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Could Fine Wine be a Better Investment than Property?

Fine wine cellar

For centuries, property has been hailed as the sturdiest of investments. After all, what could be more solid than bricks and mortar? But with the five or six figure price tags, near-constant renovation or service work and gut-wrenching taxes, is it really such a wise investment? In this article, we compare the performances, costs and returns of fine wine against property to see which one works out better for investors.

What returns could investors expect?

Investors in fine wine have reaped significant returns, especially over the past years. The Liv-ex Wine 1000, which tracks the overall performance of fine wines, shows how the asset has grown in value by 45% over the past five years alone[1] (at the time of writing). And since the index was created in 2004, fine wines have steadily risen to almost five times their original price. Over the past year, fine wine investors have enjoyed returns of 13.6% on average[2]. While past performance is no guarantee of future returns, fine wine has a strong track record of delivering smooth and stable value for investors.

Property market values are a little more complicated to measure, as they are influenced by politico-economic factors. For example, the 2020-2021 UK Stamp Duty cuts impacted price movements significantly. However, we can still compare returns.

Most real estate investors will opt for a Buy-to-Let property. Depending on the area they select, rental profits generally range from between 3% to 8% each year. 2022 research from Zoopla reveals that UK rental yields are the highest in East Ayshire, Scotland. Here, investors pick up average yields of 8.5%[3]. By contrast – and perhaps surprisingly – the location with the lowest rental yields is the London Borough of Kensington and Chelsea. Despite the average property values of £1.7 million, investors reap just 3.3% profits[4]. Even the highest yielding rental properties are not delivering the superior returns of fine wine.

Comparing like-for-like, the average rental yield for a UK property today is 4.7% annually[5]. By contrast, wine investors have enjoyed returns of 13.6% on average over the past year[6].

Costs associated with buying and selling

Unless you chose to buy into a fund, purchasing the investment-grade wine of your choice can take a little longer than trading stocks and shares on the public markets. However, reputable online services like WineCap make the process simple and straightforward.

Signing up to the WineCap platform and linking your desired investment amount takes just a few moments. From there, investors can effortlessly view, track, and purchase the finest wines available. They can even benefit from state-of-the-art analysis tools, and experts are on hand to recommend the best brands. Selling wine with us is just as painless. We are extremely well positioned to trade wine, reaching keen audiences and investors across the globe. When investors sell fine wine, WineCap charges a brokerage fee of 10%.

Buying a property, on the other hand, is almost always a drawn-out and complicated procedure. Investors looking for a buy-to-let will need to visit multiple different properties and locations, requiring time and planning. They’ll also need to deal with estate agents, surveyors, conveyancers, lawyers, banks and possibly mortgage brokers, adding around £5,000 to the cost[7]. Plus, if tenants are already living in the property, it problematic for investors who want to renovate or increase rents.

Selling a property means going back through the same laborious process, especially if the new buyer is part of a chain. It also occurs additional costs such as estate agents fees, EPC energy certificates, conveyancing fees and removal services, adding around £6000 in total[8].

Buying and selling a property comes with a lot more hassle and fees than fine wine. When fine wine is sold using online services like WineCap, a one-off 10% brokerage charge applies. By contrast, when buying and selling a property, investors are inundated with charges and requirements, adding thousands to the bill.

Inflation-hedging and interest factors

Fine wine is famously inflation-resistant. Over centuries it’s demonstrated that returns are not corelated to the wider financial markets, and over the last years it’s become even more stable than gold. As a scarce and depleting asset, fine wine investments are a promising hedge against inflation.

However, the same cannot be said for buy-to-let mortgages. Unless investors can purchase property outright, they are likely to get hit with annual interest rates of around 5%[9]. Considering that the average property in the UK comes to £296,000[10], mortgage holders will pay out £14,800 each year. What’s more, since 2017, buy-to-let tax relief has been gradually decreasing in the UK. As of 2022, it became zero. Property investors will be feeling the rising interest more than ever.

