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Investment-Grade Wine Prices Favorable for Investors

A bi-product of the current economy, wine prices have dropped to levels that are finally more palatable for investors and wine enthusiasts alike.  We frequently sell investment-grade wines, and we have witnessed the prices drop approximately 25%.  For wine buyers with cash on hand, the return on investment (ROI) is significantly better than it was this time last year.

Between 1998 and 2011 wine demand grew leaps and bounds. By the end of that period supply couldn't keep up, thus the prices were driven to unbelievably high levels. Since then, the Chinese market has significantly cooled and long-time buyers of En Primeur stopped purchases due to extremely high prices. Hence, in the past two years Bordeaux vintners have recoiled their release prices to better align with market demand. This means we are at a temporary lull - global demand will come back and the supply/demand shortfall will again become an issue.

Unlike the stock market or commodity trading, wine is finite.  Once a vintage is produced, you can’t make anymore.  Therefore the laws of supply and demand apply more rigorously.  Using western Europe as an example of a saturated wine-buying market, it is likely that countries like the US, China, and Russia will continue their demand growth for many more decades.  Yet Bordeaux is not making any more first growth wine (like Lafite or Latour), and no other wine growing region can yet match the endurance and reputation of France’s finest chateaux.  Therefore, the price of today’s investment-grade wines should only continue to skyrocket, and our customers will eventually have the disposable income to jump on these deals.

As an example of the value of investment-grade wines, consider a 1982 Lafite, bottled in 1984, which would have cost you $400 USD per bottle if you purchased it when it was released. The current market price is $5000 USD per bottle, a profit of $4600 per bottle or a cummulative annual growth rate of almost 9%. This type of return is common for many of the grand cru chateaux in France, which is why the 2005 vintage was scooped up by investors at such a fast rate.

So, if you have ever considered wine as an investment, now is definitely a good time to buy.*

 

*(Please note that we are not certified financial advisors, we are just presenting our observations.)