% annual average).

This trend was also reflected in the 2022 Power 100 list, which offered a snapshot of the ever-changing landscape of the secondary market. For the first time ever, no Bordeaux wines featured among the top ten most powerful fine wine labels.

Even if trade for these brands remains consistent or increases, the First Growths are facing greater competition. Still, they are among the wines with the greatest liquidity, attracting regular demand and high praise from critics year after year.

First Growths’ price performance

In terms of price performance, the five First Growths have followed a similar trajectory (i.e. rising post-Covid and dipping in the last year in line with the current market reality). The relative outcast has been Château Latour, whose performance was impacted by the decision to leave the En Primeur system in 2012. The wine has been the worst-performing First Growth, up just 17.9% in the last decade.

The best performer has been Château Mouton Rothschild, with an increase of 43.2%. Recent releases have elevated the performance of the brand, like the 2020 vintage, which boasts 100-points from The Wine Advocate’s William Kelley, 99-100 from James Suckling, 98-100 from Jeff Leve and 99 from Antonio Galloni (Vinous). ‘Off’ vintages like 2011, 2013 and 2014, which have greater room to rise, have also fared well over the last five years.

The second-best performer has been Château Margaux, which is also the second most affordable First Growth. Similarly, its biggest price risers have been 2014, 2011 and 2013. Less classical years reveal the strength of these brands, as demand for the First Growths remains consistently high regardless of the vintage.

First Growths’ price and score comparison

The table below shows the average price per case and critic score of the First Growths for vintages since 2000.

Château Haut-Brion tops the list with the highest average score (95.9) and the lowest average price per case (£4,595). With a price per point of £48, the wine seems to offer the best value among the First Growths. Vintages that have received 100-points from The Wine Advocate include 2018 (LPB), 2016 (LPB), 2015 (LPB), 2009 (LPB) and 2005 (RP).

Looking at the average prices, Château Lafite Rothschild stands out as the most expensive of the First Growths. The wine has achieved 100-points from The Wine Advocate for its 2019 (WK), 2018 (LPB), 2010 (LPB) and 2003 (RP) vintages.

In conclusion, the First Growths remain an important part of the changing secondary market, offering brand strength, consistently high quality and stable growth.

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

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Cautious optimism for Australian wine amid tariff review

  • Australia and China have agreed to a suspension of their ongoing dispute over the steep tariffs imposed on Australian wine since November 2020.
  • The tariffs had a profound impact on demand and price performance of Australian wine.
  • Australia’s best price performers have risen over 40% in value in the last year.

Australian wine tariffs under review

In a significant shift that could redefine trade relations between Australia and China, the two nations have agreed to a suspension of their ongoing dispute over the steep tariffs imposed on Australian wine since November 2020. This development comes ahead of Australian Prime Minister Anthony Albanese’s forthcoming trip to Beijing, marking a potential thaw in the trade tensions that have severely impacted Australia’s wine industry.

While the Chinese government has consented to an expedited five-month review of the punitive duties, which have plummeted Australia’s wine exports from over $1 billion to a mere $12 million, there remains a cautious optimism. Despite this progress, industry experts predict that even if the tariffs are promptly revoked, the Australian wine sector, which has undergone substantial restructuring in response to the lost Chinese market, would still require approximately two years to recuperate and effectively redistribute its current surplus.

Impact on Australia’s wine investment market

The Chinese tariffs, ranging from 180% to 200% on Australian wine imports, had a profound impact on Australia’s budding secondary market. The country has historically been the second most important fine wine player from the New World after the U.S., enjoying greater demand than South Africa, Chile or Argentina.

After a record-breaking year of trade in 2020, Australia’s investment market shrank in 2021. The number of different Australian wines traded on Liv-ex declined 32.2% year-on-year, as demand decreased.

