Fine wine is a tangible asset whose prestige and desirability increases with its value.
During the 21st century demand for top wines has become considerably stronger, coming not only from the traditional markets of Europe and (more recently) North America, but also new, emerging markets in China, the Far East, South America and Russia. The value of the global wine trade in 2016 is estimated at $6–$8 billion. Globally, the growth rate in consumption is expected to be 6.17% over the next five years (IWSR research).
Growing numbers of the newly rich are seeking to demonstrate their wealth and status, boosting demand. Wine auction revenues in Hong Kong now exceed those of London and New York combined.
The supply and demand characteristics are also positive. Fine wine from the world’s great wine regions is produced in small quantities; less than 1% of all wine produced worldwide may be considered investment grade, with the market traditionally preoccupied by the prestigious chateaux of Bordeaux.
Production of the very best wines are highly restricted by terroir and regulation and the supply curve for these wines is almost perfectly inelastic, ensuring predictable growth in the long-term.
Over time as wine is consumed the price of the remaining bottles rises. Additionally, quality improves with age, further increasing consumption and inevitably increasing the rarity and desirability of remaining bottles. Hence, the pure enjoyment of owning and drinking fine wine creates conditions where very high returns are possible.