- Fine wines and rare spirits are becoming increasingly popular luxury assets for investors.
- Such investments are bringing high returns, the owners of the oldest US wine shop told Insider.
- Fine wines are also seven times less volatile than other luxury assets.
More investors are turning to fine wines and rare spirits as an investment asset, according to the owners of Acker Wines, America's oldest wine shop and the world's largest wine auction house.
The company has seen "spectacular growth and a surge in demand for fine wine," its chairman John Kapon told Insider.
It comes as investors are recognizing high returns on fine wine investments and their relative stability.
While other luxury assets like watches and cars saw gains of 5% and 4%, respectively, fine wines from Bordeaux, for example, outclassed these returns in the past 12 months to June 2021.
At the same time, The Drinks Business reported that the average price of Hermès Birkin handbags dropped by 3%, while the average price of investment-grade wines rose by 13%.
But it is not only Bordeaux wines that are in high demand, Rupert Millar, managing editor for Liv-ex, the global marketplace for fine wine told The Drinks Business: "As for which wines have benefited the most, it spans everything from classic French regions (Bordeaux, Burgundy, Champagne, etc.), to increasingly popular labels from Italy and the US, which are taking ever greater shares of trade by volume and value."
People are increasingly noticing that wine is a strong-performing asset to stock, and is seven times less volatile than other luxury assets, according to Kapon. For example, when markets when down in March last year, wine didn't really budge, he said.
Kapon added: "The other part of the economics of wine is that there is a supply and demand imbalance for fine wine." The supply of wines, which is already limited, decreases every year because people drink it, but the number of people interested keeps increasing.
Due to such a favorable supply-demand imbalance for investors, wine offers a solid asset in inflationary times too. According to Kapon, "wine performs exceptionally well during a long-term inflationary period and acts as a great hedge and store of value."
But fine wines are not the only type of alcohol people are increasingly investing in. Spirits are attracting attention from younger consumers, especially as more people began drinking fine whiskey during COVID-19 pandemic lockdowns.
"Whiskey has become another active collectible over the last five years, like wine, and many investors are seeing the returns and entering the asset class, further propelling the prices of the top rare whiskeys," Kapon said.
"With restaurants and bars closed, holidays out of the question, and generous stimulus packages pumping cash into the economy, people have found themselves with extra money to burn and have been treating themselves to luxuries such as fine wine, which can be readily enjoyed at home," Millar said.
Tod Bradbury, head of Rare and Collectable whiskies at Justerini and Brooks, based in London, told Forbes that individuals had a lot more time on their hands during the pandemic and began drinking more, specifically fine whiskey, as a result.
But with an increasing number of people drinking fine whiskey, supply is naturally suppressed. This supply-demand imbalance, like in the case of fine wine, tilted in investors' favor, making it an attractive asset.
Looking ahead, Kapon said a tremendous demand for fine wines has meant Acker is on track to reach more than $200 million in global sales this year.