Fewer wines from Australia made it into the rankings of the most powerful brands in the world. Australia’s leading label, Penfolds Grange, dropped in the 2021 Power 100 rankings, from fifth in 2020 to 45th place in 2021. In last year’s edition of the rankings, the wine fell further – from 45th to 55th place, while Henschke exited altogether. Part of the reason is that Penfolds has historically been heavily reliant on the Chinese market. In an attempt to rebuilt tariff-hit business, earlier this year Treasury Wine Estates, owner of Penfolds, announced the introduction of its first China-sourced premium wine.

Australian wine price performance

Since the tariff introduction, prices for some of the top wines have dipped, creating pockets of opportunity. For instance, the average price of Henschke Hill of Grace is down 4% in the last year; similarly, Penfolds Bin 707 is down 9%. While their trajectories are different, the long-term growth trend remains, with over 90% rise in the last decade.

Some Australian brands have seen impressive price performance despite the ongoing trade tension. The table below shows the five best performers on Wine Track in the last year, which have risen between 31% and 41% on average. Clarendon Hills Brookman Syrah leads the rankings, with an average price per case of £1,042. Two Hands Aphrodite has been the second-best performer, up 39%.

The cautious optimism for Australian wine will likely affect its secondary market performance. As demand rises, so will prices. It remains to be seen if a potential tariff suspension will bring back the momentum to a region that has quietened down in the last three years but nonetheless remains an important New World representative.

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

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Q3 2023 Fine Wine Report

Our Q3 2023 report has now been released. The report examines mainstream market performance, the best buying opportunities in fine wine, releases from La Place de Bordeaux and the latest industry news.

Report highlights:

  • Investors leaned towards liquid assets like cash amidst the struggle between the Federal Reserve and inflation, contributing to an environment steeped in risk and uncertainty.
  • Q3 witnessed a marked slowdown and potential bottoming out of fine wine prices, with the Liv-ex 100 index showing modest signs of recovery.
  • The fine wine market morphed into a buyer’s market due to stock availability and dipping prices, especially visible in regions like Champagne.
  • The La Place de Bordeaux campaign, amidst an eleven-month market decline and global economic uncertainties, mirrored the earlier En Primeur campaign in its inability to energise the market, with offerings often misaligned with trade expectations.
  • Wines like Almaviva 2021 and Masseto 2020 stood out, providing relative value for money and showcasing a strong price performance history.
  • Investors should be looking at ‘pockets of opportunity’ where there is brand strength, value and liquidity.
  • Demand is likely to pick up in Q4 with Christmas around the corner and exciting vintage releases on the horizon.

Click below to download your free copy of our quarterly investment report.

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Key trends that shaped the fine wine market in Q3

The following article is an extract from our Q3 Fine Wine Investment report, which will be published next week.

  • Ongoing inflation and interest rate hikes led to increased volatility in mainstream markets.
  • The fine wine market in Q3 was a buyer’s market for two main reasons: availability of stock and falling prices creating value.
  • Two of the best value La Place releases were Almaviva 2021 and Masseto 2020.

High interest rates rattle global markets

Mainstream markets experienced a turbulent third quarter, mainly due to a marked rise in borrowing costs coupled with a substantial increase of nearly 30% in oil prices. As a major input in several industries, rising prices for crude oil led to overall increase in production costs, impacting profit margins and, ultimately, reducing stock prices. These developments created a challenging landscape for stocks and bonds, with investors opting for more liquid assets like cash that tends to be a safer short-term bet. This inclination towards liquid assets illustrated the unresolved struggle between the Federal Reserve and inflation, leaving investors navigating a path marked by heightened risk and uncertainty.

Fine wine’s downturn slows

Fine wine prices fell in Q3, but their declines gradually became smaller. For instance, the Liv-ex 100 index recorded dips of 3.1% in July, 1.3% in August and 0.1% in September, showing humble signs of recovery. The broader Liv-ex 1000 index dipped 3.9% in Q3. Italian wine fared well, thanks to strong performance from Tuscany and Piedmont, as well as older Bordeaux vintages which experienced slight rebounds. Global trading activity increased suggesting that interest is there for well-priced stock.

