Investing in Wine, Whisky and Cigars
Investing in wine, whisky and cigars
The prestige of having a good wine cellar is considerable, and is now a truly global phenomenon, with the new wealth of the BRIC nations seeing many leading vintages leaving the traditional collecting bases of the US and Europe. This has seen prices soar for the finest wines over the past decade.
Traditionally forced to play second fiddle to wine, whisky investment is among the most alluring diversification plays around, with values for the finest bottles of Scotch soaring to unprecedented levels as demand rises around the world.
While values remain far below those seen for wine and whisky, growing numbers of investors are also diversifying into Cuban cigars, with major returns seen for the most prestigious names over the past two decades.
Reasons to invest
A rare commodity: The new wealth of Brazil, Russia, India and China view wine and whisky as major status symbols. Their appetite for the finest examples is driving the market, with many of these buyers quaffing their purchases - ensuring that wines from the best vintages and whisky's best tappings are becoming increasingly rare. You can capitalise on this trend by buying and holding as an investment.
The Chinese market is particularly on the up: Barclays' 2012 Wealth Insights report reveals that collectibles such as wine and whisky make up 16.6% of Chinese high-net worth individuals' wealth, far higher than the 10% global average. With China's economy growing rapidly, this is excellent news for the wine and whisky market.
World records: World record prices are continually being achieved for the world's finest wines. Acker Merrall & Condit's May 19, 2012 auction set 64 new wine records.
A liquid investment: Global wine auctions every month ensure that you can sell quickly when you decide that the time is right.
Whisky is a booming market: Whisky exports from Scotland were up 23% in 2011, according to the Scotch Whisky Association, while the value of the auction market is set to soar to £17m ($26.9m) by 2020, says Highland Whisky. It was worth £4m ($6.3m) in 2011. Brazil's whisky market was the fastest growing in the world in 2011, with imports from Scotland up 48% compared with 2000.
Cigar investment growing: The sale of hand rolled Cuban cigars, the only cigars worth investing in, is growing by 10% year on year.
Historical performance
o Wine
Prices for the very best wines have risen by an average of 15% a year over the past 25 years. Quiet periods, such as 1998 to 2002, and being more-than balanced out by the busy ones, such as 2005 to 2007.
Between 2000 and 2010 the value of Bordeaux made great strides. A 12 bottle case of 1982 Lafite Rothschild grew in value by 25.34% pa during the period, according to Liv-Ex.
While Bordeaux has undergone a correction during 2011 and 2012, the Burgundy market is strengthening, with DRC leading the way. The value of DRC's Romanee Conti grew by 24% between July 2011 and July 2012, according to Liv-Ex.
Super Tuscans - while Bordeaux remains the most popular wine, it is facing a backlash from collectors due to high prices. Those that looked elsewhere have discovered the Super Tuscans, an unclassified category of wines from Italy, which have seen their market share rise from 0.9% in 2010 to 3.3% in 2013.
o Whisky
The current world record for a whisky bottle at auction is $94,000, set in March 2012 by a Glenfiddich Janet Sheed Roberts Reserve, beating the previous record, set in December 2011, by 26.6%.
The top 250 investment grade whiskies grew in value by 183% between 2008 and 2012, according to Whisky Highland.
A cask of the Macallan whisky sold for $206,500 in Hong Kong in 2014, a new world record sum, showing that the market is really taking off in Asia.
o Cigars
Boxes of mid 1980s Davidoff Dom Perignon cigars, originally bought for less than £300 ($480), now auction for around £6,000 ($9,480).
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