Post-Brexit Fine Wine Investment

Is Fine Wine an Investment Haven After Brexit?

Britain collectively voted to exit from the European Union causing major upheaval in the venture capital world. Investors experiencing the economic turbulence after Brexit are understandably nervous. The upshot of this momentous event has left several severely startled financiers concerned about the rapidly falling pound – and looking around for secure investment options.

Investing in fine wine has just become an
even safer investment haven

Even though global markets are rattled, there are still steady, reliable options available to investors – vintage options, like fine wine investment. One of the main traits of a vintage investment is that it has several defensive characteristics that make it perform well, even in a declining economy. This is why:

Pricing – Since thBrexit Blue European Unione pound has dropped to the lowest it has been in over three decades, fine wine prices have become more competitive. Because of this overseas demand is stimulated. Even though fine Bordeaux investment wines may be priced in Sterling, most of the buyers are transacting from overseas countries like Japan, China and the United States.

Fine wine investment remains on an upward trajectory – Despite the fine wine market suffering a substantial price correction after a period of falling prices between 2011 and 2014, annual returns and price increases remain consistent, unlike many other investment markets and economies.

Fine wine is independent – While many other asset prices are dependent on other pricing, holdings in fine wine has no correlation to the FTSE100. Again, performance is consistent.

Lack of white noise – Lucrative investments can be drowned out by the white noise of a strong economy. During an economic decline, solid investment options become more obvious and fine wine investments are no different.

Physical assets perform better in a weak economy – This is especially true when it comes to the excellent long-term performance track record of fine wine investments.

Sin Industries – Although fine wine cannot truly be considered as sinful, it is regarded as part of the so-called ‘sin industries’ – and during economic downturns these industries do better.

The Flip-Side of the Coin

Of course there is apprehension when it comes to making investments during tumultuous times. According to Mike Laing, Armit Wines managing director, many customers would prefer taking the risk of waiting to see how things settle down post-Brexit before committing funds. Gary Boom of BI is equally wary and was heard voicing concern over volatility when it comes to trade markets.

Is it Really That Risky?

Veteran investors agree that making time-honoured investments is the way to go – and what better than investing in en primeur wines? Acquiring stock at the lowest market price, especially when the economy is dipping, makes perfect sense. According to the Wine and Spirit Trade Association (WASTA) wine trade in the UK has more than doubled in the past 10 years and the country has become an importing and distribution hub for fine wines across the globe. Being the preferred point of entry into the EU’s single market, Britain is the ‘beating heart’ of the global wine trade, making fine wine investments in the UK a very sensible decision. Any investment has associated risks. It is up to the individual investor to decide what level of risk they are prepared to take, and what they are prepared to invest.

Elegance, Exclusivity, Craftsmanship

What Makes a Cult Wine?

Cult wines are wines that dedicated enthusiasts pay large sums of money for. These wines are often collected as a status symbol – or an investment. To some only an intimate selection of fine Bordeaux wines and certain Cabernet Sauvignon wines from the Napa valley are considered as cult wines. Although it is true that the majority of cult wines do originate from these areas, the industry is not that limited. Wines that fall under the title can be from other regions, like Rhône, Italy, or Burgundy. Whether it is a subtle, brilliant Pinot Noir or a sophisticated Cabernet Sauvignon, some wines have that extra edge that turns them into a cult wine

Wine Barrels
What is it about them? Wine Barrels.

 

The Edge

A single quality makes a cult wine: high demand, and this is usually amplified by scarcity. A wine that comes into record-breaking popularity is nearly always created by a famous winemaker, and then authenticated by high ratings and reviews. When only a few hundred cases are produced at a time, cult wines become even more sought after. Although this may sound fairly straightforward, it is not that simple. In industries like motoring or music a clever ad campaign can shoot a new car range or song into instant stardom. In the wine industry advertising is entirely irrelevant without first producing a vastly superior product. How this is achieved only elite wine making companies know.

The Winemaker’s Secret

According to winemaker Michael G. Etzel from Beaux Frères Winery, the philosophy of wine that can achieve cult status is in the process. He believes in minimal intervention, and in using indigenous yeast. According to Etzel wine should be stored only in French Oak for between 10 months and a year while adjusting the percentage of new oak. At Beaux Frères the strict process also includes not racking the wine until it is ready to be bottled, and not fining or filtrating the wine. Known as making some of the most exquisite Pinot Noir outside of Burguny, and part owned by famous wine critic Robert Parker, Beaux Frères Winery is certainly a trusted source.

