2023 Wine Investment Landscape: Balancing Growth, Risks, and Collectibility

2023 Wine Investment Landscape: Balancing Growth, Risks, and Collectibility
Photo by Joonas kääriäinen.

The Knight Frank Fine Wine Icons Index (KFFWII) has risen 5% in the past year, indicating a globally balanced growth in the wine market. However, the heightened cost of capital may act as a drag on blue-chip fine wine markets for the rest of 2023.

Based on the 'Knight Frank Luxury Investment Report 2023' some markets like South Africa (+11%) and Australia (+8%) have seen strong growth this year. However, the market is experiencing downward pressure on secondary market prices.

Price Change of Selected Investment-Grade Wines (to July 10, 2023)

  • Burgundy: 12-Month 6%, 5-Year 50%, 10-Year 214%
  • Bordeaux: 12-Month 2%, 5-Year 14%, 10-Year 54%
  • Champagne: 12-Month -1%, 5-Year 61%, 10-Year 125%
  • US: 12-Month -1%, 5-Year 24%, 10-Year 127%
  • Italy (Tuscany and Piedmont): 12-Month -9%, 5-Year 35%, 10-Year 115%

Expert Insights

Nick Martin of Wine Owners points out that when interest rates have risen sharply to around 6%, new releases in particular should be offered at a bigger discount to future value. Burgundy is scarcity-led, whereas Champagne is a high-volume market. Prices of some prestige cuvées have been testing price elasticity of demand and seen sales stagnate as a result.

Collecting: Casks or Bottles

The purchase of casks enables you to select a specific vintage or taste profile that resonates with your personal preferences. It provides a personalized experience that caters to your individual taste. On the other hand, buying limited-release finished products in bottles may offer a less personal experience but often holds greater appeal to collectors in the secondary market.

Conclusion

The wine market is showing signs of growth but also faces challenges due to economic factors and interest rates. Investors should exercise caution and consider diversifying their portfolios to include wines from markets showing strong growth.

Sources

Knight Frank (2023), The Wealth Report Luxury Investments 2023. https://content.knightfrank.com/resources/knightfrank.com/wealthreport/2023/the-wealth-report-luxury-investments-2023.pdf

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