When it comes to buying wine as an investment, going for the cheapest option isn’t always the most desirable choice. You can’t ignore the fact that you’d want to look for that luxurious experience. Because of this, you will naturally reach for the expensive bottle you can find in a store or a restaurant.
While spending hundreds of pounds on a wine bottle may seem ridiculous, it is also human nature to value exquisite taste. Read on to discover what you must know about investing in fine wine and how it can give you a pleasurable experience.
Discussing the Veblen Good
A “Veblen good” is any good or service that defies the traditional price-demand connection. Fine wine is not always a clear-cut example of a Veblen-related item, although its high price is part of the appeal.
Wineries utilize price as a proxy for quality because many buyers lack the knowledge or drive to determine which products are superior. Whether buyers are correct, a higher sticker price suggests a greater value. Furthermore, the consumer’s preference for the more expensive option has little to do with the product’s quality or functionality.
Breaking Down Wine Purchasing
Investors in the wine market have historically opted to buy and hold their shares. It starts with buying bottles on the primary market and ends with selling the wine on the secondary market for a profit, whether the purpose is financial gain or personal whim.
Bordeaux’s primary market is organized in the same way a contract is. The wines are first distributed to buyers through dealers and merchants in the spring following the harvest. Payment is due at the time of order, and delivery will take approximately 18 months.
Meanwhile, other wine-growing regions sell their wines after they’ve been bottled, using a combination of direct sales to the estate and intermediaries. Keep in mind that secondary marketplaces are extremely dispersed, making it a chore to work with the right partners.
The wine market is complex and experiences low liquidity. These factors are crucial for first-time investors since they obscure appraisal and make it more difficult to sell wine quickly at its appraised value. It also complicates and increases the expense of implementing strategies other than “buy and hold.”
The fine wine market has been highly active in the preceding years:
1. Bordeaux
Following an almost five-year slump, Bordeaux has staged a return. Two outstanding vintages (2015 and 2016) accelerated the region’s expansion. Prices are approaching the highs seen in early 2011.
2. Burgundy
Burgundy’s increasing trend that began more than a decade ago has continued. Recent vintages have been remarkable in terms of quality but not quantity, contributing to their scarcity. As a result of the supply-demand imbalance, further price hikes have occurred.
Many wine regions formerly overshadowed by Bordeaux and Burgundy have gained prominence. This is especially true in the classic Piedmont, where certain wines have quadrupled or tripled in price over the last five years. Now, we can see that finesse and authenticity have overtaken the market’s thirst for robust, intense wines produced in a modern manner.
What is the archetypal alternative way to buying wine as an investment: it has low liquidity, is difficult to value, and is both complex and fascinating? It promotes a luxurious lifestyle that may yield even bigger returns. Therefore, it’s important to learn more about fine wine markets before diving into this hedonistic financial adventure.
Learn about buying wine as an investment in the UK. Cru Wine offers the modern approach you’ve been looking for. With our support and guidance, you can understand the process and reap the benefits and procedure of investing in great wine. Contact us today and discover more!
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