Whether you like glass of Chardonnay in the garden on a sunny day, want to cuddle up with a nice bottle of Merlot on a rainy Sunday afternoon in front of an old romcom, or are a proper oenophile that knows the relative soil type, elevation and micro-climate of every vineyard for every wine bottle in your extensive cellar, wine means different things to different people.
Investment in fine and vintage wines – not your GBP 5.99 bottle from Sainsbury’s – is a great way to diversify your investment portfolio and enhance your returns. According to a recent 2Q22 report by WineCap, a London-based fine wine investment advisor, fine wine proved itself as a stable investment in the second quarter of the year, which was characterised by exacerbated economic pressure. WineCap reported that prices continued their steady ascent and even outperformed safe haven assets like gold.
That said, the wine sector has not been immune to global economic pressures. Sharply rising labour costs, energy prices and interest rates have driven inflation higher on a global scale. The wine industry itself has felt the impact, with the cost of bottles, labels and wood up over 25% and limited supply of materials.
Nevertheless, despite deteriorating global growth outlook, fine wine has been resisting inflation and recession fears, due to its inherent tangibility and scarcity.
Burgundy
Burgundian wines are a stalwart, viniculture had been going on long before Julius Cesar turned up with his legions and said: “veni, vidi, vici.” The region’s most famous wares include, Grand Cru and Premier Cru, and WineCap said: “Burgundian wines, in particular, delivered impressive returns this quarter.”
Burgundy was the best-performing region, with prices for its top wines rising 8%. On the secondary market, it enjoyed unseen levels of demand mid-June. Typically sitting at about 25%, its weekly market share increased to over 38%.
Overall, the leading fine wine indices made upward moves, although smaller than this time last year. The Fine Wine 1000 index rose 0.7% for four months in a row. Its cautious rise reflected the current economic landscape and the narrowing focus of buyers. Many turned to blue-chip labels that are proven winners in an investment portfolio.
The Fine Wine 1000 index consistently outperformed the FTSE100 index, showing that diversity is key to the market’s ability to weather the deteriorating economic situation.
While Burgundy continued to break secondary market records, the prevailing theme of the quarter was Bordeaux, with the launch of its 2021 vintage. For the first time since the start of the Covid-19 pandemic, merchants and journalists returned to the region for the annual En Primeur tastings. Critic reports suggested that 2021 was better quality than expected, with excellent dry and sweet whites.
Popping corks
Someone’s celebrating something out there! On an individual basis the most traded wine by volume in 2Q22 was Louis Roederer Cristal 2008. Retailing at GBP 3,598 a case. Its market price per case rose just over GBP 100 since the end of March. The 2014 Cristal vintage also made the rankings once again, with an increase of about GBP 200 per case.
Screaming Eagle 2019, a Cabernet Sauvignon trading at GBP 37,037 a case was the second most in-demand wine, perhaps boosted by its 100-point score from Antonio Galloni (Vinous). Last year, Galloni described the 2019 vintage of ‘the most talked about wine in Napa Valley’ as ‘simply magnificent from the very first taste’.
This was a New World outlier, as the market had a taste for French classics in 2Q22. However, WineCap predicted that 3Q22 is likely to move the spotlight away from France (albeit only shortly) and highlight prominent estates from the rest of the world. Library ex-cellar releases from Châteaux Palmer and Latour will also intrigue buyers. Next month will perhaps bring a needed summer lull for the trade before the autumn La Place campaign takes centre stage – bigger and brighter than ever before.
So, next time you are rummaging around in the back of the kitchen cupboard for something to serve at the barbecue, dust off the label and google its contents before you pop the cork. It might be worth more left in the bottle.