A buyer’s market

The fine wine market in Q3 was a buyer’s market for two main reasons: availability of stock and falling prices creating value. This was particularly noticeable in regions like Champagne. Some of the top and most desirable brands, which have an impressive mid- to long-term performance saw small declines in Q3. Buyers took advantage of this opportunity and demand increased. Such is the case with Dom Pérignon 2013, which has fallen 7.1% in value since its release in January but has been the most traded wine this year. The brand’s overall trajectory is upwards, with Dom Pérignon prices rising 64% on average in the last five years, and 133% over the last decade.

Assessing the La Place de Bordeaux campaign

Over 110 fine wines were released through La Place de Bordeaux this September. The overall pricing strategy bore similarities to Bordeaux En Primeur earlier this year: price increases that failed to take the current market environment into account. Some critics expressed the opinion that there weren’t ‘as many hits as usual’. Two wines that stood out as good value were Almaviva 2021 and Masseto 2020; the latter immediately generated trading activity above its release price.

Over the last decade, Almaviva prices have risen on average 167%, while Masseto is up 107%.

Stay tuned – our Q3 Fine Wine Investment report will be published next week. The report contains further analysis on the best-performing and most in-demand wines, and Q4 investment outlook.

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Examining the investment potential of Salon 2013 amid heightened demand

  • Salon Le Mesnil Blanc de Blancs 2013 has enjoyed heightened demand shortly after release.
  • The 2013 offers good value compared to similarly scored back vintages, which come at a significant price premium.
  • Salon has delivered higher returns (71%) than the Champagne 50 index (62.8%) over the last five years.

The latest release from Champagne house Salon has already been met with heightened demand. Salon Le Mesnil Blanc de Blancs 2013 came to the market at the end of September, and featured among the most traded wines on Liv-ex shortly after. Below we examine the reasons behind this increased interest and the wine’s investment potential.

The ‘magnificent’ 2013 Salon release

The 2013 was the first vintage release following two unusual releases: the 2012 which the Champagne house initially said they would not offer, and the 2008 of which only 8,000 magnum bottles were released (about 1/3 of their normal production).

The wine received 99-points from Antonio Galloni (Vinous), who declared it ‘the most powerful, dense young Salon I have ever tasted’. The critic further noted: ‘Champagne of mind-bending complexity, the 2013 possesses tremendous mid-palate intensity and power from the very first taste’.

Meanwhile, the Wine Advocate’s Yohan Castaing awarded the wine 97-points, saying that 2013 is ‘more complex and incisive than the 2002 and exhibits similar power to the 2012 at this early stage’.

In terms of value, the 2013 stands out among other Salon vintages available in the market today. The only higher-scoring scoring wine is the 2008 at nearly twice the price. Other similarly scored back vintages such as the 1996, 1995, and 1990 also come at a significant premium to the 2013.

Salon brand performance

Perhaps the most coveted of all Champagne brands, Salon is certainly one of the rarest. Only around 50,000-60,000 bottles are made in most years, and fewer than 50 vintages in the last 100 years.

Salon is a wine defined by its singularity, representing a single vintage expression from one grape and one village. The wine was originally conceived as a private label for the consumption of its founder Eugène-Aimé Salon at a time when the making of Champagne was characterised by blending.

Salon’s exclusivity has been reflected in its investment performance. The wine has delivered higher returns (71%) than the Champagne 50 index (62.8%) over the last five years.

Even in the current climate that has seen prices fall across the board, Salon has fared better than average, down 7% compared to a 12.9% decrease for the broader index, which includes the likes of Krug and Cristal.

The long-term prospects for a wine as rare and highly regarded as Salon are more than promising. There is significant space for Champagne prices to rise in the medium term, and a wine like Salon is especially well placed to benefit.

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

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Differences and similarities between the fine wine and financial markets

  • The fine wine market is not correlated with mainstream markets yet there are some notable similarities and differences between them.
  • Global events and the law of supply and demand affect both the fine wine and financial markets.
  • Some of the main differences are tangibility, liquidity, the impact of time and factors influencing their performance.

