Analysis of Wine Investment

Since 1988, the information people have obtained from the wine market has become real and reliable. Since then, the annual yield of the wine market has reached 12.1%.

However, in terms of investment risks and benefits coexist, which is particularly evident in the wine industry. From 1988 onwards, every five years as a period of time, we found that the wine industry only experienced negative returns within a certain period of time - only a 1.1% drop. In contrast, the UK’s FTSE 100 (FTSE 100) experienced negative growth for 72 consecutive years, which fell by 39% at the most. Once upon a time, brewing became a low-risk investment. To understand the reasons, we must start with the basic characteristics of this market.

Bordeaux - We think that investment grade wines are generally from Bordeaux and are a limited producer of wine producers, so the annual wine production is also limited.

Over time, the consumption of wine in a certain fixed year will continue to increase and inventory levels will gradually decline. Therefore, the supply will naturally become scarce. In terms of demand, as the wine matures, the quality of wine will also increase, and it will also be more popular with consumers. Are there other assets like wines, the longer the time, the better the quality and the less the supply?

Finally, with the globalization of the market, consumers from new countries are constantly exploring wine, so the market is also expanding.

So, how to make full use of these characteristics of wine? We believe that among the more than 8650 wineries in Bordeaux, only the top 35 wineries can reach the investment level.

During the maturing process, the prices of these wines are uneven, and when they reach the optimal drinking period, prices will change differently. After reaching the optimal drinking period, market demand will increase, and with the increase in sales, there will be a situation where supply falls short of demand – and prices will continue to rise.

After a period of time, the consumer's attention will shift to another year's wine, and the previously sought-after wine will be left behind until the next sales period. The key is to judge which wine has obvious signs of appreciation and which wine price has reached its peak.

After a period of medium and long-term, top wines will become a low-risk asset. However, the London International Wine Exchange Brewery 100 index shows that last year was a period of adjustment for 2009-2011 vintages, with prices of some fine wines down by 29% from the peak period. It may be due to oversupply that the price is lower than the previous level.

Judging from the current form, starting from the first half of 2009 is the best time to enter the wine investment market.