Inflation and interest rates are closely linked. When inflation rises too much, central banks will attempt to “cool” the economy by raising interest. At the moment, we are in a high inflation environment, and so interest rates are unlikely to drop back to pre-pandemic levels for the foreseeable future. This is bad news for landlords and property investors, but it doesn’t negatively impact fine wine holders.

When it comes to inflation-hedging and interest, fine wine investments have the edge over property. Unless the investor can pay for the entire estate without any mortgage, they will be hit with higher rates and less tax perks.

Ongoing maintenance costs

Some investors already have a temperature-controlled cellar at home. But for those that don’t, there are storage facilities available. Ensuring that the bottles are stored in the right conditions is crucial for maintaining and increasing value.

While storage costs vary from place to place, it’s usually between £10 and £40 for a case of twelve for a year. Some facilities may include insurance, or investors may prefer to purchase it themselves. Investors may also wish to have the wine delivered to a new location, which adds to the overall cost.

If you would like to talk to an expert about fine wine and the maintenance costs, we’d be happy to help.

Investing in property also comes with maintenance charges, which are often far more troublesome and costly. The estate may need renovation, cleaning, plumbing work, building work, decorating and more. Those planning to rent out also need to stay on top of regulations, such as fire safety measures. Many investors will employ a property manager to ensure that day-to-day issues are dealt with quickly, which is a drain on profits.

In addition, properties such as flats often require quarterly service charges, to pay for the communal maintenance, cyclical charges (like repairs) and reserve funds. Most service charges are between £1,000 to £2,000 a year.

Both fine wine and property investments come with maintenance charges. However, the cost of storing, insuring, or transporting fine wine is usually much less than the costs associated with properties.

Tax considerations

One of the major advantages of fine wine investments is the generous tax status. Under the UK HMRC, fine wine usually falls under the category of “wasting chattel”. This means that since it needs to be consumed within the next 50 years, it is exempt from Capital Gains Tax (CPT). Investment-grade wine which valued at less than £6,000 is also usually free from CPT. You can read more about the taxation rules of fine wine with our comprehensive guide.

However, the same cannot be said for almost all property investments. Property investors in the UK must normally pay stamp duty, capital gains tax and income tax. Buy-to-let investors will need to pay more in stamp duty than other homebuyers, as they have an additional 3% surcharge. And foreign property investors may face yet more taxes from both their own state and the one they are buying in.

Depending on the type of service property investors want to offer renters, they may also take on the Council Tax as well.

Property investors will probably need to pay stamp duty, CPT and income tax. Meanwhile, nearly all fine wine investments are exempt.

Is fine wine the new property?

In the current environment, fine wine has many desirable qualities and benefits over traditional property investments. While wine does have some associated costs, they are usually much lower and more straightforward than buying property. And, unlike property investments, the returns on fine wine are not directly impacted by tax, interest rates or inflation.

Perhaps most importantly of all, fine wine tends to preserve or increase in value during a recession. It is not linked to the wider economy and government intervention in the same way that the housing market is. On the contrary, in the aftermath of the 2008 housing collapse, fine wine rallied[11].

So, is fine wine the new property? We think it’s better.

 

[1] Source: Liv-ex

[2] Source: Liv-ex

[3] Source: Zoopla

[4] Source: Zoopla

[5] Source: Joseph Mews

[6] Source: Liv-ex

[7] Source: KFH

[8] Source: HOA

[9] Source: Money Supermarket

[10] Source: ONS

[11] Source: Liv-ex

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News

Chablis Commission Pleased with 2022 Harvest

Chablis grand cru vineyard

While Chablis declared 2021 to be a ‘complicated’ year, 2022 has proven to be a real contrast, with the Chablis Commission having declared this year’s harvest to be a healthier and overall higher-yielding one.

Paul Espitalié – president of the Chablis Commission – commented that 2022 was a much more dynamic vintage when compared to 2021, as the years before it had ushered in ‘challenges for winemakers in Chablis with the changing and unpredictable climate’.

Many winegrowers in Chablis rejoiced after the harvest this year as yields were plentiful and almost up to the maximum amount permitted. Because of this, the commission is hopeful that the region will be able to make up some lost ground with regards to volumes for export markets, where the UK still holds the top spot.

