Wine as a Luxury Passion Investment

2018 was a record year for stocks and was considered a record-breaking year for the fine wine market, where it had two strong gains as the Liv-ex 1000 grew 10 cents over the last year and Burgundy gained over 35 per cent. 

Other famous brands in the category include the bottle of Domain Romanee-Conti 1945, which was auctioned for US$ 558,000. 

The market share of Bordeaux declined from 68 per cent in 2017 to 59 per cent in 2018 as the investors were trying to improve their scope and encompass several smaller production estates. 

In the classic luxury investment category, Bordeaux is considered better than gold due to higher returns and lower unpredictability in price. 

Comparing Cars and Wines 

The luxury asset class has done exceptionally well in the last decade, where luxury cars gained 258 per cent. It was the only investment to give a better return, like a rare whiskey that gained over 582 per cent simultaneously (in US dollars). 

The NASDAQ returns were 330%, while S&P delivered 250 per cent.  Sotheby's record finds the most expensive cars sold in 2008 was a 1963 Ferrari 250 GTO auctioned for $28.5m, and the 1962 Ferrari 250 GTO sold for $48.4m after ten years. 

In both asset classes - wines and cars, scarcity remains the key driving factor for demand. 

Investors should be careful while buying luxury products as the car as the model should be free of rust and possess original parts and good looks. 

Nevertheless, in the case of wine, one should try to gain knowledge about the various types of vintage drinks. 

The UK is one of the key markets for Bordeaux's future, and the US started a business in the category last year. And now, China and Asia are the markets that may see a growth in demand, although the region prefers vintage en-primeur ready-to-drink. 

The fine wine market may see buoyancy as it moves towards the bull market. Brexit may create a new demand as the buyers take defensive investment positions in intangible assets like gold, wine, and cars. 

Trade war impact on Wine sales and price

The US is the biggest buyer of EU wines, accounting for only 16 per cent of its imports.  The trade war led to the imposition of extra taxes on imports where the latest retaliatory taxes became effective on June 1, putting an additional 15 per cent tariff on US wine and increasing the total cost by 54 per cent, on top of the preexisting 37 per cent, which will increase the total price by 91 per cent in China as compared to US rates. 

It has been an important market for the industry due to the sheer size and potential where the growing middle class and the new millionaires create greater demand.  

Last year's duties resulted in a fall in exports from the US to China by 25 per cent. Furthermore, China has moved on to alternative sellers like New Zealand, Australia, Europe, and Chile, who have renegotiated some new deals to allow their products to enter their markets at zero tariffs.