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What factors affect fine wine prices?

  • The most important factors that affect fine wine prices are production costs, climate change, market demand, and economic conditions.
  • Market demand is influenced by critic scores, rarity, producer reputation, vintage quality, and geopolitics.
  • Understanding the factors that affect fine wine prices is key to making smart investment decisions.

Fine wine is more than just a luxury product – it is an asset class, a status symbol, and for many, a serious investment. While buyers might be aware of the rising value of sought-after labels, understanding the factors that drive these prices (upwards or downwards) is key to navigating the fine wine market. 

In this article, we explore the primary factors affecting fine wine prices, including production costs, climate change, market demand, and broader economic conditions.

How production costs shape fine wine prices

At the heart of fine wine pricing are the production costs. The making of a high-end wine is a meticulous, labour-intensive process that is inevitably reflected in the price. So are the land costs, which can reach astronomic heights in famous fine wine regions like Burgundy, Napa or Bordeaux. 

For instance, the luxury conglomerate LVMH recently acquired 1.3 hectares of Grand Cru vineyards on the Côte d’Or for 15.5 million euros. The purchase includes half a hectare each in Corton-Charlemagne and Romanée-Saint-Vivant, as well as 0.3 hectares in Corton Bressandes.

Besides land costs, manual labour and vineyard management can further affect release prices. The more human intervention required – whether in the vineyard or the winemaking process – the more costs add up.

Finally, many fine wines are not ready for release for several years after production. Extended ageing means producers incur additional costs, which in turn drives up prices for wines that are stored for longer periods before hitting the market.

The impact of climate change on fine wine pricing

In many traditional wine regions, unpredictable weather patterns, such as frost, heatwaves, and hailstorms, have resulted in lower grape yields. For example, the devastating frost in Burgundy in 2021 significantly reduced production, leading to a scarcity of wines from that vintage. 

When yields are lower, the limited supply pushes prices higher, especially for in-demand producers. This scarcity effect can be seen in top wines like Domaine Leflaive or Domaine de la Romanée-Conti, where a challenging growing season can result in soaring prices.

Additionally, climate change is affecting the style of wines being produced. While some regions like Bordeaux are adapting to these new conditions, climate volatility has added another layer of unpredictability to wine prices. It has also facilitated the emergence of new wine regions, leading to a more competitive landscape.

Market demand and the rise of fine wine investment

Market demand is perhaps the most significant factor affecting fine wine prices. The most sought-after bottles usually rise in value, as quality improves over time and supply diminishes.

Producer reputation, vintage quality and scores from major critics like Robert Parker and Neal Martin play a key role here, informing buying decisions and pricing strategies. A 100-point wine often commands a significant premium to a 99-point wine. When it comes to the Bordeaux First Growths, for instance, the average difference between a 99-point and a 100-point wine is over £350 per case.

Market demand is also shaped by geopolitical factors. The global nature of wine trading platforms means that market sentiment can affect wine prices faster than ever before. Demand from China largely contributed to Bordeaux’s pricing surge in 2011, and today interest is moving towards Burgundy and Champagne.

Economic forces that influence fine wine prices

While the fine wine market generally operates with its own dynamics, macroeconomic factors such as inflation, currency fluctuations, and recessions can all have an impact.  

In times of economic downturn, discretionary spending often decreases, which can lead to short-term drops in wine prices. However, fine wine has historically shown remarkable resilience due to its tangibility, rebounding after economic dips. 

Currency fluctuations also play a role; for instance, a weaker euro might make European wines more attractive to international buyers, spurring demand and increasing prices in markets like the US or Asia.

Changes in trade policies and tariffs can also have an impact. The Trump tariffs on European wines in 2020 temporarily raised the prices of French and Italian wines in the American market. While these tariffs have been reduced, ongoing changes in trade regulations can create volatility in wine pricing, particularly for internationally traded wines.

Understanding price fluctuations within fine wine

Fine wine prices are influenced by a complex interplay of factors, from the inherent quality of the wine itself to broader market forces and economic conditions. Understanding these factors is key to making informed decisions and maximising returns on investment.

Want to learn more about fine wine investment? Download our free guide.

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Piedmont on the move: rising stars under £1,000 a case

  • Italy is the best-performing fine wine region year-to-date. 
  • Some Italian brands have recorded positive movement as high as 15% in the last six months.
  • Piedmont’s edge in the fine wine market can be attributed to historical significance, limited production, and an increase in global appreciation. 

