Rare wines attract investment interest

It is known that certain types of wines, mainly red wines, have a great capability of aging. Over time some of them acquire more complex flavors and aromas, something that fascinates connoisseurs around the world and those that search for sophisticated tasting experiences and can afford them.

The continuously increasing demand for expensive wines, combined with the limited supply, steadily drives their prices higher. From 2000 to date, the prices of the 1000 most precious labels increased twice as much as the stock market prices of major stock market indices like S&P 500.

In fact, during the economic crisis of 2008 when the prices of most investment products were rapidly falling the prices of said labels seemed to resist.

The ratings of specialist oenologists set the price for each wine, always in combination with the supply. The rating of the most expensive wines used to be exclusively Robert Parker’s business. Parker, as the most trusted wine critic, enjoyed the privilege of being the only judge of expensive wines. This monopoly in the past exasperated many investors who considered a deterrent to any financial investment.

In recent years, following the introduction of the internet in our everyday life, this situation is a thing of the past. Today, the rating of good wines is subject to the combined critique of hundreds of connoisseurs. There are several online forums where connoisseurs express their opinions and the wine prices follow the prevailing view.

The internet’s influence doesn’t stop here. One does not have to be physically present at the auction room anymore, through the Internet one can participate in any auction in any location worldwide. Due to the Internet, rare wine auctions attract investment interest from anywhere on the planet and, most importantly, also a young audience.

Today it is estimated that 80% of the expensive label buyers are simply investors that buy the product in order to resell it at a profit. Therefore, it is a purely investment product. However, this particular market presents several particularities in relation to classic investment products. In order to conserve the product long term and prevent the alteration of its characteristics it must be stored in specific temperature conditions, moisture conditions etc. It should not be transported often and it must not be exposed to light. In any case, one can never be certain of the quality of the product, until one tastes it. This entails a great risk that must be assumed by the investor. Furthermore, there is a cost for storage and conservation of the product, that annually amounts to 15 euros per bottle.

External factors, such as climate change, may affect the product’s price. If the investors determine that quality wines can now be produced in regions with a colder climate, in central Europe for example, the prices will fall.

Nevertheless, the quality wine market is growing. In 2020 the transactions volume is estimated to exceed 4 billion Euro, up from just a billion Euro in 2000. When eventually the Chinese and Japanese enter the game we will be talking about an entirely different market.