Interest in Wine Investing Grows as China Drinks More
Asia is taking a sizeable swig of the market share when it comes to wine. In fact China, including Hong Kong, became the world's largest consumer of Bordeaux wines last year, according to the Bordeaux Wine Council. The country imported 33.5 million bottles of Bordeaux alone worth a total of $375 million. China now imports more than $1 billion of wine each year, a four-fold increase from the amount it imported in 2004.
For institutional and retail investors who want a piece of the action - wine funds are becoming more popular compared to more standard asset classes.
Peter Lunzer, asset manager and head of Lunzer Wine Investments tells Bernie Lo on CNBC's Straight Talk show this week, that putting your money into fine vintages can be a good investment for "family offices, private banks, and individuals with a bit of spare cash."
He says Lunzer Wine Investments portfolio returned 23% last year and institutions have begun to show a much greater interest in wine investing.
As for those who might be skittish about jumping into luxury investments like wine amid geopolitical turmoil, Lunzer says that while he understands a lot of people are being cautious, the reality is that wine is a finite industry, with only a certain number of bottles of the best vintages being produced each year.
So how can investors judge what to pay? The London-based fine wine exchange, Liv-ex is a way for merchants to trade amongst each other and for others to track prices. Lunzer says there are signs that Liv-ex is experiencing a slight decrease in liquidity and availability. That's actually good for wine investors because it means merchants have been able to sell stock to the public and demand is strong.
Lunzer says the wine industry also has a quirk that's important to keep in mind. When people buy a $1000 case, they often tend to drink some of it. But when prices go to $2000, they might think about selling it. Thus, higher prices often lead to lower consumption demand and higher supply for investors.
Spring auctions, which are now under way, are a popular way to get an idea of the wine market and to get started. Lunzer says that most of the money now seems to be coming from mainland China. And, he adds, "the auction rooms are a great barometer of what's going on in the world."
— CNBC'S Cecilia Lo contributed to this report.
Straight Talk airs every Friday at 5pm HK/SIN, Saturdays at 8am, 11am, 5:30pm, and 7:30pm HK/SIN, and Sundays at 7am, 9:30am, 11:30am, and 7pm HK/SIN.