Fine wine has become increasingly popular among investors looking to hedge against inflation, and it’s no surprise - Aaron Rowlands, research editor at Cult Wine Investment shares, “Fine wine can offer a good option during inflationary times because there’s a supply and demand imbalance. It tends to outpace inflation.”
While that may seem a bold claim, the value of fine wine is primarily determined by factors that are unlikely to be affected by inflation.
“Tradition matters in wine. Sometimes it is just about buying the best names,” says Aaron. The quality of a wine and its brand are more or less set from the time it’s made. High-quality liquid will lend a bottle value on its own, as will the renown of its producer.
A fine wine made by a highly-regarded producer with the potential to continue improving with age will always be in demand. Aaron explains, “They have consistent global buyer demand from wine connoisseurs, collectors and investors. They’ll always be after these types of wines.”
Investing in a bottle of this calibre is generally considered a low-risk strategy for consistent appreciation. The bottle’s inherent value and inbuilt demand make it resistant to macroeconomic turbulence while offering some potential for growth.
If the wine later receives further accolades from critics or wins awards, or the producer becomes especially sought-after, the bottle has the chance of offering even greater returns.
High-quality wines from renowned producers tend to have enthusiastic and devoted markets, and that’s essential for liquidity. Liquidity refers to how easy or quickly an asset can be bought, sold, or traded. If you know that you’ll want to carry out transactions in particular time frames, you’ll want to choose wines that have that consistent demand for the best opportunities for liquidity.
Investors with low appetites for risk and particular temporal needs will likely want to familiarise themselves with wines that have historically been highly liquid. But investors with a greater appetite for risk and plenty of time may be interested in exploring wines with less performance history and more future potential.
With CultX, investors can get live data on the performance of the bottles in their portfolio and enjoy 24/7 access to a global market. CultX allows investors to choose when to buy, sell, and trade - and gives them all the resources they need to make the right decisions for their needs.
In times of inflation, investment in an established fine wine can prove a stable, and potentially profitable, choice. In Aaron’s words, “There are still a lot of positives for fine wine right now.”
And with £10,000, you have the chance to build a portfolio that could present plenty of positives.
With £10,000 to invest, Aaron and Kelly agree that they’d concentrate primarily on Bordeaux and Burgundy. Aaron specifies that he’d take his £5,000 investment strategy and expand it further, putting 40% of his money into Bordeaux and 40% into Burgundy - with a significant upgrade for Bordeaux.
“This time, I’d probably have to get a First Growth wine,” he says. His top choices in Bordeaux would be Chateau Haut Brion (a personal favourite), a Château Canon and Carruades de Lafite (which is a Second Growth of Chateau Lafite Rothschild).
Kelly points out that while some of the top producers may still be out of reach at this level (“Lafite Rothschild recently released its 2021 En Primeur (for advance orders) for £484 per bottle (London RRP). Their other vintages were priced similarly, En Primeur then sold for around £600 when they came to market two years later, so there is a good chance this year’s vintage may perform similarly.”), plenty of second wines of the top chateaux and popular producers can present great relative value.
Her picks in Bordeaux would be Chateau Beychevelle or Chateau Lynch-Bages. In Burgundy, she has her eye on some plots in Santenay, Fixin and Marsannay because they’re expected to be upgraded to Premier Cru later this year.
For Burgundy, Aaron would choose a top-tier producer such as Sylvain Cathiard at the Premier Cru level (around £5,000). “It’s a lot of money to spend on one case, but top name Burgundy should be a good buy over the long term, especially if Burgundy continues to appreciate like it has been,” he explains.
Alternatively, he suggests, “You could go on a little journey.” He recommends exploring Perrot-Minot, Charmes-Chambertin Grand Cru and Domaine Tortochot Mazis Chambertin Grand Cru as they’d also be good investments.
Bordeaux and Burgundy are the traditional foundations of a wine investment portfolio, whether you’re starting with £1,000 or £100,000. These regions are home to many of the world’s best-regarded producers, and there’s almost always a market for these highly-acclaimed wines. Both regions have seen positive performance in recent years, making the top wines from Burgundy and Bordeaux essential for any wine investor.
Next, Kelly would look at sparkling wine. “There’s a category called Grower Champagne,” she says. “These are independent producers who grow their own grapes and make their own wines rather than selling the grapes to big champagne houses like Dom Perignon or Pol Roger.
Recently, some of the more adventurous types are starting to innovate with their own Champagnes as well. Some of them taste like Burgundy white with fine bubbles; they have an extra layer of creaminess, toastiness, and are very experimental.
Grower Champagnes have had really good returns in the past and are even outshining some of the bigger houses. So I would put some producers like Jacque Selosse and Egly-Ouriet in there. They may be a bit harder to source but they could be great as slightly longer term investments.”
