(This post “ What will your wine be worth in 10 years ? ” was written by Guillaume Jourdan. You can reach him at info@vitabella.fr or via Linkedin.)
The big management consulting firms are turning their hands to wine, and for a very good reason. Investors want to know when it’s best to buy and when to sell wine in a decision-making context based on criteria that go way beyond a simple score awarded by the world’s most famous wine critics. Luxury, wine and finance go well together and today it’s vital to master all three of these sectors in order to correctly advise chateaux, brands and domaines. In this sphere of expertise, and following an exchange with Sisi Liang of Platinion North America (part of the The Boston Consulting Group), in New York, I discovered a paper by Joseph L. Breeden entitled “A New kind of Wine Analytics”. And his analysis gives real food for thought.
Forecasting the price of wine in 10 years in relation to what we know about the evolution of prices over time, the influence of vintages and various scenarios concerning the future of the market, now there’s a great project! But modeling future price variations for a wine is no easy task. There is no certainty. In reality, the only thing we can be sure of is that a lot of wines don’t fall into the ‘investment’ category. So what qualifies a wine as an investment? There are four essential criteria: liquidity, durability, integrity and price variability. Using these as a base, investors want to know when is the best moment to buy a wine and when the value of a wine will appreciate most. In the world of wine, investors’ expectations are high, because the choices are made alongside other types of investment that are much more structured. To reassure an investor, we need answers to the following questions: What are the factors that determine a wine’s appreciation? How can we predict these as early as possible?
This analysis guides the investor by evaluating the price evolution curve of a wine over time. Although initial price volatility over the first 6 to 8 years is a key point in this analysis, it shows that the major price appreciation takes place after 8 to 20 years. And if it can’t predict a new price hike like the “Lafite bubble” (what a shame for the speculators!), it does at least have the merit of rationalizing investment in wine. Scary? No, on the contrary, it’s really exciting!