Espitalié commented that: ‘The UK continues to be our most important export market and we believe a key element to the continuing success of Chablis wines’. He also added that one of the commission’s main focuses is to increase consumer awareness of both Petit Chablis and Chablis wines.

‘These appellations have just as much to offer the market, particularly in the current financial climate in terms of offering great value wines,’ he said.

The 2022 harvest’s wines will be available in the UK shortly. Over the course of a year, a total of 3.8 million bottles were sold in the UK in 2021 – 2022.

Looking ahead, 17% of all Chablis vineyards are currently 100% organic and the subregion is also on track to hit the Burgundy-wide target of becoming carbon neutral by 2035. The aim of these initiatives is to improve the vineyards’ health and protect the local industry for the years to come.

Read more about the potential of Burgundy’s 2022 harvest here.

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Report

Insights from leading Bordeaux fine wine producers

Sunny Saint Emilion vineyard

Our Insights from leading Bordeaux fine wine producers report is now available to download. This report is the result of 32 face-to-face interviews WineCap conducted in 2022 with some of Bordeaux’s leading châteaux owners, winemakers and senior representatives. 

While global stock and bond markets have had a turbulent year, the fine wine sector has continued to perform strongly. Thanks to its low correlation with mainstream asset classes and defensive characteristics, fine wine is attracting a wider investor audience.

WineCap recently undertook research among leading fine wine producers responsible for many of the highest quality vineyards in Bordeaux. We are delighted to share some key findings, which include, wine producers’ oldest vintage and favourite year, their views on new permitted grape varieties and how they are coping with challenges such as climate change.

Despite the perception that older vintages are more desirable, it’s fascinating to find that most leading Bordeaux producers prefer wines from the last decade. Find out which vintages they mention in particular in this report. 

While six new grape varieties are now permitted to be planted in Bordeaux, to help producers adapt to climate change, Cabernet Sauvignon remains the dominant grape variety, representing 32% of the total 1,668 hectares in the region. 

A key priority for the wine producers we interviewed is to maintain the same volume to all their existing customers, while attempting to supply as much as possible to new ones. While some producers have acquired adjacent land to expand production volumes to meet growing demand, volumes can vary dramatically depending on the quality of the harvest. Managing demand expectations is therefore a key challenge and calls for a flexible approach on the part of the customer.

Download our new report to discover key insights from one of the world’s top fine wine regions.

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News

Champagne Producers Fight Against Zero Herbicide U-Turn

stormy skies over champagne vineyard

Winemakers in Champagne have written an open letter – published in Le Monde on the 6th of December – that voiced their opposition to the professional bodies’ reneging on a commitment to phaze out the use of all chemical herbicides in the region by 2025.

The date was significant: it was the day of the Annual General Meeting of the Association Viticole Champenoise (AVC). At the AGM, both the Syndicat General des Vignerons (SGV) and the Union des Maisons de Champagne (UMC) had officially announced – five years previously – that herbicides would be banned.

Jean-Marie Barillère, former president of the UMC, commented in 2018: ‘There are only two possible outcomes: either we move forwards or we are forced to move, with all the risks the latter entails in ecological terms, in terms of image and therefore in economic terms for our industry and our businesses. I prefer to forge a path towards a virtuous Champagne, rather than keep dwelling on the past.’

Maxime Toubart, president of the Syndicat General des Vignerons, also said at the 2018 AGM: ‘Our objective is, in a few years’ time, to be able to talk about a 100% sustainable Champagne, that takes its commitments seriously and can be held up as an example, and which can proudly proclaim: zero herbicides.’

Despite previous assurances, in 2022, Toubart refused to add the zero-herbicide policy to the cahier des charges: the Champagne appellation’s rulebook. Because of this, the dispute between the SGV, the Association Biologique Champenoise (ACB) and a union of organic growers, has only gained momentum.

President of the ACB, Jérôme Bourgeois, commented: ‘It is unacceptable that a prestigious appellation like Champagne can even imagine walking back a core environmental promise made five years ago, especially in today’s ecological climate.’

