“The fundamental demand and supply imbalance underpins this market”
Philip Gearing • Chairman, Cult Wines
Enthusiasts have been seeking out the best wines since the invention of wine itself. In that respect, wine investment has existed for decades – centuries, even – and what began with keen oenophiles filling their cellars with good Bordeaux and Burgundy has since blossomed into a lucrative global market which offers strong returns, minimal volatility and, for those who appreciate a good bottle, considerable enjoyment.
The fine wine market – worth some $5bn-$6bn per year globally – consistently outperforms other financial instruments, making it an attractive option for a wide range of investors. Indeed, it is no longer the sole preserve of luxury investors or high net worth individuals, and increasing numbers of people from all backgrounds are considering wine investment as a fruitful alternative to the usual commodities.
How does fine wine investment work?
Simply put, wine investors see ROI (return on investment) by capitalising on the age-old balance of supply and demand. While billions of litres of wine are produced worldwide every year, not all wine is created equal. Great vintages and highly sought-after bottles from the likes of Bordeaux and Burgundy are being bought all the time, leaving diminishing amounts available. Decreasing supply leads to increased demand, which pushes up prices. Add into the mix the fact that many wines improve – and therefore become more desirable – with age, which further increases demand as supplies continue to dwindle. Those in possession of prized wines are then able to sell them on for an often very handsome profit.
There is, of course, a difference between wines purchased in liquor stores, and investment-grade wines that come from the most esteemed winemakers in the world. As such, determining a wine’s value involves a number of factors, such as the brand, vintage quality, availability and scores from critics. Seasoned collectors with a wealth of wine investment experience may be able to identify lucrative buying opportunities themselves, but many will engage the services of a trusted wine investment company, such as Cult Wines, which uses quantitive and qualitive analysis to determine which wines are in line for a price growth, or are currently undervalued and represent strong investment potential.