The world of fine wine and the broader financial market might seem like distinct universes at first glance. However, there are intriguing similarities and differences between the two, which we examine below. 

Similarities between fine wine and financial markets

Both fine wine and financial markets provide lucrative opportunities for investors. While the latter showcases a plethora of options like stocks, commodities, and currencies, the former provides an alternative avenue for diversification, offering tangible assets, valued not just for their financial potential but also their historical and cultural significance. In stark contrast to the complexity and varied strategic approaches inherent in the financial markets, the wine market is more straightforward, predominantly guided by a ‘buy and hold’ strategy. Moreover, the universe of investable wines is notably narrower, typically centering around a select group of regions and producers.

Driven by demand

The laws of supply and demand are central to price determination in both markets. A rare vintage from a renowned vineyard or a wine produced in small quantities can fetch astronomical prices due to limited supply, mirroring the price surge of a high-demand stock or asset. For instance, Hubert Lamy Saint-Aubin Premier Cru Derriere Chez Edouard Saint Aubin has risen 189% in value over the last year due to low supply. The singular wine comes from a tiny plot of 0.7 hectares in Derrière chez Edouard, which was planted 20 years ago at 30,000 vines per hectare. At such a density, the entire plot only yields enough juice to fill the contents of a single barrel. In the world of stocks, demand has played a key role too. Nvidia – the company of the AI-fueled market rally – has been the best-performer in 2023, up 198%.

Impact of global events

Economic downturns, political events, and global crises can influence both the fine wine and financial markets. However, fine wine is less susceptible to global crisis. In fact, events that induce uncertainty usually drive investors towards more stable, tangible assets, which can include fine wines.

For instance, the fine wine market hit new heights during the Covid-19 pandemic, which saw a shift away from risk assets. Prices rose due to heightened demand for fine wine, which demonstrated remarkable resilience during the pandemic.

Expert valuations

Just as financial analysts predict stock performances, wine experts gauge the potential value of wines, guiding investors’ decisions. Investors can also follow the historical performance of their wines of interest with tools like Wine Track, which shows the performance of different brands over various time periods, as well as average prices and scores.

Differences between the fine wine and financial markets 

Tangibility

Investing in fine wine is an investment in tangible assets. The very bottle that appreciates in value over the years can be held, showcased, and ultimately consumed. Contrarily, financial investments, such as stocks or bonds, epitomise intangible assets, wherein the investment is in a concept or a digital representation.

Liquidity

The fine wine and financial markets have different levels of liquidity, which are rooted in their inherent trading characteristics. Fine wine tends to be less liquid, due to its tangibility, with transactions often slowed by factors such as the necessity for physical transport, authentication of products, and a comparatively limited buyer market. Additionally, investment-grade wines often necessitate longer holding periods to realise their gains, further reducing their liquidity. Meanwhile, the financial market is commonly cherished for its high liquidity, with assets like stocks and bonds that can be rapidly traded on large-scale platforms, accommodating a broad, active base of buyers and sellers.

The impact of time

The relationship between wine and time also sets these markets apart. While fine wine can age (which impacts its quality and value), financial assets do not inherently bear such physical transformations. However, their value may be just as susceptible to the passage of time and shifts in market dynamics.

Storage and maintenance

Fine wines require specific conditions for storage to retain or enhance their value, incurring additional costs. In contrast, stocks or digital assets don’t require such maintenance.

Factors influencing performance

In the wine investment landscape, several factors, including vintage quality, expert reviews, provenance, and global demand, play pivotal roles in determining a wine’s value and investment potential. Often burgeoning markets exert a profound influence, dynamically shaping global demand and investment flows, like China’s love affair with Bordeaux.

On the other hand, the financial market is steered by economic indicators and central bank policies, technological advances and corporate actions, such as mergers and acquisitions. Each factor, be it micro or macro in scale, casts its influence over the market’s performance, underscoring the multifaceted nature of financial investments.

