Can the fine wine market maintain its performance? | FT Wealth

Few would argue that we aren'tliving in turbulent times. But today I've come to aparticularly serene part of southeast England to findout how an evolving fine wine market is responding to anassortment of traditional and not so traditionalchallenges, ranging from long-termweather patterns to pandemics. It's very strong. The market has moved from beinga UK-centric type investment.

To right now, worldwide. And there are more platformscycling up all the time. In fact, the Live-ex 100,the leading industry exchange of the secondary market,has risen by around a third over the past two years. They are very, very goodat putting out information as to the state of thewine market in general. And they are saying thatit's extremely robust. Over the past 10 years, whenit comes to luxury investments'.

Performance, wine has trailedonly cars and rare whisky, according to the KnightFrank Investment Index. But this global market is facinga global issue that could well affect investment values andprices in the longer term – climate change. The major wineregions for investment are all on the same latitude. So you start off withNapa Valley in California, on the West Coast ofthe United States,.

Through to Bordeaux,through to Burgundy. And of course, these regions aregetting hotter and/or colder. As our climatechanges, it could make it harder to produce futurevintages of the quality we're used to. Climate change is going toplay a part in the wine life. That said, with wine, ifthere is no more Bordeaux, then the wines thatare held with customers are only going toincrease in value.

Of course, climatechange could eventually influence supply the otherway by actually opening up new areas for qualitywine production. The Champagne regionof France, for example, is an area seen asbeing particularly susceptible to climate change,which is why famed champagne houses, like Pomeroyand Taittinger, are now looking to placesthey would never previously.

Have considered for production. Big international players havecome into the English wine scene to invest intheir own vineyards, put their moneywhere their mouth is, and recognise how specialthe southeast of England is. The effect of climate changewill, of course, be gradual. But I have come to the UK'soldest wine merchant, Berry Brothers, foundedin 1698, to learn more about how certainaspects of the markets.

Are changing now. Some good ordinaryclarets, are they? Yes, my favourite. The company stores around£1bn worth of wine for private clients. There may be a few thousandbottles here, maybe. I actually don't knowthe exact figure. In Basingstoke we currentlyhave a facility for 9mn bottles. Spending on fine winesactually increased.

Throughout the recent pandemic. And sales for itsen Primeur season, which allows collectors tobuy the most recent vintage before it is bottled,were up over 40 per cent in 2021 compared with 2019. As sales grow, and withgreater volumes being traded across the world, ensuring theorigin and care of their wine is as it should be isbecoming ever more important for collectors.

The bulk of what I do islooking to check that everything that we sell is absolutelyas pristine as it should be, and that it's comefrom the right place so that the provenance iscorrect, that it's been stored correctly on the way into us. In times of higher inflation,as we're seeing now, physical assets dohave the potential to offer solid returns. But wine can entail highercosts than other investments.

Due to factors likeshipping and storage. It's seldom ashort-term investment, and concerns aboutcounterfeiting are also becomingmore prominent. It wasn't really an issueup until about 10 years ago. Now it's something whicheveryone asks us about. Cases like thatof Rudy Kurniawan, who in 2013 wasconvicted of wine fraud for selling tens ofmillions of fake wines,.

Have thrown a spotlighton counterfeiting. So how big of a problemis wine fraud nowadays? The more commontypes of wine fraud is mass produced bottlingof perfectly potable table wine with a moreexpensive label on it. And that's happeningprobably as we speak. Somewhere in the world,somebody is bottling something which is not what itsays on the label. Combating the fraudstakes various techniques.

And technologies, bothold and more recent. Can you see the fluorescinglights and the fluorescing label there? Yeah. But there are twotiny little holograms in the shape of a cloverleaf. Their position moveswith every vintage. Other verificationsystems can range from nanochips totracking numbers.

And even a system that matchesa unique pattern of air bubbles under the cap to animage kept on file. One relatively recentdevelopment uses blockchain technology to helpgain clarity over a bottle's condition and whereaboutsacross the supply chain. When you've got abroken supply chain, actually, that's the best time,in my opinion, to commit fraud. So what we're doing issaying, actually, we may make 5,000 or 500,depending on what's.

Going out of a QRcode that will be unique to that bottleand that batch. Can you show me how this sort oftechnology would actually work in practise then? We're going to scanthat code as so, and now we're going to go intotemperature, humidity, and GPS location of that bottle. Systems like Chainvinewon't be for everyone. But in a globalsurvey of wineries.

Last year, blockchaintechnology ranked second of alltechnologies they saw as having the highest priorityof importance to develop. As for the wineinvestment market, if it wants to build onstrong recent performance, it will have to adapt tothe constant changes coming from both inside andoutside the industry.

Can the fine wine market maintain its performance? | FT Wealth

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