While the main Champagne body (the CIVC) didn’t comment on the open letter at the 2022 Annual General Meeting, David Châtillon – UMC president – did speak about the importance of preserving ‘Champagne’s perceived image’. Promisingly, he also made it clear that the Champagne region is committed to its zero-herbicide pledge, although no deadline was given.

In their address, Toubert added that ‘Champagne was greener than it ever had been before.’ This was supported by Arnaud Descotes, the CIVC’s technical director, who highlighted that the new herbicide law brought in last year has restricted the number of treatments permitted, as well as which herbicides are allowed.

Whether the initial deadline to rule out herbicides by 2025 will be met remains to be seen. However, one thing is for sure, those who signed the open letter are still keeping up the pressure: ‘We, Champagne winegrowers, Champagne houses and members of cooperatives, call upon the SGV and the UMC to continue implementing their progress strategy by respecting the deadline of ‘Zero Herbicides by 2025’, embracing an effective and sustainable commitment of our sector, in the interests of all stakeholders in the Champagne region and our fellow citizens.’

Read more recent Champagne news: Moët Hennessy’s Champagne Stocks Running Low.

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News

Christie’s London Auction Reaches Over £2.12 million

Christies flag hanging outside building

Christie’s recent Finest and Rarest Wines & Spirits sale that took place in London on the 1st and 2nd of December reached over £2.12 million at auction. Lots included anniversary collections from Champagne Philipponnat and California’s Ridge Vineyards, as well as six bottles of Pétrus 2000.

The top lot was made up of six bottles of Pétrus 2000 and fetched an impressive £30,000, which was the same value as 12 bottles of Le Pin 2018. Representing Burgundy, six magnums of Georges Roumier, Bonnes Mares 2005 went for £25,000.

Other notable wine highlights in the sale included some very special lots unearthed from King’s College Cambridge’s cellars: six bottles of Château Lafite-Rothschild 1959 that raised £20,000, 12 bottles of Taylor 1948 Port that went for £11,875 and six bottles of Croft 1945 that sold for £6,875.

The London sale celebrated Ridge Vineyards’ 60th anniversary. The collection comprised wines from each of its six decades and raised a total of £117,075. Mixed lots consisted of bottles, magnums and large formats of the leading Napa producer’s most exclusive wines, offered straight from its cellars. The star expression was undoubtedly nine magnums of Ridge Monte Bello that sold for £7,500.

Another key milestone the sale paid honour to was the 500th year anniversary since April de Philipponnat arrived in Champagne in 1522. The Champagne house presented 11 lots direct from its cellars and all of them sold, raising a total of £13,763. Particular highlights included three magnums of Clos des Goisses L.V. 1996.

A spokesperson from Christie’s commented that buyers from 22 countries, across five continents took part in the auction. Interestingly, millennial collectors were well represented, with 46% of new registrants being part of this demographic.

Read more about the recent Hospices de Beaune Burgundy auction here.

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News

2020 Château Mouton Rothschild Label Unveiled

Painting on 2020 Mouton Rothschild label

Château Mouton Rothschild has unveiled its 2020 label by Scottish artist Peter Doig. The renowned figurative painter settled in Trinidad in 2002 and divides his time between there and Scotland. Doig is the first British artist to have been commissioned to paint this leading Bordeaux château’s label since Lucien Freud in 2006. Other famous British contributors include (formerly) Prince Charles in 2004 and Francis Bacon in 1990. 

The initiative to invite an artist to adorn the Château Mouton Rothschild bottle label with a painting first began in 1924 with the poster artist Jean Carlu. 

The 2020 label is of a dreamlike scene showing red grapes growing under the light of a full moon with workers in the vineyard. Doig has drawn parallels with other renowned artists such as van Gogh, Bacon and Cézanne who have all painted farm or vineyard workers. The main figure in the centre of the piece – Emheyo Bhabba – is one of Doig’s close connections and muses. A Trinidadian cuatro player, Emheyo has previously performed in one of the artist’s previous exhibitions in Paris using this four string guitar.

