Fine wine increases and decreases in value over time. It is similar in this way to gold, oil, sugar and coffee - the long-standing mainstays of commodity investment. Wine prices react much more slowly to social and economic forces, so predicting changes in wine value is more straightforward than for other investment commodities. Although the subtle mechanics of wine investment differ somewhat from more traditional commodities, the basic investment principals remain the same: buy low, sell high. Fine wine is a simple, slow-burn investment, and a relatively secure once, provided that reliable storage conditions are arranged. Below is a summary of the key factors which govern wine prices.
As with all luxury items, 'supply and demand' is a significant factor in determining wine prices. Scarcity is a highly effective catalyst for a wine's market value, provided there the wine has an existing reputation to build on. Salient examples include Domaine de la Romanee-Conti's eponymous Romanee-Conti and La Tache Grand Cru wines, 'microchateau' merlot Le Pin from Pomerol, and Napa Valley's Screaming Eagle. In 2012, when the first vintage of Screaming Eagle Sauvignon Blanc was made, just 600 bottles were released to an exclusive mailing list. The release price was $250 per bottle, making it the most expensive Sauvignon Blanc on earth. The wine instantly (and controversially) attracted secondary market prices in excess of US$2,000 per bottle. Full story here.
Some vintages are simply more expensive than others - period. Comet vintages (when astronomical events occur at harvest time) are famously exclusive and expensive, and vintages with favorable harvest conditions (or whose wines have developed particularly well over time) almost always attract higher prices than others. When influential wine critics declare a 'vintage of the century', wines from that year invariably increase in value. This happened when Robert Parker correctly predicted the high quality of 1982 Bordeaux red wines, propelling that vintage - and Parker himself - to stardom. Three decades later, 1982 Bordeaux reds still overshadow their 1983 counterparts because of this story (see table below), even though the latter typically perform better in blind tastings. Ultimately, the fame and reputation of a given vintage will influence the price of its wines more than the actual quality of the wine inside. Psychosocial factors influence a wine's market value more than any viticultural or oenological consideration.
The graphs below demonstrate the significant price difference between the 1982 and 1983 Bordeaux vintages (both of which were of excellent quality). In 2011, the 1982 wines were 367% more expensive on average than those from the less famous 1983 vintage.1982 First Growth Bordeaux Prices
The economic conditions of a country, or the world as a whole, also have a strong bearing on the wine market. Whether for investment or consumption, wine prices traditionally mirror local and global economic trends. A good example is the worldwide financial recession of 2008 and 2009, which had an adverse impact on the industry across all price points (see table below). During this period, the upward trend of the Bordeaux first growths was temporarily reversed.
Effect of the 2008 – 2009 recession on fine wine prices.
Age is perhaps the most commonly recognised factor in wine values - demonstrated by the widely held assumption that "old wine is expensive wine". A bottle's future ageing potential is also taken into account. The tables above show clearly how age-worthy wines increase in value over time.
If you are considering wine as an investment, or would like wine investment advice, visit our investing in wine page. And for a snapshot of the world's most expensive wines, please see The Most Expensive Wines in the World.