Fine wine as an investment: A modern perspective

In this article, expert David Dallas from Doerr Dallas Valuations sheds light on fine wine as an investment.

Two key factors have transformed the way people view wine. Firstly, there is more wealth in the world than ever before, with the number of billionaires now eclipsing millionaires from half a century ago. Secondly, advances in viticulture and viniculture (the science of cultivating, growing and harvesting grapes; the latter being specifically for wine production) have made winemaking far more scientific. This ensures consistently high-quality wines, even in years when the weather is less than favourable. Together, these factors create a perfect storm: a surge of wealth chasing the limited supply of truly exceptional wines.

But what constitutes a “great” wine? Personal preferences aside, it comes down to the exceptional brilliance and complexity of flavour. This is achieved through meticulous grape selection from old vines with deep roots capable of absorbing rich minerals. Combine this with decades of expertise in blending and a terroir (soil and climate) recognised for its excellence over generations, and you have the ingredients for greatness.

Fine wine has long been prized, with price serving as a historic marker of its quality. For instance, the famous 1855 classification of Bordeaux’s Médoc red wines ranked vineyards into five growths based solely on their price at the time. Remarkably, with only one exception - Château Mouton Rothschild’s promotion to Premier Cru in 1973 - these rankings have remained unchanged for nearly two centuries.

Once acquired, fine wines need to be stored with care. The ideal conditions involve laying bottles horizontally in a dark space with stable, cool temperatures and moderate humidity. This position ensures the cork remains moist, preventing oxidation, while also preserving the label from mould or damage. For collectors, the aesthetic condition of a bottle is vital - not just for its visual appeal but as evidence of proper storage. Immaculate bottles fetch higher prices in the secondary market, given that many are traded rather than consumed immediately.

The scarcity of great wines drives their value. Take Romanée-Conti, for example, which produces fewer than 6,000 bottles annually. Owning even one numbered bottle from this legendary estate is a mark of prestige. As these bottles are consumed, the remaining stock becomes ever rarer, further driving up its price. A record-breaking example was seen in 2018, when a bottle of Romanée-Conti sold for an astonishing $558,000 at Sotheby’s.

The fine wine market has grown into a global phenomenon, producing an estimated 60 billion bottles annually. While Bordeaux and Burgundy remain the titans of tradition, other regions have joined the ranks of fine wine greatness. Super Tuscans, Napa Valley vintages, Australia’s Penfolds Grange, and Spain’s Vega Sicilia are now equally revered.

However, not all investments are guaranteed winners. Timing and market conditions play a significant role. For instance, Château Lafite 2009, released during the global recession in 2010 at £9,000 per dozen, saw its value dip significantly. It took 15 years just to return to its original price.

Despite the glamour of wine collecting, the market is not immune to scams. Infamous fraud cases, such as those depicted in the films Sour Grapes and The Billionaire’s Vinegar, highlight the need for caution. Provenance is everything when it comes to rare bottles. Collectors should tread carefully, ensuring the authenticity of their purchases, just as one would with any valuable asset.

Even with occasional market dips and risks of fraud, fine wines continue to rise in value, particularly as they become scarcer with consumption. This underscores the importance of regularly updating insurance valuations, especially for inherited collections. Many collectors discover hidden gems within their cellars - sometimes to their delight.