‘The painting shows something of what goes on behind the scenes in the production of wine, what happens offstage, as it were’, commented Doig. ‘It’s a sort of ode to workers, to all those involved at the various stages of making a wine before it’s finally bottled. It’s a dream with a romantic streak, as if someone spontaneously decided to sing in the vines. It’s a moment of poetry, where you can take your time. It’s neither really day nor really night, but rather something in between, between waking and sleeping. It is possible to see it as a progression, a dream journey in the world of the harvest.’

Commenting on this new label, Julien Beaumarchais de Rothschild said: ‘We wanted an artist who uses canvas and pictorial material to express figurative subjects.’ ‘Unrivalled as a colourist, Peter Doig focuses entirely on painting and has become one of his generation’s foremost exponents of the discipline, holding exhibitions all over the world. There is something very special about his technique and his universe that sets them apart in contemporary figurative art. His subjects are very varied, his painting resists any classification: he has succeeded in creating his own, inimitable world.’

Take a closer look at the 2020 label and at previous years’ here.

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News

Moët Hennessy’s Champagne Stocks Running Low

Bottle of Krug Grande Cuvee

Moët Hennessy’s CEO has commented that due to high demand from affluent buyers in the run up to Christmas, its Champagnes are ‘running out of stock’.

Philippe Schaus, Moët Hennessy’s CEO, spoke to Bloomberg Television and said that the French luxury company – that owns top Champagne brands including, Dom Pérignon, Krug, Moët & Chandon and Veuve Clicquot – was ‘running out of stock’ of some of its bubbly. This is mainly due to Covid rules having been relaxed and more people socialising.

‘As people are coming out of Covid there’s been pent up demand for luxury, enjoyment and travelling,’ Schaus commented.

Schaus didn’t elaborate on which Champagnes were running low, or hint at what the state-of-play is with specific brands’ stock levels.

Louis Vuitton Moët Hennessy (LVMH) shared last month that its wine and spirit divisions had delivered double-digit revenue growth in Q3 of this year. Still wines and Champagne were the best performing categories. 

The luxury conglomerate announced that sales had risen ‘sharply’ this year in Europe, the United States and Japan. The two main drivers of this growth can be attributed to international travel resuming after the pandemic, as well as ‘solid demand’ from consumers.

On the subject of the strength of the US dollar in the market, Bloomberg made the point that strong growth might simply have been because US shoppers were able to take advantage of this by buying luxury items in Europe. However, Schaus indicated that there is still uncertainty out there due to rising inflation. It’s possible that some products will go up in price due to the rising cost of raw materials. 

Find out more about Dom Pérignon’s new P2 2004 release in our recent news article.

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News

Hospices de Beaune 2022 Wine Auction

Exterior of the Hotel Dieu in Beaune with the sun falling on the roof's tiles

Each year since 1859, the Hospices de Beaune has taken place on the third weekend in November. It’s the world’s most famous charity wine auction that happens in the heart of Burgundy’s Côte d’Or: the town of Beaune. Christie’s auction house had organised the annual event since 2005 and it is undeniably the key occasion in any Burgundy lover’s calendar. However, it bounced back last year with a physical auction (2020 was virtual due to Coronavirus) and with a new auction house at the helm too: Sotheby’s.

The History of the Hospices de Beaune 

The Hôtel Dieu (God’s House) was built in 1443 by the Chancellor of the Duchy of Burgundy Nicolas Rolin and was originally a charitable hospital. It was founded to house sick Burgundians and help them recover there. The auction was first created in order to raise funds to support the Hospices’ benevolent works. Today, it is no longer a hospital, nor are any wines made there as a new winery was constructed in 1994. However, the funds raised from the auction continue to support those who work in the vineyards. Even those who may not be familiar with the auction might just recognise the eye-catching roof tiles of the Hôtel Dieu that shimmer in the Côte d’Or sunlight.

The 2022 Wine Auction

This year’s 162nd edition of this prestigious wine auction will take place on Sunday the 20th of November. Sotheby’s has announced that it is set to be one of the largest auctions in its history, with a total of 802 barrels from the 2022 vintage that hail from all of the 51 cuvées.

