Why collect fine wines?
Collectors of fine wines are driven by either a desire to ensure access to the finest and rarest bottles for their own enjoyment in the future, or by an intention to collect for investment, or a mixture of both . At Vynluna, it is our mission to help our clients build and maintain an eclectic collection whatever their goals.
For drinking
Casual buyers of fine wine begin collecting as their knowledge grow, and they spend more time researching and analysing what wines they buy. For wine lovers, the benefits from starting a fine wine collection is plentiful.
Provenance
How a bottle of wine has spent its time since leaving the producer’s cellar has a major bearing on its quality. A bottle stored or transported in heat and under sunlight will age much quicker than one stored untouched in a cold damp cellar. By purchasing a wine young, and through a trusted merchant, one is able to guarantee the provenance of a wine, and ensure the nuances of your precious bottle has not been lost to poor storage and transportation.
Discovery
While one should collect according to their tastes, as more and more quality wines are being produced across the globe, a bigger range of fine wines with different styles to choose from emerge. It is a pleasure for wine lovers to study and discover new collectible wines early when availability is not an issue, and be able to share a bottle from their collection with fellow oenophiles once matured.
Access
Fine wines typically exhibit different qualities as they age, and connoisseurs of mature wines particularly enjoy the secondary and tertiary aromas that fine wines can develop. Mature wines with good provenance are unfortunately difficult to find as bottles are drunk over time, reducing the supply of stock just as the wine enters its peak drinking window. By building a fine wine collection, the collector can ensure access to mature wines when they are ready to drink, and at a lower price level before dwindling supply pushes prices higher.
For investment
As experienced collectors of fine wines ultimatley discover, there is a high correlation between age and price of collectible wines because of the supply and demand dynamics for mature wines. It is not uncommon for collectors to buy two cases of fine wines on release with the intention of consuming one, and selling the other in the future to finance the entire purchase. Afterall, what’s better than following your passion and be able to simultaneously benefit financially from it. We expound on the benefits of collecting fine wine from an investment perspective below.
Diversification
Various studies have shown fine wines to have low to negative correlation with other major asset classes in a financial crisis. The value of a fine wine collection is therefore less susceptible to a broader financial market sell off. This could be due to various reasons.
1. As high net worth individuals are major holders of fine wine from an investment and consumption perspective, their holding power ensure that these assets are not liquidated aggressively in a market downturn.
2. Fine wine as an asset class has high participation from consumers compared to other asset classes, and their holdings are typically not in a leveraged format. As a result, their considerations in a market downturn is different, and sustained selling is not typically seen.
3. Inventory in a fine wine collection is by definition rare, any substantial drop in value is likely supported by collectors looking to fill in gaps in their collection, providing support and establishing a floor on how low prices can go.
Age and price
The supply and demand dynamics underpin a stable growth in fine wine prices as they age. While the cost of exit is higher than other financial markets (wine merchants and brokers typically charge more commission than a financial securities house), on a long enough horizon (typically 5y+) this can be discounted.
Growing demand, limited supply
The world economy, particularly in emerging regions, have enjoyed unprecedented growth in the last 20 years. The increase in disposable incomes in countries with traditionally smaller fine wine buying populations has raised the number of collectors. Supply of blue chip fine wines, on the other hand, are limited. Unfortunately, there are only so much Grand Cru Burgundies that can be produced each year. A fine wine collection should continue to benefit form this dynamic over time.