Amid economic fluctuations and changing market trends, the wine investment landscape has seen varied performances across regions. However, Italy, and particularly the Piedmont, has stood out for its robustness and resilience, outperforming other regions in maintaining and even enhancing its investment appeal.

Italy’s performance in a bearish market

The Liv-ex Italy 100 sub-index, which tracks the price performance of the top 100 Italian wines, has shown resilience in the current bearish market. While the broader Liv-ex 1000 index, representing a wider range of global wines, has experienced a decline of 5.2% year-to-date, the Italy 100 sub-index has seen a relatively minor decrease of 1.7%. 

This indicates a sustained interest in Italian wines, despite broader market uncertainties. Some Italian brands have even recorded positive movement in the last six months as high as 15%.

The rising stars of Piedmont

A significant contribution to this trend comes from the Piedmont, specifically Barolo and Barbaresco. 

Produttori del Barbaresco, a renowned cooperative known for its high-quality production, has seen impressive gains across a range of its wines. The Rabaja Riserva has risen 15% since the start of the year. The wine has an average case price of £968 per 12×75, and a Wine Track critic score of 94 points. 

From the same producer, the more affordable Ovello Riserva is up 9%, while the Montestefano Riserva is up 8%. 

From Barolo, Cascina Fontana has shown consistent returns. It has appreciated 6% in the last six months and a remarkable 105% over the last decade. The wine’s affordability at £665 average price per case makes it a value-driven choice for investors.

Meanwhile, Elio Grasso’s Barolo Gavarini Chiniera has increased 4% in the past six months and an impressive 110% in the last decade. 

Why Italy, and why now?

The resilience of the Italian wine market, particularly in premium segments like Barolo and Barbaresco, can be attributed to several factors such as historical significance, quality, limited production, and growing global appreciation for the value on offer.

Wines from Piedmont are steeped in history and are globally recognised for their quality and complexity, attracting both connoisseurs and investors.

The limited production and exclusivity of certain labels ensure their demand remains high, even in less favourable economic conditions. While these wines are highly sought-after, the brands above continue to offer value – all being under £1,000 a case despite recent gains.

Finally, Italian wines continue to see growing appreciation in key markets such as the UK, USA and Asia, broadening the investor base.

As we navigate through fluctuating markets, Italy, especially Piedmont, holds firm, demonstrating potential for growth. For investors, Barolo and Barbaresco represent stability, quality, and a legacy that stands resilient against the tides of economic change.

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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Fine Wine Investment for Beginners

Fine wine investment is increasingly gaining popularity amongst beginners and novices looking to reap the benefits of this alternative asset. Not only is it a proven way to diversify and strengthen an investment portfolio, but also an enjoyable pastime for wine enthusiasts and budding connoisseurs.

Surging prices regularly push fine wine investment into the spotlight, and headlines are filled with stories of investors who bought wine at low prices, then sold it years later for thousands. But how and where do you get started as a beginner? And what are the wine investment returns that you can expect?

The following guide provides an overview of the fine wine investment market and how it works in practice.

How big is the wine investment market?

Investing in wine is no new phenomenon. In fact, it has existed in different forms since antiquity, as wine was circulated and traded throughout the ancient world by Greeks, Egyptians, Phoenicians, and Romans. The writings of Thomas Jefferson provide one of the first pieces of evidence of a premium charged for an older wine. In 1787, he wrote that the 1786 vintage for top Bordeaux wines cost 1800 livres per tonneau compared to 2000 livres for the older 1783. Through the centuries, shrewd wine lovers have been selling part of their collections as a way of subsidising their consumption, leveraging the gains of a uniquely rarifying asset against their own cellars.

Today, the market is transparent and open for beginners as well as experienced investors looking to embark on their wine journey. Investing in fine wine is easier than ever, thanks to specialised wine investment companies, relying on current market data and the latest technology.

The global wine market is forecast to reach US$525 billion by 2025. But while fine wine has emerged as a popular alternative investment, not every wine is investment worthy. For example, the majority of wines produced in renowned regions, such as Burgundy and Bordeaux – perhaps surprisingly – often won’t appreciate in value. In fact, of all the wines made worldwide, only a very small percentage have the potential to improve as they age, and an even smaller percentage of that group has the capacity to see its price rise.

Precisely this scarcity of investible wines is one of the main drivers behind wine investment’s profitability. The limited supply of collectible wine leads to price increases, especially for labels in high demand. This is why it is important to keep abreast of the latest market trends and factors influencing global appetite.

