The Marketplace

With countless new millionaires being created around the world every year, the future for such comforts as fine wine looks rosy. However, you don’t have to be a millionaire to enjoy the benefits. Global growth and prosperity has brought more buyers to the auction houses, no doubt you are aware, fine wine has an established reputation that dates back centuries.

The fine wine market is estimated to worth as much as £14 billion a year as opposed to £7 billion in 2000.

British wine drinkers are consuming more wine than ever before. In 2001, consumption rose to 1.3 billion bottles, a rise of 20% compared to four years earlier. Of all the non-wine producing nations, the UK is the largest consumer of wine, and, moreover, has become the largest importer in the world.

In 1990, British wine sales were £3.8 billion compared with beer’s £11.6 billion. While beer sales rose to £15.4 billion in 2000, wine sales almost doubled to £7.2 billion.

The Far East market is a new entrant in the fine wine trade with Hong Kong being the all-important gateway to the much-coveted mainland, China. In 2008 Hong Kong abolished import duty on wine, this has lead to a rush of new buyers into the market that has continued and today China dominates overall global sales. With India rumored to be on the verge of implementing a similar ruling reducing duty on wine, the BRIC countries (Brazil, Russia, India and China) are now key secondary market options for trading wine and will continue to be for some time to come.

What Drives the Market?

It is the persistent supply and demand imbalance within the wine market that pushes price appreciation. This imbalance is due to the following factors:

  • The supply of fine wine is severely constrained due to the fact that it is produced in such limited quantities. This constraint primarily is a result of the restrictive classification system and zoning laws imposed upon the top producers especially in Bordeaux. Not only is supply limited from the off, as time goes on, more and more wine is consumed, reducing supply further, of an already limited product.
  • Global demand for the top wines has significantly increased over the last decade due to the emergence of the ‘new super-rich’ in BRIC countries and other emerging markets who want to own theses wines. These new players are buying huge volumes of fine wine, but they are not storing or bedding them down, they are drinking them. This has had tremendous long-term effect on the market and certainly a positive effect for the investor. Global consumption is growing at a rate of 3-4% per annum. However, in developing economies, the rate of growth is as high as 7-8%.
  • Fine wine improves with age; thereby, becoming more attractive and valuable as it matures.