Every investor wants to understand the value of their investment wines, to be sure they are paying a fair price for fine wine and there are a number of factors that influence wine valuation. This can explain why, historically, inconsistencies in valuations led to a lack of investor confidence. Thankfully, the market has evolved significantly over the last two decades with Liv-ex, other online sources of data and an increase in fine wine investment specialists such as Vin-X, providing information which deliver greater transparency and access to key information upon which investment wines can be valued.
What factors influence the Valuation of Investment Wines?
- Brand – the profile of the producer and their market recognition as a one of the most highly regarded fine wine makers
- Critical opinion and scores of the leading industry critics.
- Vintage quality – Prime /Mid / Off can add a premium
- Age of the wine – pre / during / post drinking window
- Rarity – as a wine ages it improves in quality within its drinking window and is likely to become increasingly scarce and more valuable.
- Provenance and storage – fine wines with an impeccable history of ownership and correct storage will command higher prices – bought direct from the wine producer’s cellar is the ultimate provenance and this can command a higher value. Most investment wines are kept in a specialist bonded storage facility to guarantee the optimum conditions to protect quality and value.
- Original Wooden Case (OWC) and bottle condition – the state or quality of the investment wine packaging and label will also affect price – ideally investment wines should have perfect packaging in their original wooden case with pristine labels and a condition report should be requested.
- Region – wines of certain regions will be recognised as benefiting from ideal ‘terroir’ – i.e. geographic benefits in terms of geology and soil composition, altitude and aspect, e.g. south facing slopes and climate influences. Furthermore, there will be a heritage of wine making, a level of skill and investment in wine-making which benefits the area. These regions include Bordeaux, Burgundy, Champagne, Rhone in France, Tuscany and Piedmont in Italy, the Douro in Spain, Napa and Sonoma in California, etc. The market will over time have a regional focus as demand for the wines of a particular area enjoy growth and can broaden in the process with new labels attracting wine investors’ attention.
- Currency – fine wine can be used to hedge currencies as a global asset. Fine wine can therefore vary in value dependent on the currency metric applied
- Wine market strength – like any asset the value of fine wine can go up and down, however fine wine prices are considerably more stable than equities and financial markets. In particular, during periods of recession fine wine tends to perform well and can be used to protect capital. Similarly there may be periods where the market drifts or suffers a downward trend with an effect on wine valuation.
- Tax status – investment wines should ideally be stored in a specialist bonded tax facility to ensure the ‘off-shore’ treatment of the wine. Accordingly, VAT and Duty does not apply unless the owner removes the wine from this storage. Most investors will choose to keep their fine wine in bond for this reason and to guarantee the optimum storage for quality – a key for protecting value.
- Costs – as with all investments there are costs to be considered when looking at returns – these include storage, insurance and management fees for a merchant or specialist fine wine investment advisor.
Critical score is a key influence on value and this was most starkly notable during Robert Parker Jnr’s era when the announcement of a new Parker 100 point score was guaranteed to move prices in investment wines. A classic example of this in November 2014 when Parker published his upgrading of Chateau Haut Bailly 2009 to the perfect 100-point score in the Hedonists Gazette stimulated a 45.2% uplift in trade prices over the following three days from £775 to £1,125 (12 x 75cl).
The quality of a wine will vary every vintage as climate and growing conditions are different each year. This means that, whilst modern wine making techniques and equipment has helped achieve consistently great wines year on year from the same vineyard plots, there will be variance in the wine and the critical scores which will affect price.
For example, the Bordeaux First Growth, Chateau Haut Brion’s 2009 vintage was scored 100 points by Robert Parker and last traded on Liv-ex at £5,730 (12 x 75cl) in September 2020. Haut Brion’s 2013 vintage, a more climatically challenging year, was scored 90 – 92 points by Parker and traded in May this year on the exchange at £3,000.
Interestingly, Liv-ex reports that three vintages of Petrus led the market by trade value in the week 4 – 10 September 2020, providing an example of price variance most likely influenced by critical score. All of these wines are very young, they will improve in quality as they age, there will be five and ten year anniversary tastings and rescores and they will become increasingly rare over time – all factors that will positively influence price.
|Last trade price (12x75cl)|
Source: Liv-ex.com 15.09.2020
Notably, Petrus 2017 (bottled and shipped Spring 2020) is currently scored 98+ – i.e. the critic expects this wine to improve and given the current price of the preceding vintages we can expect this wine to see growth in value. In fact, at the time of writing there is an offer posted on the exchange for more than £24,000. Definitely a wine to watch.
All of the factors listed above are considered when valuing wine and most investors will be guided by a fine wine investment specialist. Liv-ex, the market equivalent to a stock exchange, provides its trade members with online pricing data and market analysis which has established fine wine as the leading luxury alternative asset for investors, not just on performance but also increasingly in terms of market efficiency. Liv-ex provides key benchmarks which guide the market on value and delivers liquidity. Vin-X as a fine wine investment specialist utilises this data and further analysis to advise their clients which investment wines offer strong opportunities for growth and provide fine wine portfolio valuations.
Contact the Vin-X team now for a free wine investment portfolio valuation and to discuss which investment wines to either start a collection with or to add value to an existing portfolio on 0203 384 2262.