If you are one such investor, you might be keener to invest in fine wines, which, unlike traditional financial assets that tend to move with stock markets and market sentiment, have little to zero correlation to financial markets.

Considered an alternative asset class, fine wine is typically less volatile and can even increase in value when stock markets fall.

Johan Malan, head of brokerage and investments at Wine Cellar, says when you invest in wine, the key factors to consider include track record  (of both the wine producer and merchant), brand equity, vintage, region, provenance and critic review.

A winery’s track record can play a critical role.

If a winery has been producing a certain wine for an extended period and the quality is consistently high, that would give confidence to the market to invest and hold their wines long-term. 

“Globally, the investment outlook is not incredibly exciting. To just find any asset class that offers reasonable returns, and stability, is a major win. 

“While many sectors have been crushed over the last couple of years, South African (and international) fine wine has proved to be very stable during the Covid pandemic and has in fact shown good growth.”

As Malan explains, both demand and supply of South African fine wine are increasing, particularly with older and rare vintages. A weak rand is adding cost pressure and demand, and prices are set to increase further.

“There are more producers each year making world-class wines, often at a fraction of the price of their international counterparts. So, whether investing to drink later or for monetary growth, these wines are going to be harder to get and they will become more expensive.”

“As quality has boomed over the last 10 to 15 years, more of the leading international wine publications are sending their critics to taste South African wines annually. Independent critic reviews, especially from multiple sources, essentially determine quality and therefore ultimately investment potential,” he says. 

Some of the wineries Malan considers investment-worthy range from traditional names to rising stars. 

These include Kanonkop, Tokara, Rust en Vrede and Reyneke from Stellenbosch, as well as Mullineux, Porseleinberg and the Sadie family from the Swartland. 

Then there are Boekenhoutskloof’s Syrah and straw wines; Klein Constantia’s famous dessert wine, Vin de Constance; Alheit Vineyards Cartology; and younger winemakers showing potential such as Lukas van Loggerenberg, Duncan Savage and Donovan Rall.

Pricing is also key, as wines that build value over time are generally those with a longer-term outlook and are priced accordingly. 

Malan says, at a high-level view, wines priced around R200 and less are not produced or bought with the intention to age them over the medium to long term, and don’t see much demand. 

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However, you shouldn’t be spending thousands of rands on bottles of wine either. 

“Buying at super-premium levels, above R1,000 per bottle, creates a very high base for price appreciation. Investment wines are generally traded in six-bottle cases, and we believe the greatest potential lies between the R2,000-R3,000 per case level,” he says. That works out to a price point of around R330 to R500 a bottle.

Just like investing in shares, diversification is the name of the game — so wine investors are advised to invest in wines from different regions as well as various producers and varieties. 

Malan points out that red wine is a substantial part of the market since vintage white wines have less appeal than reds, although there has recently been a resurgence in the sweet wine category.

According to a Cult Wine Investments report, the relentless rally from Champagne makes a compelling investment case.

While the wider fine wine rally eased temporarily over the past year, Champagne just bubbled higher. The Liv-ex Champagne 50 index has been a top performer, with a 76.6% surge from the beginning of 2021 to the end of October this year. 

Champagne is an icon of not just fine wine, but of the wider fashion and luxury world — alongside items such as clothing, handbags and watches. Most of these markets experienced rising prices in 2021, according to Knight Frank’s Wealth Report 2022. 

This trend appears to have carried over into 2022 with luxury brand icon LVMH (owner of Moët & Chandon, Krug, Dom Pérignon, Ruinart and Veuve Clicquot) reporting strong results over the first three-quarters of 2022, with its Champagne and wines division a key driver with 32% growth. 

Of course, not everyone has a wine cellar at home and storage is critical in the wine’s entire lifecycle. As a physical liquid asset, it is subject to heat fluctuations and needs to be kept at the correct temperature, as well as lying on its side. 

Companies such as Wine Cellar offer investors a storage solution, which helps to guarantee the provenance of the wine — where it came from and where it is being sourced. The provenance is a key point when you decide to liquidate your wine assets — which, by the way, means selling them on to other investors, not drinking them. 

Last but not least, insurance is key when you invest in wine. 

Tarina Vlok, managing director of Elite Risk Acceptances, notes that wine must be stored on its side to keep the cork moist, ensuring that it does not dry out and degrade over time. 

Sunlight must be avoided at all costs.

“Bear in mind that insurance policies will not pay for gradual deterioration, like the deterioration of the cork or evaporation,” she cautions. BM/DM