More fine wine investment opportunities than ever before

Historically, Bordeaux’s classified growths have been the leading force on the fine wine investment market. In 2010, Bordeaux took 96% of all trade on the global marketplace for wine. Today, it accounts for less than a third of this market by value.

The main reason behind its declining trade share is that the fine wine investment market is bigger and broader than ever before. Other French regions like Burgundy, Champagne and the Rhône, USA, Italy (led by Tuscany and Piedmont), Germany, Spain and Australia are increasingly seen as reliable sources of considerable wine investment returns.

Investing in fine wine is thus not limited to a small group of wines, contrary to what one might expect. There are more opportunities than ever before that can be suited to your stylistic preferences and budget. The collectors’ market is booming, with record number of investible wines trading right now.

Greater fine wine investment returns

As global demand for fine wine has grown, the investment returns have increased too. Burgundy is a prime example. Thanks to its iconic status and its tiny production levels, early investors in the sector have seen eye-watering growth: upwards of 2000% in 15 years for some wines. The volume, value and breadth of trading has increased significantly, and wine prices have risen dramatically over the last decade; the region’s major index is up almost 200% in the past ten years.

Meanwhile, investors in Champagne have benefitted from supremely consistent returns, although it is not the most expensive or the rarest of fine wines. Its brand strength and distribution network, however, remain unparalleled.

Prices for different regions and wines have risen at a different pace. Region and wine-specific factors thus play a role in the returns that an investor can expect, the cost and length of the investment.

How long do I need to invest in fine wines for?

Fine wine is considered a medium to long-term investment. As a general rule, we advise our clients to hold their wines for three years at the very least.

Many collectible wines have long ageing windows, between ten and 50 years. As the scarcity and quality of fine wine appreciates over time, so does its value. The premise of fine wine investment is to buy wine when it’s young, then sell it once it’s older and more valuable. There are other external factors that may help determine how quickly a wine may deliver the desired returns such as critic scores, supply/demand and significant events related to the region or the producer.

For instance, the price of the Super Tuscan Sassicaia 2015 went up 25% in the day when the American publication Wine Spectator announced its ‘Wine of the Year 2018’. Those buying and re-selling the wine on the day would have made a small profit; however, those holding the wine since release would have seen its value rise over 160% to the present day.

As a long-term low-risk investment, fine wine doesn’t lose its value overnight. Where share prices may increase one day and decrease the next, fine wine provides stable returns year after year. Its low volatility has led many to consider it the best ‘safe-haven’ asset – a great advantage particularly in times of market turmoil.

Unlike mainstream assets, fine wine is fairly insensitive to macro-economic events. When global markets tumbled due to ongoing Covid-19 restrictions and upon Russia’s invasion of Ukraine, fine wine remained resilient. The returns of leading fine wine indices were greater than the FTSE100, S&P500 and even other safe investments such as gold.

How do I start investing in wine?

There are a lot of decisions you need to make when taking on wine investment. Wine investment experts like our team here at WineCap can help you make decisions relating to the following factors:

Set a wine investment strategy

The first step is to set your budget. Consider how long you would like to hold your wines for and your preferred investment strategy. Fine wines command a range of prices depending on the producer, how much of their wine is made and the wines’ age. Make sure to set your budget before embarking on building your portfolio so you can ensure you have exposure to all countries and regions.

Speak to a wine investment expert

There are different routes to accessing the wine investment market, such as through specialised retailers and auction houses. Expert wine investment brokers offer unbiased advice on strategic investment opportunities and can help you build your portfolio, based on your preferred length of investment and budget. While WineCap doesn’t charge any annual fees, most wine investment companies do, so be sure to do your research and be aware of any fees your portfolio might incur.

Select world-class wines for your portfolio

A wine investment expert will help you find the wines best suited for your investment portfolio. WineCap has formed long-lasting relationships over the past decade with négociants, wholesalers and private collectors. This means that we have access to some of the world’s most prized wines. What’s more, our unique proprietary technology analyses over 400,000 wine prices a day to identify the right, undervalued wines to buy and sell across the global market at the right time and price.

Store your wines professionally

Choose to keep your wines in government bonded warehouses as this will ensure they are professionally stored in temperature-controlled conditions best-suited for ageing wines. World-class care ensures that when you come to sell, your wines’ provenance will quickly secure maximum prices.

Fine wine investment can be daunting if you are a beginner, but with a little practice and help you can soon enjoy the benefits of the best-performing luxury asset.

Ready to get started now you know more about how to invest in wine? Speak to one of WineCap’s investment experts to discover the next steps on your wine journey.