The investment quality wines are among the top 1 percent of the wines produced around the globe. Such wines become better as they age as they are made or produced via a reputed winemaker or chateau. In the recent past, there has been a steady increase in the prices of the best investment quality wines. But, for them to become an asset worth trading, they should be available in sufficient quantity in the market. Also, the investment quality wines should receive a score of at least 95 or more by a highly influential wine critic to gain popularity among investors. In this article, learn more about wine as investment.
Best regions for Fine Wine Investment
Around 80 percent of the globe’s investment quality wines are produced by the Bordeaux’s Big 8 chateau, in France. Other than France, the best regions for growing wines include Tuscany in Italy, Stellenbosch in South Africa, Rioja in Spain and Barossa Valley in Australia among others. Apart from this, the varieties of the red grape wine such as Merlot and Cabernet Sauvignon are quite popular in Bordeaux whereas Chardonnay and Pinot Noir are grown in Burgundy.
Below, learn more about the best wine growing regions:
Bordeaux: Bordeaux is regarded as the classic fine wine investment region. In fact, both the white and red Bordeaux wine that comes from the Bordeaux region are some of the most sought-after wine varieties around the world. The Big 8 in the Bordeaux are considered to be the most reputed wine chateaux in the region with a history of over hundred years (i.e. since 1855). In fact, the 8 chateaux including Ausone, Château Haut Brion, Château Lafite Rothschild, Château Latour, Château Margaux, Château Petrus and Château Mouton Rothschild are the best places where fine quality wine in made and produced.
Burgundy: In Burgundy, the vintages in Château Cheval Blanc are estimated to be at 10,000 euros. The leading Burgundy estates like the Domaine de la Romanée-Conti, estimate their output as per the individual bottles and not cases. Although, the supply is minimal, Burgundy offers some very expensive wines.
In order to purchase the first young Bordeaux wine wines you need to subscribe en primeur through specialized dealers. This implies that investors purchase the wine even though it still remains within the barrels at Château. In other words, he/she only purchases entitlement certificate for buying at a later date as the Châteaux releases their wines only after a period of 3 years. For making an early payment as well as trusting the quality of the wine, the buyer is rewarded with a price that is favourable. In the exchange language, such entitlement certificates are referred to as ‘futures’. They are easily tradable and their value may double as and when they are finally delivered. However, it may also fall in case the vintage or wine fails to meet the desired expectations.
MGP Ingredients (MGPI): With a market capitalization of 1.485 billion dollars, MGPI is one of the most sought-after wine stocks in the market. MGP Ingredients basically is based in Kansas and specializes in both beverage and food ingredients pertaining to the industry of distilled spirits. The company’s stock prices rose by 30percent at the beginning of 2019.
Truett-Hurst (THST): Based in California, Truett-Hurst is essentially a tiny wine maker that trades at the level of penny stocks. Their market capitalization currently stands at $10.606 million and they produce mid-level wines (as T-H label) in Healdsburg.
Other popular wine stocks include Diageo (DEO) with a market cap of 97.2 billion dollars and Constellation Brands (STZ) with a market capitalization of 37.545 billion dollars.
The experts’ recommendations
As the early buyers of Bordeaux usually don’t taste their wines, they are highly dependent on the judgement of experts. In the month of April after harvesting is over, the Bordeaux Châteaux invites dealers as well as the critics to taste the unfinished wines. The pricing of these wines is dependent on their judgement. Wines that are rated at 99 or 100 points double their prices within one day. Any rating below 85 points results in a tear.
The Wine Exchange
Established in 1999, the London International Vintage Exchange Liv-ex was formed by Justin Gibbs and James Miles. It features top 100 wines, out of which almost 90% are Bordeaux wines and the remaining come from Champagne, Burgundy, Rhône as well as Italy.
The Liv-ex Fine Wine 50 Index keeps an eye on the daily movement of the price of the commodities that are heavily traded in the market. On the other hand, the Liv-ex Fine Wine 100 Index represents the movement of hundred most popular fine wines in the market.
The Liv-ex Bordeaux 500 is considered to be the most popular and comprehensive index of the Liv-ex for the Bordeaux wines. It indicates the movement of 500 top wines from Bordeaux and is calculated on a monthly basis utilizing the mid-price of Liv-ex. This index comprises 6 -sub indices including Fine Wine 50, Second Wine 50, Right Bank 50, Right Bank 100, Sauternes 50, as well as Left Bank 200.
Similarly, Liv-ex Fine Wine 1000 keeps a track of 1,000 top wines from around the globe using the mid-price of Liv-ex. It includes 7 sub-indices including Bordeaux 500, Burgundy 150, Bordeaux Legends 50, Rhone 100, Champagne 50, Italy 100 as well as the Rest of the World 50.
Also note that in order to calculate and compose the Liv-ex wine index, the famous wine critic Robert Parker’s evaluation points are taken into consideration. Also referred to as the PP or Parker points, the highest score that the wines can get is 100 points. In case you are interested in investing in a wine investment fund and wine related assets, then it is important that you keep a track of Robert Parker’s Vintage Guide as well as the Liv-ex index. Also, if you follow certain rules then you will be able to profit from your wine investments. For instance, investors must look for factors such as durability of the wine and its value increasing potential before making investments in wine.
Apart from this there are many alternate assets or investments such as the shares issued by spirit produces as well as the wine merchants, wine basket certificates, innovative vineyards investment funds such as the Vincent Pretet and the Genuss-Schein certificates that offer much scope for profits or higher returns.
- The Wine Bible, Karen McNeil (Workman Publishing)
- Investing In Fine Wine: How to Buy, Sell, and Profit from the World's Most Delicious Asset, Alex Andrawes (Lioncrest Publishing)
- The World Atlas of Wine, Hugh Johson (Mitchell Beazley)
The website and the information contained therein are not intended to be a source of advice or credit analysis with respect to the material presented, and the information and/or documents contained on this website do not constitute investment advice.