Drinking to success: The amount of fine wine traded last year, rather than consumed, was up 70 per cent on 2019
It is time to raise a glass to the future.
And if it is full of wine, you may consider joining a growing army of fans turning this pleasure into a shrewd investment.
Lockdown fever has resulted in increasing numbers of people drinking wine at home. And it is not just cheap bottles of plonk we are buying – but also the finest vintages which some are acquiring for investment purposes.
The amount of fine wine traded last year, rather than consumed, was up 70 per cent on 2019 according to wine market tracker Liv-ex.
It monitors the prices of a thousand investment quality wines.
This year international interest is expected to fuel the boom further following the recent lifting of a 25 per cent import tariff that was levied by the United States on the majority of French wines.
The index for the top 100 investment wines has seen prices rise by just under 10 per cent in the past year. But over five years, this Liv-ex Fine Wine 100 index has enjoyed impressive returns of 31 per cent.
In comparison the FTSE 100 Index, which plots the fortunes of the top 100 companies listed on the London Stock Exchange, is up about 19 per cent over a year, 10 per cent over five years.
Justin Gibbs, co-founder of Liv-ex, says: ‘With so many hotels and restaurants closed for much of the past year, a lot of people have been drinking favourite top quality wines at home. Many investors have also been selling stock as they realise life is too short not to enjoy their fine wines.’
Clarets from the Bordeaux region of France have long been the driving force behind the wine investment market.
The most important are in a so-called ‘premier cru’ category.
These are wines that come from the five most prestigious chateaux of Haut-Brion, Lafite-Rothschild, Latour, Margaux and Mouton-Rothschild.
They are known as ‘first growths’.
But there are plenty of other investment quality wines from this vineyard-rich region to consider, including ‘super seconds’. Among these are La Mission Haut-Brion and Cos-d’Estournel.
Gibbs says: ‘Although Bordeaux remains the most popular region for investors, there has been growing interest in other regions of France for wine in recent years, such as Burgundy and Champagne.
Italian wines are also in high demand.’
Burgundy favourites include ‘grand cru’ wine from Domaine de la Romanee-Conti, Henri Jayer and Leroy. Much-loved champagnes include Louis Roederer and Salon Le Mesnil. Top Italian wines include the ‘super Tuscans’ of Sassicaia, Solaia and Ornellaia.
You are unlikely to find investment quality wine down at the supermarket – even if you are willing to push the boat out and break the £6 budget most people set for a 75-centilitre bottle.
Instead, you should find a reputable trader.
Wine investments must be treated with caution as it is an unregulated market and you are not protected by the Financial Services Compensation Scheme if anything goes wrong. It also means not trusting anyone who contacts you out of the blue.
Wine merchants such as Berry Bros & Rudd, Farr Vintners, Justerini & Brooks and Alex Marton Fine Wines all have experts who tour vineyards in search of future investment winners – buying wine before it is even bottled, which is known as ‘en primeur’. You can buy this wine from the merchant and never see it.
The merchant will typically take a ten per cent commission when you come to sell.
Once bottled, investment quality wine can be ‘bonded’ – stored in a temperature-controlled warehouse where there is no duty or VAT to pay as long as it remains under lock and key.
A merchant typically charges about £15 a year to have a crate of a dozen bottles stored on your behalf. This price includes insurance against loss or jackpot slot damage. Most wines are stored at least a decade before being sold again. Wine is deemed a ‘wasting asset’ by Revenue & Customs so escapes capital gains tax.
Alex Marton, of Alex Marton Fine Wines, says: ‘Last year was challenging because many merchants struggled to travel and taste wines at the vineyards.
But this has not stopped samples being sent out so critics could still give valuations.’
A huge influence on the investment value of a wine is the verdict of American wine taster Robert Parker. He has invented a 100-point quality scale that is used by industry publication The Wine Advocate to judge the investment potential of a wine.
Anything that rates 96 or above is ‘an extraordinary wine of profound and complex character displaying all the attributes expected of a classic wine of its variety’. This is gold dust for investors. Anything between 90 and 95 is ‘an outstanding wine of exceptional complexity and character’ – so also a fabulous buy.
Among the best recent vintages – scoring an incredible 100 out of 100 – is a Chateau Mouton-Rothschild 2016 that can sell for £550 a bottle.
Another top-marked favourite is Petrus. A bottle of 2016 Petrus can set you back £3,000 while a rarer 2000 Petrus cost £7,500, thanks to so many bottles being emptied by Russian oligarchs in recent years.
The vintage of a wine – the year in which the grapes were grown – is crucial in dictating its quality.
This is because no matter how great the grape, soil and patch of land on which vines are grown, weather dictates how the grapes turn out.
The 2020 vintage had a wet spring followed by a long, hot summer – and experts are hopeful it may herald a great vintage for regions such as Bordeaux.
This is because the weather was similar to past recent top vintages, including 2010, 2016 and 2018.
Unfortunately, 2021 has got off to an inauspicious start. Earlier this month, unexpected frosts and snow are feared to have wiped out a third of the grape harvests expected in French vineyards this year.
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