Richmond, VA | March 22, 2023 09:30 AM Eastern Daylight Time
The story of Champagne includes Romans bringing vines to present day France, monks perfecting the carbonation process, and more recently, investment returns that outpace the most notable indices. In an ever more volatile stock market, alternative assets are becoming more popular. This includes fine wines such as Champagne.
Champagne has been the second best performing region over the past two years, gaining 56.0% (through February 2023) on the London International Vintners Exchange (Liv-ex) versus an S&P 500 return of around 4.4% through the same time frame. The names leading the way for this index include Dom Perignon, Bollinger, Krug and Cristal.
To understand the factors behind Champagne’s rise, you have to look at its changing place within the secondary market. According to a Liv-ex report, Champagne only amounted to about 2% of secondary trading a decade ago. As of September of 2022, that share had climbed to 12.4%. This is demonstrated evidence that demand and liquidity continue to increase for bubbly. When taking these factors into account, Champagne has emerged as an increasingly compelling investment category.
Scarcity is also a factor in younger vintages. The Champagne region of France has not had the most consistent of growing seasons, and not every year’s crop becomes a vintage. 2021 for instance had early frost, which damaged yields for many producers. While this was a major disappointment to wine lovers, it feeds into the supply and demand variables that drive wine prices on the secondary market. 2022 was also a banner year for the trade of Champagne on Liv-ex, with 2008 Cristal being the most traded wine by value.
Obviously it would be ill advised to think this asset will constantly outpace equities. The broader appeal of Champagne and other investment grade wines lies in its non-corollary nature. Wine markets largely operate independently from traditional equity and bond markets. That’s why diversification into this asset class could provide a strong hedge against volatility for portfolios.
There is also a potential hedge for economic conditions outside of public market volatility. Champagne’s performance is led by high profile names such as Krug or Bollinger. Because of the high priced nature of these wines, there is a bit of a buffer against broad economic uncertainty. That’s not to say that wine markets won’t be hit by economic circumstances, but the pocketbooks of the consumer-base capable of paying for these levels of Champagne are a little more insulated. This means spending power for collecting and drinking these wines stands to be less impacted by an economic slowdown.
If you reference the Liv-ex 1000 index performance through two periods of major economic disruption, 2008 and 2020, you’ll note that price movements for the 100 most sought after wines were either quicker to rally, or less impacted as a whole.
Simplify this down to the Champagne 50 index alone, and performance has been even more steady. Through 2020 and the covid-19 pandemic, investment-grade Champagne prices were relatively unscathed relative to the stock market.
As the prices of the most in-demand collectible fine wines have continued to appreciate over time, the relative value of top champagne bottlings has increased dramatically. Another important catalyst has been the successful positioning of champagne as more than just wine, but as a true luxury good - the fact that major players in fashion and luxury such as LVMH, also own some of the most prestigious champagne houses is no accident. Their marketing leverage is being used to great effect, as global demand, secondary market activity, and prices are following accordingly.
Investing in Alternatives Like Wine
Alternative investments under management are projected to reach $17.2 trillion by 2025, as investors seek diversified returns. Investment platform Vint views wine and spirits as a key piece of that mix, given the stability and historical performance of the market.
Investing in the asset class through a professional can be more conducive to long term results, rather than simply storing a few wines in your basement. Vint’s platform allows investors to invest in shares of wine through securitized offerings, rather than having to go out and purchase an entire wine collection on your own.
Vint makes decisions based on proprietary analysis and fundamental research, to attempt to bring the return potential of fine wine and rare spirits to investors.
This article was originally published on Benzinga here.
Founded in 2019, Vint set out to financialize fine wine and spirits and create a new asset class. Vint received SEC qualification in 2021, thereby creating the first fully-transparent, efficient platform for wine, spirits, and futures collection investing. Vint offers expert-curated, thematic collections of fine wine & spirits to institutional, accredited, and non-accredited investors. Since launching, Vint has securitized and offered over $6M worth of assets. Through Q3 2022, Vint has generated returns of 28.3% for asset exits on a net annualized basis since inception. Vint is backed by leading investors Montage Ventures, MS&AD Ventures, Goat Rodeo Capital, Fintech Ventures & Slow Ventures. To learn more about Vint, visit Vint.co.
This is not investment advice. All investors should do their own research, due diligence, and make their own decisions when it comes to investing capital in markets. Please read Vintâs disclaimer