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Fine wine market grows 234% in 10 years
A new report has revealed the increasing popularity of fine wine over the past decade, highlighting growth of 234%.
Commissioned by Cult Wines, a specialist in the acquisition, management and valuation of rare wines, the report by Intelligent Partnership also predicted a shortfall in production as demand for fine wine increases from wealthy buyers, particularly from China and India.
Citing research from Morgan Stanley the report places current global demand at around 3 billion cases, compared to total production of around 2.8 billion.
The report said that in the past 10 years fine wine experienced 234% growth from Q4 2004 to Q4 2014, according to Knight Frank’s Luxury Investment Index.
Guy Tolhurst, managing director of Intelligent Partnership, said: “Wine collecting has been a hobby for hundreds, if not thousands of years, but more recently fine wine has been recognised as a genuine alternative asset class, providing significant diversification benefits from mainstream financial markets.”
Meanwhile, last year London-based fine wine merchant Woolf Sung touted vintage Champagne is being the next big thing in wine investment, claiming that it presents the most value for money in the fine wine investment market with 10% growth expected over the next year.
The aim of the report was to educate investors and advisers about fine wine investment, and potential growth markets for fine wine.
He added: “The last four years have clearly demonstrated that playing the fine wine market is not without its risks, but that those who use expert advice to identify good value, acquire and divest at the right times, diversify their collections and understand that this is not a short term, highly liquid investment, are likely to learn more about the sector and more fully profit from the potential benefits on offer.”
Despite rapid growth over the past 10 years, wine critic Robert Parker has spoken out against the merits of wine investment previously, explaining that professional storage costs, slow appreciation and insurance makes investment in wine a tough and often fruitless endeavour.
I remain deeply suspicious of reports like these, commissioned by those who have an interest in the perpetuation of the Fine Wine Investment illusion.
An increasingly large percentage of ‘investment grade’ wine is now in the hands of people who have no intention of drinking it, but want to play pass the parcel as the prices spiral upwards, in the hope that they are not left holding the stock when the music stops.
The whole raisin d’être for investing collapses if there are no real drinkers happy to pull the cork and drink the wine when the parcel stops in front of them.
Pragmatic drinkers in the U.S., whose money drove prices upwards in the 80s and 90s have largely abandoned the blue chip investment grade wines, and are focussing on wines that they truly value in the $50-$200 brackets.
Canny Chinese drinkers have also seen the light, and it is no longer a sign of wealth and power to consume conspicuously by drinking lavish quantities of Lafite, but rather an indication of ignorant vulgarity.
Of course the super-wealthy will always find something more expensively faddy than the last trend to spend their money on, but this consumption won’t sustain the middle-market notion that it makes sense to treat wine as a financial asset class. Many people have had their fingers burnt by the last crash in prices post 2010 vintage, and those days are over for some time to come.
@Justin Howard-Sneyd – please can we send you a copy of the report?
I have an interest in the fine wine market, and I believe in its growth because the quantity of bottles produced is not increasing at the same growth rate of the worlds millionaires and billionaires. These are the people who can afford to buy and consume fine wines. The number of wine drinkers of fine wines is definitely increasing. You can read reports on this anywhere on the web so i wont make any references as the information is easy to find online. Quantity of Bordeaux labels produced each year are set by French and & EU regulations. This is the way the first growths and other recognized classifications have been setup for many years and there are no plans to change them.
There is of course risk, as there is with any investment. But risks are lower than a majority of investments on offer because you have an asset backed investment. The risk is finding the right broker who can give you an honest price. Followed by selecting the right wine with decent enough ratings. You can become very technical if you wish but its really not as hard as people make it out to be. The hard part is ensuring you find the right wine at the right price and don’t get conned in the process buying wine from a fraudulent company. So do your due diligence on the companies you select and then put your faith in them to deliver the right recommendations and parcels of stock. There’s a lot that goes on behind the scenes of a fine wine company, I know because I run one. But doing it professionally is simply being ethical and following a set of rules and guidelines in your operational procedures. Be prepared to wait for returns because you will not become rich overnight from wine investment. But you should be able to produce a decent portfolio over time if you are patient and consistent, which can be a wonderful nest egg you can rely on.