Australian Wine in the Headlines

The annual Australia Day celebrations have reminded us about Australian wine again – and perhaps it’s useful to have a reminder this year, as Australian wines don’t seem to be as dominant in the marketplace as they once were. It seems like much more shelf space was dedicated to Australia a decade ago – perhaps our interest in Australia’s budget and mid-range wines reached its peak and then dropped off slightly as other wine-making nations emerged. That’s not to say that Australia’s wines are performing badly in the marketplace – their wine exports were up 14% in value last year, although this is not reflective of how they are performing here in the UK, where growth has been relatively slow at 0.2%.

A problem of perception
australia wine

At the top end of the market, Australia still struggles slightly with how its finest wines are perceived, particularly in the on-trade where they are often under-represented in favour of their high-end counterparts from Europe. Australia’s fine wines are plentiful, and extend far beyond its most famous names, Penfold’s Grange and Henschke’s Hill of Grace. Unfortunately many of the top wines from smaller producers are yet to trickle through to the European market.

Consistent vintagesaustralia-wine-section

Australia’s climate is much more reliable than that of France and other leading Old World wine producing countries, nor have they struggled with drought like the Californians have done of late. That means there are no bad vintages to speak of, their best wines are consistently good and just as ageworthy as their Old World equivalents. There is also a good deal more freedom when it comes to deciding what grapes to grow and how the blend is made up. Some of the finest Australian wines are Bordeaux-like but with a proportion of Shiraz in the blend, a grape that is not grown in Bordeaux. Shiraz loves the Australian soil and adds weight, complexity and softness to the blend. Rhone-style blends are also common.

The best is yet to come

At the lower end of the market it is worth noting that modern Australian wines have much more subtlety and delicacy than earlier versions, and it is likely that the best are yet to come. At the top end, a recent free trade agreement with Korea has encouraged sales, and certainly it seems like the ‘buzz’ around Australian wines has been renewed. For investors, the message seems to be “watch this space”.

What will 2016 bring for the fine wine investor?

wine Field

A less than desirable picture was emerging from the Liv-ex 50 in November 2015, with First Growths down 40% since the market’s peak. First growths and top Sauternes have struggled slightly, together with the second wines of top Chateaux that showed so much promise in recent years. However this is not the full picture – when we look at the second, third, fourth and fifth growths, we start to see some very positive signs for the year ahead, and reminds us once again that there is much more to Bordeaux than just the First Growths.

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Grappling with the Wine List

Grappling with the Wine List

Best grapes for wine

 

 

 

 

 

It is often the case these days, particularly in ‘fine dining’ establishments, that the food menu is very short and the wine list is very long. Wine lists that go on for pages and pages can be a bit of a confusing ordeal though. Ultimately most of us just want something that will complement the food nicely and won’t cost the earth. How should the average wine enthusiast tackle the ‘larger than life’ wine list? Continue reading

Dreaming of a Perfect Bordeaux Vintage

Weather effect on Bordeaux Wine 2015On 18th June decanter.com reported that the Bordeaux 2015 vintage has got off to a good start in the Medoc, with near perfect conditions during the flowering period (read the full article here – http://www.decanter.com/wine-news/bordeaux-2015-medoc-chateaux-dare-to-dream-after-perfect-flowering-263703/ ). It’s great to hear that things are on track, but of course there is a long way to go. At what point can growers start to celebrate in the knowledge that everything has come together, to ensure that the vintage is memorable for the right reasons?

 

Staying on track

The short answer is, not until every grape has been picked right at the end of the harvest! If only our climate in the northern Hemisphere were reliable, but unfortunately there are many possible perils still to come. Bordeaux has a fairly mild maritime climate, which means that there are few problems with freezing winters but frosts in the springtime can wreak havoc. So producers will be hoping for a warm, damp spring this year to ensure they remain on track. Continue reading

Meet the little device that could change the way we drink fine wine

Meet the little device that could change the way we drink fine wine

For the past 12 months the wine industry has been intrigued by a new device known as the Coravin, which you may have heard of if you read the wine press regularly. This clever device allows us to draw wine out of the bottle without removing the cork, thereby allowing the consumer to enjoy a glass while leaving the remaining wine preserved as it was before for future consumption.

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