South African investors have been urged to look into fine wine as an alternative asset class as it always remains stable even in turbulent times.
Wine Cellar, an online merchant of the finest wines, said yesterday that fine wine was fast emerging as a stable investment asset in turbulent times globally, and South African fine wine was no exception.
Wine Cellar’s head of brokerage and investments Johan Malan said the drawcard was that the returns in fine wine have little to zero correlation to financial markets, unlike traditional financial assets which tend to move with stock markets and market sentiment.
Fine wine investment is built on the basic economic principles of supply and demand, where prices rise over time on diminishing supply.
Also, if the position is held that a particular wine will grow in value over time, then buying at the release price will constitute a saving in comparison to buying the wine from the market once the wine is already mature.
Malan said when investing in wine the key factors to consider included, track record – of both the wine producer and merchant – brand equity, vintage, region, provenance and critical reviews.
He said that while many sectors have been crushed over the last couple of years, South African and International fine wine had proven to be very stable during the Covid-19 pandemic, and has in fact shown good growth.
Malan said that both demand and supply of South African fine wine was increasing, particularly with older and rare vintages, adding that prices were set to increase further as a weak rand was adding cost pressure and demand.
“There are more producers each year making world-class wines, often at a fraction of the price of their international counterparts. So, whether investing to drink later or for monetary growth, these wines are going to be harder to get and they will become more expensive,” Malan said.
“As quality has boomed over the last 10-15 years, more of the leading international wine publications send their critics to taste our wine annually, including Neal Martin for Vinous.com, Anthony Meuller for the Wine Advocate and Tim Atkin MW.”
“Independent critic reviews, especially from multiple sources essentially determine quality and therefore ultimately investment potential.”
Some of the wineries Malan considers investment-worthy range from traditional names to rising stars include Kanonkop, Tokara, Rust en Vrede, and Reyneke from Stellenbosch, as well as Mullineux, Porseleinberg, and the Sadie family from the Swartland.
He said other go-tos were Boekenhoutskloof’s Syrah and straw wines; Klein Constantia’s famous dessert wine, Vin de Constance; Alheit Vineyards Cartology; and younger winemakers showing potential such as Lukas van Loggerenberg, Duncan Savage and Donavan Rall.
“Pricing is also key, as wines under R200 are not demanded with age and therefore won’t increase much in value. Similarly, buying at super-premium levels, above R1 000 per bottle, creates a very high base for price appreciation,” Malan said.
“Investment wines are generally traded in 6-bottle cases, and we believe the greatest potential lies between the R2 000-R3 000 per case level.
“As our local and international market grows, the potential for wine above R1 000 will increase. We have already seen huge price discovery at the Strauss & Co and Cape Winemakers’ Guild Auctions.”
In terms of diversity, Malan advised investors to not put all their eggs in one basket, adding that they needed to consider other things such as storage and insurance.
“A diverse wine portfolio should include regions beyond Stellenbosch or Swartland, as well as various producers and varieties,” he said.
“Red wine is a substantial part of the market since vintage white wines have less appeal to reds. We are, however, seeing a resurgence in the sweet wine category as South Africa produces class-leading wines.”
BUSINESS REPORT