With the remaining capital, Kelly and Aaron would both look to Italy for opportunities to diversify. Aaron names the Vietti Barolo Brunate 2016 as a “solid purchase,” and also likes Super Tuscans such as Biondi Santi from the Brunello di Montalcino region or Solaia from Marchesi Antinori.
Kelly would choose Barolo and Brunello. On allocating the rest of the budget to Italy, she explains, “These are the regions that haven’t yet reached their price ceiling. They are gaining popularity in the US and China too, which is always a good sign for the future of these regions.”
Italian wines may not yet be household names like some Burgundy and Bordeaux, but they’re attracting international acclaim. They can be a great way to pick up a quality wine for less than a comparable bottle from a more established region, and offer some great opportunities for growth and potential appreciation.
Finally, Aaron mentions, “Rhone also has incredible value – I would definitely get some at this level. It’s established and popular in the US. Domaine Rostaing or M. Chapoutier would both be good options.”
With an established market and attractive pricing, Rhône can be a great way to diversify without taking on too much risk.
Much has been made of the effects of climate change on traditional Burgundy, but Kelly explains that, “for a lot of the top producers, it’s actually been good.”
“It’s opening up new areas for investors to explore as well. Some of the higher slopes in Burgundy haven’t been able to successfully ripen grapes to the top quality level until more recently. These higher plots are now much warmer,” she elaborates.
It could be worth looking into the producers who are now seeing these benefits, but she recommends proceeding with some caution. “There are also other factors with rising temperatures and irregular weather patterns, the consideration for droughts, early bud bursting and flowering, adverse frost and excessive rain. Climate change has brought a lot of unpredictable risks for producers and it’s something we need to constantly watch out for as investors. It's going to have a long term impact on how producers are going to fare in the long run.”
Burgundy has traditionally been one of the premier investment wines for its consistent quality, demand, and performance. This doesn’t seem to be changing any time soon, but investors are beginning to explore options beyond its borders.
“Burgundy white is probably the most established in terms of white wine investment. It ages incredibly well, it has the same hierarchy as Burgundy red with the Premier and Grand Cru classifications, and there are small micro vineyards that produce some of the most famous wines in the world. But I think red wines are still regarded as more appealing to a global audience. There is a market for white wine but it’s smaller,” Aaron says.
Still something of a niche in wine investment, white wines can offer many of the same benefits as their red counterparts but are often overlooked. White Burgundies are considered some of the world’s best, and like red Burgundies, they command high demand and prices to match.
For investment white wines with greater growth potential, Aaron suggests, “German and Alsace Rieslings also have a lot of the qualities that can make a good investment wine. There are incredibly small producers on steep slopes, with very specific small terroirs.”
“It can seem hard to get away from France as investors, but there’s a global trend to move away from the big bold Italian and Bordeaux styles favoured by the Americans and into the wines that have a broader appeal around the world,” Kelly shares.
“Personally, I’m very sympathetic towards New World wines,” she adds. “I drink a lot of wines from Australia and Chile.”
In terms of investment, Kelly especially likes the Chilean producers Almaviva, who are “doing quite well globally because of their ability to access a distribution network in Bordeaux.” Aaron echoes her enthusiasm for Almaviva and mentions Sena as another Chilean winemaker to watch. Chile has a long tradition of high-quality wines, but it’s only recently garnered global attention - making them a great choice for investors looking for growth opportunities.
In Australia, Kelly’s picks for investment would be Penfolds and Henschke. She notes, “They’re popular because they’ve been able to market themselves in China, and the fine wine market in China is currently experiencing incredible growth.”
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Aaron Rowlands - Research Editor & Investment Writer - WSET Level 3
Aaron Rowlands began his career as a financial journalist and his passion for wine after spending time with a winemaker in Bordeaux.
He brings his experience of both finance and fine wine to his role as Cult Wines’ Research Editor. Working with the investment team and portfolio managers, he’s become well-versed in the essential strategies for identifying new investment opportunities and building successful portfolios.
Kelly Liang - Wine Writer
WSET Level 4 Diploma in Wine in progress
Kelly Liang is currently studying for her Wine & Spirit Education Trust Level 4 Diploma in Wine, the highest qualification offered by WSET.
A chance tasting of a Vouvray Demi-sec from the Loire Valley inspired her to learn as much as she could about wine and set her on her path toward pursuing wine expertise. She’s already achieved the prestigious WSET Levels 1 - 3 Awards in Wines, and brings her knowledge and passion to the industry.
* Past performance is not indicative of future success; the performance was calculated in GBP and will vary in other currencies. Any investment involves risk of partial or full loss of capital.
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