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Fine wine whets appetite of Gulf investors

Ingrid Brodin, CEO and co-founder of Vindome, a wine trading app Supplied
Ingrid Brodin, CEO and co-founder of Vindome, a wine trading app
  • Sotheby’s auctioned bottle of wine for $361,000 last year
  • Wine investment company Vindome launches trading app in UAE
  • Dubai financial advisor cautions wine is only for ‘sophisticated investor’

A Methuselah-sized bottle of wine – six litres – was auctioned by Sotheby’s last December for a staggering $361,000.

The sale of the 2007 Domaine de la Roman-Conti is an indication that investments of passion – art, cars, watches and wine – may not have been dented by the recent global economic worries.

The region’s love of Champagne is well known – the number of bottles shipped to the Gulf in 2022 surged 91 percent, according to Comité Champagne, the industry body representing French producers.

And now Monaco-based wine investment company Vindome is launching its trading app in the UAE, targeting Middle East investors looking to fine wine for healthy returns.

“Against a backdrop of global economic uncertainty, with increased levels of market volatility, rising interest rates and inflation, investors are exploring different ways to diversify their portfolio,” Ingrid Brodin, CEO and co-founder of Vindome, told AGBI.

“This is true for investors globally, including the UAE.”

Wine recorded a 10 percent price growth in 2022, according to the Knight Frank Luxury Investment Index. While this was down from 16 percent the previous year, it still offers a palatable return for investors.

Investment in the strong stuff was estimated at $5.1 billion in 2018 and is projected to grow by 54 percent by 2024.

Top 10 fine wine brands 2022 – average price growth
2022 rankFine wine brandRegion2021 rankPrice growth in yearTrade price in 2022
2Arnaux LachauxBurgundy62487.2%$12,547
4Armand RousseauBurgundy963.5%$23,391
5Prieure RochBurgundy3843.8%$9,698
6Dom PérignonChampagne439.3%$2,907
7Louis RoedererChampagne934.9%$3,538
9Jacques F MugnierBurgundy4785.8%$8,513
Source: Liv-ex Power 100 Report, 2022 (published November 2022)

“Burgundy has risen by more than 80 percent during the past five years, but at some point the market had to pause for breath,” Nick Martin, co-founder and CEO of Wine Owners, said.

Fine wine returns offer lower volatility than many mainstream financial assets and can be an alternative investment for those looking to enhance potential returns, increase diversification, or hedge against market risks such as inflation or sudden macroeconomic shocks.

“The core dynamic that underpins wine’s investment potential is an internal supply-demand imbalance that increases over time after a wine is released,” Daniel Ward, director of UAE at Cult Wines, said.

“Investment-grade wine improves as it ages, meaning demand typically grows as it approaches its drinking window.”

He added that the combination of decreasing supply and stronger demand “establishes the core engine of consistent price appreciation”.

Suman Bannerjee, chief investment officer of Paris-based investment fund Hedonova, revealed that a diversified portfolio of wines from France, Italy, South Africa, Argentina and California would have returned around 14 percent in the last two decades.

“In terms of returns in the last three years, Chilean white wine has dominated the market,” Bannerjee said.

“But if you go back two decades, red wines from the Burgundy and Bordeaux region of France have been consistent performers by generating returns upwards of 14 percent.”

He added that although wine prices are extremely cyclical in nature, this does not correlate with the general macroeconomic environment.

Keren Bobker, a Dubai-based independent financial advisor and senior partner at Holborn Assets, cautioned that pouring cash into fine wine is something for a “sophisticated investor” and should only be for a small percentage of a portfolio.

“It is the kind of thing you do as a side investment, not as a major part of your portfolio,” she said. “Unless you are a real expert, look at it as a bit of fun and not as a major investment.”

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