Sidney Chong hadn’t had a single sip of wine before going to university. But while at UCL, he decided to extend his studies beyond chemical physics to take in the Wine and Spirit Education Trust Level 1. Now 27, Chong travels to Burgundy for en primeur tastings, blogs about wine and invests in it – both for himself and on behalf of family and friends.
Originally from Hong Kong but now UK-based, Chong is part of a new generation of younger investors for whom wine makes an attractive proposition. Financially savvy, he reasons that unlike stocks, shares, commodities and crypto, a wine’s production is limited – when combined with the law of supply and demand, this creates an interesting asset class for long-term investment. Another potential benefit is that wine is a consumable, or as HMRC terms it a ‘wasting asset’, which makes it exempt from Capital Gains Tax. One example Chong gives is from Burgundy estate Domaine Lamy Caillat: three years ago he bought a bottle of Chassagne-Montrachet 2017 for £45; now it’s trading for £700. ‘If you’re not buying blindly, I don’t see prices going down.’
According to Olivia Souto of Cult Wine Investment, the average bidder at wine auctions has shifted from 65 years old to 40. ‘Four years ago, it was male executives in their fifties and sixties looking for a pension plan, but the demographic is significantly changing.’ Barbara Drew MW of wine retailer Berry Bros. & Rudd has also identified a shift in the profile of collecting customers in recent years, with a younger, more culturally diverse demographic of wine lovers taking ‘an interest in investing in their future drinking and beginning to build their own cellar.’
Souto argues some of the more attractive aspects of wine investment for young people, beyond the liquid: ‘Fine wine has a long-term proven track record and is defensive in economic downturn.’ Even at its lowest point, fine wine’s declines were moderate compared to other mainstream risk assets during the global financial crisis. During the first year of the pandemic, the lowest point of fine wine’s downturn was -3.1%; as compared to the FTSE 100, which was -20.9%, or the MSCI ACWI which was -13.3%. At a time when the economy is uncertain and property prices have rocketed, wine is financially appealing to an increasing number of younger people who have a little bit of cash to invest somewhere.
‘Wine is something people can access, and if you do it properly you will make money,’ says Queena Wong, 51. The voracious collector began buying cases of wine in the early 2000s but found collecting, in general, to be a bit of a man’s world. ‘People would say it’s like investing in a handbag or shoes, but it isn’t. You have to be confident because you are buying something you can’t try and women in male spheres can get tested a lot,’ says Wong. ‘It’s not always friendly and it’s taken me a few years to break into some significant circles.’
Passionate about encouraging more women into the world of wine, Wong says there is now a strengthening in the industry. ‘The presence of women is growing and it’s powerful to see women doing things together.’ Drew agrees that gender parity in wine has come a long way: ‘Something that I have noticed over just the last 10 years teaching wine classes is the shift to more female attendees – in any wine tasting now, there will be a roughly 50:50 split of men and women which, as a woman in the wine trade, is heartening to see.’
Many have mentioned the effects of the pandemic. ‘It forced the old-school wine market to go online, increasing wine’s accessibility and helping to draw in younger and more diverse market participants,’ says Souto. Wine sales rose as people, stuck indoors, looked for ways to entertain themselves or get a taste of luxury at home. This new digital platform increased wine’s accessibility to those who typically would not have attended wine tastings or who had not been raised with access to a family cellar.
‘It is easy to recognise the barriers in gender and ethnicity,’ says Sam Riley, 21, a sales and purchasing advisor at Chelsea Vintners, who has been collecting for a few years now. ‘But it’s something a lot of people want to change. It boils down to confidence and exposure. Wine education and wine social media is key because it means exposure to hitherto unexposed demographics.’
While the financial appeal is certainly there, it seems something else is driving this demographic shift: an increase in wine appreciation
Indeed, while the financial appeal is certainly there, it seems something else is driving this demographic shift: an increase in wine appreciation. ‘We have noticed, particularly in younger collectors, an increasing desire to learn even more about wine, with collectors wanting to attend tastings and events,’ says Drew. Whether collecting or investing, most seem to agree it works best when you are a wine lover.
‘Lots of wealthy people go into it, which rises the prices for those who want to drink the wine,’ says Wong. ‘I buy to drink and then I sell because there’s no way I can drink everything I’ve bought, and that makes a bit of money.’
‘Wine is for drinking and sharing,’ agrees Chong. ‘But then sometimes a wine price blows up and then you sell it – and buy more of what you like.’
Hamish Greening, 22, also of Chelsea Vintners, comes from a winemaking family, so though he collects, it is not because of calculated investment. ‘My dad would pull a bottle out for lunch, and I’d look it up and it would be £300, but he’d say, “no it isn’t, I got it for £6.50”,’ he says.
‘While we can make predictions, there will invariably be a rate of failure. Don’t be influenced by so-called markets and if you only have what you love to drink you shouldn’t be left adrift in any sense.’
Ten top tips for starting a wine collection
- Do your own research, attend tastings, and create a social wine sphere; do not be afraid to contact producers directly
- ‘If using a company, do your due diligence,’ says Souto. Be aware of additional charges like exit fees, delivery charges or commissions to sell the wine on
- Wong suggests building good personal relationships with your merchant, broker or the producers themselves to ensure individual attention
- Always ensure your wine is kept in-bond. This ensures it has been stored with care to maintain its quality in a bonded warehouse and it helps guarantee the wine’s authenticity – known as a wine’s ‘provenance’, this is one of the most fundamental things when buying, selling or investing in fine wine
- Look to prestige producers of a smaller size and with very limited production for the best chance of financial return
- Souto advises on ‘diversifying your portfolio across regions and producers to diversify risk adjustment concerns’
- Buying wine at the best price, and at the beginning of its life means you can be sure of its condition and provenance, with a better chance of increasing its value, advises Drew
- Often you must spend more with a merchant to get the best allocation, so do not spread yourself too thin. If you have £10K to spend, sharing that between 10 merchants might not have the same impact as splitting it between two or three
- ‘Build a balanced collection by buying a few cases of each different wine, spread around your interest,’ says Drew
- In conclusion, for pure investment leave your drinking preferences at the door. But if you try to ensure you like what you are buying, then no wine in your collection will ever be a true loss