The auction will be made up of 620 barrels of red wines and 182 barrels of white wines from 60-hectares of holdings belonging to the Hospices which are in their second year of organic conversion. Two new cuvées that are included are the Corton Grand Cru, Cuvée Les Renardes and Beaune Premier Cru, Clos des Mouches, Cuvée Hugues et Louis Bétault.

Each year the auction features a special charity barrel – the Pièce des Présidents – (the Presidents’ barrel). This year, the selected charity barrel is a Corton Grand Cru, in honour of Louis Fabrice Latour, former head of Burgundy négociant Maison Louis Latour, who passed away in September. 

The proceeds from this charity lot will help support the Princesse Margot Association that helps children with cancer and the World Vision Organisation that comes to the aid of vulnerable children.

The 2021 auction, which was run by Sotheby’s for the first time, raised  €12.6 million in total, with a record €800,000 solely for the Presidents’ barrel.

Read more about this year’s Burgundy vintage here.

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News

Dom Pérignon Reveals the 2004 Plénitude 2

Bottle of Plenitude 2004

Dom Pérignon is launching its new 2004 Vintage Plénitude 2 (P2) Champagne this month in Hong Kong where the prestigious Champagne house has also announced its brand new member of the Hong Kong Dom Pérignon Society.

The Plénitude 2 wines represent the Champagne being ‘elevated to its second life’. With ‘close to 15 years of slow transformation in the cellars’, the wines take on a new ‘vitality’ with this extra maturation.

This launch focuses on the 2004 vintage, a year which the maison commented on as being ‘a year of renaissance and calm’. While August was cooler than normal, the weeks that superseded it brought a dry heat that allowed the vines to grow the ripest and fullest fruit.

The house has now released its tasting notes for the new 2004 expression which has some 18 years of age. On the nose, expect ‘citrusy notes of pink grapefruit and blood orange, which gently cede to figs’. There’s also plenty of brioche and roasted nuts on the palate with this new release ending with an elegant finish.

William Kelley at Wine Advocate awarded this new 2004 vintage 95 points and proclaimed that it is ‘drinking beautifully on release’.

The Dom Pérignon Society is a global network of top chefs and proponents whose main focus is on Plénitude 2. The newest member of this elite group, which comprises 64 global chefs and restaurants, is Chef Julien Tongourian who works at Hong Kong’s L’Atelier de Joël Robuchon.

Tongourian will now join his two fellow Hong Kong counterparts: Chef Maxime Gilbert of two Michelin-starred Écriture and Chef Richard Ekkebus at Amber at Landmark Mandarin Oriental which also has two Michelin stars.

To launch the 2004 Dom Pérignon P2, each of the three Dom Pérignon Society Members in Hong Kong have created a special menu to accompany this new Champagne release. Each menu will represent an interpretation of a key moment in each of the Chefs’ careers. The menus are available now at the above three Hong Kong restaurants for a limited time.

Read more news from the Champagne world in this recent article about Champagne Henriot’s merger.

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Learn

How Climate Change Affects the Value of Fine Wine

Fire in forest outside Bordeaux as viewed from the water

The greatest risk for many investors today is – undoubtedly – the climate crisis. Each year the planet warms by 0.018 degrees Celsius[1]. And the past six have been among the hottest since records began. The resulting floods, fires and changing biodiversity are impacting nearly all asset classes and investment types. By 2050, climate change is anticipated to restrict global GDP by 14%[2].

For investors in fine wine, the rising heat could signify the end of an era for some of the greatest flavours, adding further scarcity to valuable bottles. On the other hand, the changing temperatures could offer interesting opportunities elsewhere.

In this article, we’ll uncover the major threats and opportunities for fine wine investors.