Investor profiles

Fine wine appeals to a myriad of audiences, including collectors, connoisseurs, and institutional investors seeking diversified, alternative investment portfolios. The allure of tangible, appreciative assets, coupled with a penchant for oenology, makes this market a vibrant tapestry of participants.

Conversely, the financial market is frequented by a diverse mix of retail and institutional investors, brokers, and analysts. The widespread availability of resources, platforms, and instruments in the financial domain makes it accessible to an extensive demographic.

While the fine wine market and the financial market operate in distinct realms, the parallels and contrasts between them offer valuable insights. As with any investment, potential investors in either market should conduct thorough research and seek expert advice. 

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

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Investment opportunities in LVMH Champagnes

  • Recent LVMH Champagne releases offer a combination of high quality and relative value for money.
  • Dom Pérignon 2013 has been the most in-demand wine so far this year.
  • The current market environment has created plenty of Champagne buying opportunities, among which Krug 2006 stands out.

A name synonymous with luxury and quality, Louis Vuitton Moët Hennessy’s (LVMH) wines have become mainstays of any serious wine investment portfolio. Owners of iconic brands like Krug, Dom Pérignon, Ruinart, Veuve Clicquot and Ace of Spades, LVMH has set unparalleled standards in Champagne production.

Not only have their wines delivered quality, as affirmed by critic scores, but they have brought greater liquidity to the Champagne market. A common theme uniting some of their recent releases is the outstanding value they offer compared to back vintages.

Dom Pérignon 2013 – the most wanted wine this year

Dom Pérignon 2013 is the latest release from the most in-demand Champagne brand. The wine boasts 95+ points from the Wine Advocate’s William Kelley, who called it ‘a lovely wine, defined by the long, cool growing season’.

The remarkable value it offers – as the most affordable Dom Pérignon vintage in the market today – has led it to become the most traded wine by both value and volume this year. The wine’s price has fallen slightly since release (-7.1%), in line with the recent reconciliation in Champagne prices. The Champagne 50 index has dipped 13.1% year-to-date.

However, the brand’s overall trajectory is upwards, with Dom Pérignon prices rising 64% on average in the last five years, and 133% over the last decade, making it an opportune time to buy.

Latest Krug Grande Cuvée editions

The crowning jewel of LVMH, Champagne house Krug, also introduced its latest Grande Cuvée earlier this year. The 171st edition, blended meticulously from 30 different vintages dating back to 2000, represents the lowest-priced Krug GC.

Magnums of the 168th edition are also new to the market, with the hallowed 2012 as the base vintage. Older releases of such magnums are hard to find and command a hefty premium, once again underlining the value to be had here.

Opportunities in Krug 

The recent decline in Champagne prices has created buying opportunities for some of the top names. The latest Krug vintage, the 2008, has become more affordable after dipping 29.0% year-to-date. The wine received 97-points from Antonio Galloni (Vinous) who described it as a ‘nervy, electrifying Champagne, the likes of which has not emerged from Krug’s cellars since the magical 1996’.

However, the 2006 presents an even better investment opportunity. While it is the lowest-priced Krug vintage, its scores align with pricier alternatives such as 2002. The 2006 boasts 96-points from Neal Martin, 97-points from Galloni and 98-points from Kelley, making its value proposition even more evident.

Krug prices have risen 71% on average in the last five years (see more on Wine Track).

Buyers can find plenty of opportunities in LVMH’s Champagnes. Despite the recent dip in the Champagne market, the long-term trajectory of these illustrious brands indicates a steady and impressive rise. The value on offer in some of the most recent offerings makes them an even more lucrative acquisition.

WineCap’s independent market analysis showcases the value of portfolio diversification and the stability offered by investing in wine. Speak to one of our wine investment experts and start building your portfolio. Schedule your free consultation today.

