5 must-know wine investment trends for entrepreneurs
Wine expert Kate Janecek of Justerini & Brooks shares her investment insights following a busy summer
In her first article for Growing Business, Kate Janecek outlined how to create a valuable wine investment portfolio. Here, she shares the key insights for entrepreneurs and investors looking to make strategic purchases.
The end of the Summer is traditionally the slowest time of year on the Fine Wine calendar, and is when we can finally take stock of the 12 months before and events such as the Bordeaux En Primeur campaign.
Downward trend for fine wines
The fine wine markets this year have shown a general downward trend after an alarmingly accelerated growth pattern from the previous three years. The overall figures are challenging, the Liv-ex 50 which is the standard market tracker is down just over 11% year to date compared to the FTSE, down 9.82%.
The greatest losses have been from the top wines, First Growths such as, Chateaux Latour, ChateauxMouton Rothschild, and significant drops in particular vintages of Chateaux Lafite.
Speculators left punch drunk
The primary reason behind the stratospheric rise of top-end Bordeaux prices was not scarcity but speculation. Many investors piled into high priced young, top end First Growths on release with confidence in the continued interest of emerging markets (read: China) to buy and drink it.
Many new investors saw this as an opportunity to make a quick turnaround while disregarding the fact that historically wines can increase in value but gradually over time. What the speculators didn’t expect was the maturation of the emerging markets’ tastes.
High quantity vintages over-inflated
Though the markets in general have slowed, it is a different picture when you start to look at which wines have actually declined in price. The huge prices on recent Bordeaux vintages such as 2008, 2009 and 2010 have not been sustainable as nobody was yet drinking them and production levels were 18,000-25,000 cases per vintage. In contrast, top Burgundy and Barolo Domaines produce on average 800-2,000 cases from their top vineyards.
Low quantity vintages rising nicely
Many wines have seen growth in the last year and for the right reasons. Top Burgundy wines such as Domaine de la Romanee Conti and Armand Rousseau have seen a substantial rise in demand because they are produced in much lower quantities than Bordeaux. Older vintages of Bordeaux have also sold well and there has been little decline on price in wines made prior to 1990.
‘Cult’ wines holding value
Top “cult” wines from California such as Screaming Eagle have held their value and top Barolo from Italy have seen increasing demand. What do all of these have in common? Rarity. Very small production levels or little existing stock is what keeps consistent pricing on wines.
I for one am relieved to see the decline in the formerly overheated markets over the last year and for us to find ourselves back to what will hopefully be a far more stable long term market. I believe very strongly in wine as a beneficial asset class thus with greater prudence and longer-term outlooks many investors have the potential to do very well with knowledgeable support and guidance from an established Merchant.
Kate Janecek is a private account manager for Justerini & Brooks, one of Britain’s oldest wine merchants, which received the Royal Warrant from King George III in 1760, and has continued to hold each ruling Monarch’s Warrant since. www.justerinis.com