Evolution of the Fine Wine Market with Sure Holdings
The fine wine market has evolved over the years due to circumstances in the global economy. Investing into wine has almost become a fine art that requires knowledge and insight as well as thorough research of the wine market. I would like to share with you how the fine wine market has developed over the years from my perspective, both as a private investor and as a fine wine investment company.
In the ‘heydays’ before 2008, investing into fine wine is really easy. You buy your wines, you keep them for 3 – 5 years then you sell them for a profit. Initially, when you first buy your wines, you will see your wines are in the negative for about a year. This is due to the market spread. You buy at the ask and sell at the bid. Then through simple economics of supply and demand, you will steadily see your wines growing at a good pace in your portfolio. It’s almost like after one year, your fine wines will always grow positively that’s why many wine investors do not even check their portfolios at all after that. After 3 -5 years, then you will receive a call from us to sell your wines to reap the profits that you have made. You then use some of the funds from your wine sales to buy newer and younger vintages and you grow your portfolio over the years. Most, if not all the wines that you have invested in during this era would be First Growth wines such as Lafite Rothschild, Mouton Rothschild, Latour, Magaux and Haut Brion.
Then comes 2008, the wine market went down a little as the global crisis hit us. We see some global wine investors selling their wines out of panic. However, it was a great opportunity amidst a global crisis for us as we managed to pick up many first growth wines that were below market price, which the other global wine investors have let go at ridiculously low prices. Our investors from Sure Holdings have persevered and held on to our wines while picking up first growth wines at good bargains. Our strategy paid off as in January 2009, the fine wine market was rebounding faster than any other market. Now, we have more first growth wines in our portfolio and the wine market is rebounding robustly.
Next comes the pivotal 2011. Remember this year as 2011 changes the entire wine market forever. By 2011, many of the first growth wines have increased more than 100%. Lafite Rothschild 1996 went from 7000 Pounds in 2009 up to 15000 Pounds in 2011! Part of this huge bubble in the wine market was developed from too much speculation from the Chinese buyers. Their voracious glut for first growths have fed the bubble bigger and bigger. Its this year that we urge our investors to sell some of their first growths to reap the windfall of their first growth wines. There was a whirlwind of selling first growths and many investors were ecstatic over the profits made from their first growths. As the bubble became increasingly unsustainable, it finally burst. It coincides with the stock market coming back and shares started to go up. The wine market on the other hand went down and stayed down for 4 years. It was a very tough 4 years for all fine wine investors.
Bordeaux wines was the hardest hit during these hard times. Therefore, Sure Holdings have changed our investment strategy due to market changes. We started investing into Champagnes, Rhone Valley and St. Emilion wines as these wines have weathered the storm in 2011 and are strong investment opportunities. They were doing well in our portfolios and their prices are relatively attractive to buy. We will be keeping these wines in our portfolio for the long term as they are relatively young vintages. We took a hiatus from investing into Bordeaux wines for the moment as we were waiting for the market to stabilize. While we were studying the market’s direction, we have decided to cut down on all our wine recommendations just to play it safe.
The wine market has become extremely nervous and overly cautious. Wine merchants are cutting down on their wine purchases and everyone seems to be waiting for something to happen, but nobody is willing to make the first move. Even well established wine companies in the UK have closed down. It was a very long 4 years with everyone being cautious and even the En Primeur campaigns were lackluster. The once snobbish Chateaux knew they had to do something to revive the fine wine market. They then did something that was virtually unheard of till now, they lowered the prices of their fine wines to the levels of 2004! This strategy actually worked as after four years of decline, in the last 12 months The Fine Wine 100 index (Live-ex) has shown it’s finally stabilized. The Wine Index has outperformed the S&P 500 and the FTSE 100 over the last year. Confidence was coming back into the wine market again. Activities seem to be concentrated on the first growth and Bordeaux wines again.
We saw a great opportunity in the Chateaus dropping the prices of their fine wines. We started buying into first growths again while they are still so affordable before they increase due to these higher demands and activity in the market. It’s a great opportunity that knocks only once every few years to build our investors’ wine portfolios and I’m not sure will we ever be able to buy first growths at these knockout prices in a few years from now. By December 2015, the wine market saw real gains and this has been ongoing every month. 51% of our wines are up in our latest valuation.
The effects of 2011 has caused a strong inverse relationship between the wine market and the stock market. When the stock market plunged in January 2016 losing Trillions in just the first week, the wine market has been going up steadily. Unfortunately, I foresee another global crisis in the near future perhaps in 12-24 months. At this point, the stock market will crash again and that’s when we will see the wine market on its second rally.
The wine market is more sensitive these days, so we should be quick to buy or sell when opportunities come our way. We at Sure Holdings are watching the market everyday and looking for signals for you to buy or sell.
– Asia’s First Class Mandarin Speaking Wine Investment Expert