 

 

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The growing market for alternative investments

  • The market for alternative investments has seen robust growth owing to burgeoning demand for non-traditional assets.
  • Alternative assets offer a hedge against inflation, and often provide investors with higher returns.
  • Some of the main challenges when it comes to alternative investments are accurate valuations and liquidity.

Alternative investments, those that fall outside traditional financial assets like stocks, bonds, and cash, have garnered immense popularity among affluent investors. From classic cars and luxury handbags to fine art, these assets represent both a passion and a store of value. According to the results of our global wealth management survey, fine wine emerged as the most in-demand passion asset. This article explores the burgeoning market for alternative investments, with a special emphasis on fine wine, contrasting and comparing their attributes, risks, and potential.

Alternative investment landscape

Alternative investments, often tangible assets, are known for their rarity, craftsmanship, and cultural relevance. Watches, luxury bags, art, whisky, and fine wine fall under this category, offering diversification for investment portfolios.

The market for alternative investments has witnessed robust growth owing to rising global wealth and a burgeoning demand for non-traditional assets. According to Richard Bacon, Head of Business Development at Shard Capital, ‘in the last two years there has been a tangible increase in how accessible and democratized these assets have become’.

As traditional markets have faced increased volatility, clients have turned to passion assets to safeguard their wealth. Economic uncertainty and inflation have fuelled interest, as these assets tend to retain value over time and provide investors with higher returns outside of their traditional portfolios.

This can be noted in the performance of the luxury goods market, which posted a record year in 2022, reaching a market value of €345 billion, despite geopolitical tensions and macroeconomic uncertainty. This momentum persisted into the first quarter of 2023, achieving 10% growth over 2022, according to Bain & Company.

The luxury group Louis Vuitton Moët Hennessy (LVMH), which owns Champagne houses Moët & Chandon, Dom Pérignon, Veuve Clicquot, Krug, Ruinart and Mercier, also had a record year in 2022, and reported a 15% growth in the first half of 2023.

Alternative assets compared

While alternative investments have enjoyed growing popularity, each asset class operates by its own market dynamics. There are some notable differences and similarities, for instance, between fine wine, art and luxury goods. Below we outline some of the differences.

Investment nature:

  • Fine wine: A consumable and perishable asset produced in multiple quantities (vintage-dependent) with value appreciation due to age, supply-demand and quality.
  • Art: A unique, non-perishable asset, valuing subjectivity and aesthetic appeal.
  • Luxury goods: Tangible assets like watches and bags, offering functional utility and value based on brand prestige and condition.

Value determinants:

  • Fine wine: Producer reputation, age, rarity, condition, critic scores.
  • Art: Artist reputation, uniqueness, historical significance, and condition.
  • Luxury goods: Brand reputation, craftsmanship, condition, and rarity.

Risks:

  • Fine wine: Market fluctuations, storage conditions, and provenance verification.
  • Art: Market trends, authenticity, and condition degradation.
  • Luxury goods: Counterfeiting, fashion trends, and wear and tear.

However, all these assets share common grounds, including tangibility, scarcity and uniqueness driving value, a strong connection to culture and lifestyle, and being a hedge against inflation and economic uncertainty.

Market challenges and opportunities

Some of the main challenges when it comes to alternative investments are valuations and liquidity. Some assets may need longer time to trade compared to traditional investments. Values may fluctuate based on trends, and condition. It is often harder to value a single piece of art accurately, compared to fine wine, which is often made in significant quantities and cases regularly trade internationally.

The main opportunities in the alternative investment market are diversification, their potential for appreciation and pleasure and fulfilment beyond the monetary benefits. Alternative assets offer a balanced and diversified portfolio, mitigating risks from traditional markets. Meanwhile, rarity and cultural significance can result in substantial value appreciation. Beyond financial rewards, these investments offer emotional and aesthetic satisfaction. Navigating the market for alternative investments requires an understanding of the underlying dynamics, diligent verification, and a discerning eye for value.

To find out more about fine wine as an alternative investment, download our special report below.