This year’s Julius Baer Wealth Report: Asia feature on luxury wine compares the prices of a bottle of Château Lafite Rothschild 2000 across five Asian cities that are key wine markets in the region. Shanghai remains the most expensive city, whereas Hong Kong is the most price competitive. The report also examines the increasing sophistication of Chinese wine consumers, and explores fine wines as an alternative investment.
The luxury wine market’s centre of gravity has tilted eastwards, reflecting the shift in economic power. With a population of more than 4.5 billion, Asia Pacific is one of the key regions seeing a sharp rise in demand for fine wines, driven mainly by China and Hong Kong.
Consistent with previous years’ findings, the price for a bottle of Château Lafite Rothschild 2000 remains most expensive in Shanghai at a cost of USD 4,142 and amongst the most price competitive in Hong Kong (USD 1,677). Luxury wines such as the Château Lafite Rothschild continue to be highly sought after in China because of the quality and perceived status symbol.
Apart from higher taxes in China, luxury wine prices are driven by continued strength in Chinese demand, amid rising disposable incomes, aspirational consumption, increasing westernisation, and the rapid sophistication of drinking rituals. As a result, consumption habits have evolved from buying wine as gifts to buying wine for personal consumption. Millennials are also catching on to this trend.
By 2020, China is set to become the world’s second-largest wine market. Wealthy Chinese are not only scooping up fine wines, they have also developed a taste for Bordeaux vineyards. Notably, Hong Kong has become an important sourcing hub for mainland consumers and is the second most important wine auction market in the world after New York City.
’Made in China’? Like!
According to Euromonitor International, China is likely to come of age as a producer. With major international houses investing heavily in production in the country, Chinese wine exports will soon make their presence felt on the international stage.
A glass above the rest
An example of such a wine is Moët Hennessy’s first luxury wine brand in China, Ao Yun, a Cabernet Sauvignon that costs more than USD 300. Since its launch in 2017, its rarity and high quality have already drawn attention from the global wine industry.
How does Ao Yun fare on the taste scorecard?
“I think Ao Yun being a Chinese wine has been one of the most highly regarded wines by experts and journalists all over the world. And they are amazingly surprised when they discover it’s a Chinese wine because they had a preconceived idea about it. In China, you can do excellent wines that are comparable to those in Bordeaux, Napa vineyards, and Australia. I would say the wine cycle is seven to ten years. So we bet on the future,” says Mr Christophe Bourrie, Managing Director of Prestige Brands at Moët Hennessy.
Reading the wine dregs
If wine is a bet on the future, what do the dregs say about the investment outlook for fine wines?
According to Cult Wines, China’s stricter capital controls have given the impetus for China-based clients to look at alternative investments such as fine wine. This trend is expected to continue. As far as alternative investments go, fine wine has a few advantages. Although wine’s intrinsic value may be debatable, its market value is not.
Purchasing fine wines has become more popular, not just as a passion, but also as an investment. The industry’s leading benchmark, the Liv-ex 100 Fine Wines Investables Index, tracks the most ‘investable’ wines on the market – around 200 wines from the top 24 Bordeaux châteaux. This index has been less volatile than stocks or commodities, including gold, which is typically seen as a safe haven asset. Over the 12-year period, it has returned more than 250% in GBP terms. As such, investors would do well to take a long-term view on their wine investments.
In conclusion, investors can take into consideration that this liquid asset is not only drinkable, but also investable.