Scarcity will make much-loved bottles more valuable

Vineyards across Southern Europe and wine regions of North America are facing an uphill battle trying to mitigate the effects of climate change. In August 2022, an unprecedented hailstorm tore through Châteauneuf-du-Pape vineyards in France. The 120 mile-per-hour wind destroyed up to 90% of the vines in some of the most celebrated plots. So extreme was the storm that one vineyard owner described the scene as ‘completely shredded’ and ‘not a leaf is left'[3].

On the other end of the spectrum, extreme heat waves combined with drought in the summer provoke catastrophic forest fires. While only a small number of vineyards are caught up in the blaze, the resulting smoke can disrupt the delicate flavours and quality of the wine. Smoke taint – the ashy taste that lingers – can render entire harvests useless, leaving assets stranded. Even prized and world-famous regions like Bordeaux are feeling the painful financial impact.

It seems inevitable that many of the most-loved wines will become less and less available in the future. What this means for investors is that already-rare bottles are likely to become even more scarce and sought-after. Fine wine is already a limited and depleting asset, which climate change exacerbates. What’s more, as hungry new collectors enter the market, demand could even further outstrip supply, further raising the value of fine wine.

What’s more, according to 2021 data from Knight Frank, the average fine wine investment has returned a staggering 127% over ten years. Sticking to the strategy almost always pays off.

New flavours may be hard for investors to stomach

Even for regions without droughts or forest fires, climate change can seriously impact the flavour of wine. This is because the lack of water irrigation, combined with heat waves creates more sweetness and less acidity in the grapes. To avoid the wine becoming too sweet, producers may need to harvest early, which risks missing out on characteristic and valuable secondary flavours.

Not only could iconic wines now start to lack their defining volume, but the added sweetness could mean different varieties taste more alike. For wine lovers, who may enjoy certain brands or pride themselves on detecting notes, this development could be hard to stomach. There is a serious investment risk that future bottles could lose value, compared to their ancestors.

To avoid this cultural and financial damage, some regions are now lifting regulations to allow irrigation. In August 2022, for example, the Institut National de l’Origine et de la Qualité gave special dispensation for three sites in Bordeaux to water their vines. What this means for investors is still unclear. Depending on the success of regulations and irrigation systems, future harvests may yet retain their distinctive taste and value.

Another intriguing development triggered by climate change is the renewed focus on hybrid grapes. As famed vineyards look to adapt and mitigate against extreme weather, producers are working side-by-side with scientists to create more resilient grapes. While many critics remain sceptical, hybrid grapes could help vineyards restore some of their former glory..

Exciting investment opportunities are entering the scene

There are not many silver linings to the catastrophic climate situation. However, for investors in fine wine, there is a unique and exciting opportunity to buy new varieties early. As the planet warms, new terrains are opening, in previously unthinkable places.

Incredibly, vineyards are popping up in the UK, Belgium, Norway, and Sweden. In the UK, the wine real estate market is enjoying unprecedented growth, with land selling for £25,000 per acre[4]. English land dedicated to winemaking has more than doubled in the past eight years and looks set to continue[5]. As increasing numbers of producers and investors snatch up these pockets of land, it seems likely that the British wine scene is about to mature. Sparkling wines in particular, such as those produced in Sussex are exploding in popularity, with some critics describing the taste as comparable to Champagne. As of July 2022, sales of English and Welsh wine have surged by 69% from 2019[6]. Whether this boost will translate over to the fine wine market has yet to be seen, but with the warmer climate, British bottles could prove to be an interesting investment opportunity.

Vineyards with a sustainable focus look promising

Of course, the impacts of the climate crisis go far beyond the physical weather changes. Consumers are increasingly looking at the sustainability of their products too and thinking about how their money affects the planet. According to 2022 research, 48% of US alcohol drinkers say that they’re more likely to buy bottles if they see the company has sustainable or environmental initiatives[7].

In many ways, fine wine investments are already good for the environment, which is good news for the market. And it seems that those vineyards with extra sustainable initiatives in place could be even better positioned to capitalise on this trend.

 

[1] Source: Visual Capitalist

[2] Source: SwissRe

[3] Source: Wine Spectator

[4] Source: Spears Wealth Management

[5] Source: Wine GB

[6] Source: Wine GB

[7] Source: IWSR