Wines

July 4, 2025 – Published in Design & Decor Spring-Summer 2022 issue

Passion & profit

Words Andrew Azzopardi

 

We’ve all heard the story. That friend of a friend who bought a couple of cases of Château Margaux and a couple of bottles of Saint-Émilion which nobody can even remember the name, who ‘recently’ discovered he’s been sitting on a treasure of gold. His purchase of wine, sometime in the eighties, at a couple of hundred of euros is now worth tens of thousands. The story continues that he was a great investor with speculation like nobody else and will now reap those rewards.

But hold on a minute… as much as this sounds like an amazing and plausible story, there are many other factors the ‘friend’ has to consider before raking in the money. Factors such as proving he had the perfect storage facilities throughout the years coupled with some form of proof of authenticity. In a nutshell, if they were stored in the makeshift ‘wine-rack’ built just a couple of feet from the kitchen oven over the last couple of years, the net value of these wines is probably zilch. Ok, maybe a couple of euros for the bottle and label, if they’re proven to be authentic, but otherwise the contents are nearly guaranteed to have turned to vinegar in the meantime. 

Of course, this doesn’t mean that money cannot be made from ‘investing’ in blue chip-wines. Rather the contrary. Recently, fine wine has been hitting the news as outperforming the S&P 500 (Standard & Poor’s top 500 companies) and the S&P Global Luxury Index which tracks 80 of the largest publicly traded luxury-goods companies. Live-Ex Fine Wine Index, a global marketplace for wine trading, shows that blue-chip wines have been outperforming S&P 500 for the past 30 years and are not just a passing craze. Careful and well-curated wine portfolios can give a healthy return, such that the fine wine index is up 25% as of January 31st, 2022.

There are several factors contributing to the strong returns on fine wines. Covid-19 has in fact also positively affected the current upward trend. Fine wine has traditionally been seen as a stable and less volatile investment, especially during crises, providing potential portfolio protection and risk mitigation during a market downturn. In fact, in just the first three months of 2020, S&P Global Luxury Index plummeted 24% as the Covid-19 pandemic unfolded, whereas the S&P 500 fell a similar 23%, but fine wines dipped just 4%. 

Fine wine is a tangible and consumable asset such that fine wine may increase in value with age for 30 or 40 years, but the value will increase considerably depending on the scarcity and demand of the bottle. This being the main driver behind the increasing value of the wine, and not the actual wine itself, is a major factor. The wine will eventually decline in value once it reaches its peak drinking window and demand will invariably reduce as the risk of it having gone bad increases. 

As with all commodities, the ‘supply and demand’ rule are the main driver, however, unlike other commodities such as luxury shoes or handbags where the producer could scale up production to meet demand, it simply isn’t possible in the world of fine wine - the volume of production of fine wine is solely determined by the vintage. Once the vintage is produced, it is impossible to increase production till the next vintage and that will be considered a different wine altogether. Therefore, if around 30,000 bottles of say, Chateau Pétrus, are produced annually, the number of physical bottles of that vintage will only reduce in number over the years as they are consumed, thus pushing the prices up. If demand remains constant, the value can only increase. Many Chateaux have now also caught on to this trend by keeping several of their bottles in their warehouse, only to be released at a later stage, thus making further gains on release of a previous vintage that has reduced in availability. You can say that they too, are investing in their own wines, well in the know that the prices will increase substantially, allowing them to further capitalise on a near certain price increase in the future.  

With current interest rates at historic lows and inflation rising at a dramatic pace, it’s unsurprising that investors are looking for alternative investment opportunities to add to their portfolio. The history of wine-investment being somewhat safe during crises and the fact that many factors point to big gains in the fine wine market, the current interest in investing in fine wines has increased considerably. 

However, not all wines are investment worthy.  Actually, most wines are meant to be drunk now and will not increase in any value over the long term. The Live-ex 100 fine-wine index only concentrates on the top 100 sought after wines, meaning that in fact the majority wines are not worth investing in and unless you have a good understanding of what you are doing, the chances of making a dollar or two would be slim at best. Investing in blue-chip wines comes at high cost, where purchasing a case of six bottles of first growth Château Haut-Brion is easily upwards of €3000, one needs a decent cash injection to even get started. Another major obstacle is accessing these investment-worthy wines. Already scarce upon release and with allocations getting tighter and tighter, it has become harder to acquire these wines. 

Investing in wine is a long-term investment. An investment in luxury that should be regarded as a journey not a one-off shot. Unlike many other investments, investing in fine wine not only requires skill and knowledge, but also a dose of patience and loads of passion. It can be a wonderful journey in which you experience new and different wines, interact with some of the most memorable and impassioned people you can imagine, and if approached correctly can also make an extremely decent return on your investment. It is an investment that is not easily ‘liquid’ (excuse the pun) and may take time to sell off and realise the profits, but it is an investment that is extremely personal, hugely rewarding and incredibly exciting.      

And to top it all, the worst possible scenario is that you or your kids will be drinking some of the best wines in the world.