Fine Wine as Investment

Various wine brands on display at WoW Beverages shop in Nairobi on April 25, 2017. PHOTO | SALATON NJAU | NMG 

By ANNIE NJANJA

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Summary

• Annie Njanja talks to experts on why quality, region and cellaring matters

Forget about the classic cars, coins, coloured diamonds and jewellery, wine is the next frontier for storing wealth.

Fine wine moved up through the gears, knocking other luxurious items off the winner’s podium in last year’s Knight Frank Luxury Investment report after recording a 24 per cent growth.

Previously, the dollar millionaires invested in bonds, shares, gold and the property market, avenues that grow investment portfolios and augment wealth over extended durations of time.

Investing in luxury commodities is now gaining traction in Africa.

Spencer Fondaumiere, a wine connoisseur says the logic for investing in fine wine is basic. Because wine is primarily made to be drank, the longer a good quality bottle stays around, the scarcer it becomes.

‘‘If a bottle of wine is sufficiently scarce, if the producer is reputable and is well-acclaimed, it’s value will grow over time. Very scarce top quality wines easily fetch over $100,000 (Sh10.3 million)’’ says Mr Fondaumiere, who is a wine buyer, wine judge and sommelier in South Africa.

Is it valuable?

As the super-rich globally stow away their money in multiple investment avenues as a means of spreading risk and cushioning themselves from volatile markets, are Kenyans seeing any value in wine?

Chris Lucas, the managing director of WOW Beverages says if the wine stock movements are anything to go by, then Kenyans are cellaring wine as investments.

‘‘The local consumer is now as discerning and perhaps as sophisticated as the consumer in New York or any other key global market. The local consumer due to globalisation factors appreciates fine wines and spirits and can afford to responsibly enjoy such beverages,’’ he says.

Mr Lucas adds that holding of fine wines and spirits for their derivative value appears to be catching up on the local market as consumers are seeking out 18 to 32 years aged whiskies and prefer wines from specific cellars and wineries.

WOW Beverages is among wine outlets that stock a few bottles of investment-grade alcohol.

‘‘We have a sizeable selection of connoisseur wines in stock at our cellars. These are the wines favoured by collectors and sourced from key wine producing countries such as Argentina, France, Chile, South Africa, Italy and Australia,’’ Mr Lucas says.

He adds that one of the most valued investment-grade spirit sold locally is a St Louis XIII (Cognac), a 700ml bottle which is retailing at Sh400,000 while a one-litre pack costs Sh700,000.

As African ultra-wealthy drift towards collectables especially art, wine and classic cars as popular ways of storing their wealth, it has seen the rise of portfolio managers solely specialising in these objects.

900 million bottles

Nick Martin of Wine Owners, a fine wine trading exchange says wine’s stellar performance was driven by exceptionally strong growth in key areas across the world and in particular the resurgence of the top Bordeaux chateaux, which forms the backbone of most investment cellars.

Bordeaux is considered to be the blue-chip investment because it has pedigree.

The region in France produces about 900 million bottles of wine a year, roughly 1.5 per cent of the world’s production.

‘‘If you can get your hands on one bottle from any of the region’s 16 top tier châteaus (wine farms), with 100 years of pedigree then you’ve gotten a good thing,’’ says Mr Fondaumiere.

Of more value than a bottle of Bordeaux is Burgundy. Premium Burgundy, for instance, also from France, continued to grow last year, churning out the most expensive bottle (1988 Romanée-Conti), which was sold for at Sh17 million at the world famous Bonhams auction in October.

Napa wine

The performance of the fine wine from Napa in California also had a remarkable growth of up to 34 per cent last year as a result of the demand for its cult (investment) wine.

The Northern Italy- Piedmont also performed exemplarily well after the market rose by 28 per cent, a course that it’s expected to hold in 2017, especially now that there is a growing interest in the region’s vineyards from global investors.

“Collectors and direct-to-consumer wine ‘clubs’ continue to support the market as they buy into the scarcest wines irrespective of release prices, in the knowledge that having an allocation at first release is prized and secondary market prices are likely to see a jump after release,” says Mr Martin.

Kenyan wine

The thirst for high-end alcoholic beverages is quite high. But most of the wine produced and sold in Kenya does not get better with time as it is best consumed within a few years.

However, Kenya is making its mark in wine making market with the few vintners seeking to appeal to luxury buyers despite the region being a non-traditional wine growing region, hence it has no history or heritage.

If you look at some Italian or French wines you will notice that they have been producing for 300 years, hence they have a history or heritage.

Some of the winemakers in Kenya include the famous archaeologist, Richard Leakey who produces Chardonnay and Pinot Noir from his grapes grown in Kiserian and Rift Valley Winery which produces wine under the Leleshwa label which comes in Sauvignon Blanc and Shiraz.