Experts estimate that just 1% of all wine is actually investment grade.
In fact, many wines are meant to be consumed young and don’t actually improve over time.
Because of this, navigating the wine market and understanding which bottles will appreciate over time can be quite difficult.
Investing in wine through a platform like Cult Wine or Vinovest can be an option for many investors looking to add wine to their portfolio without having a deep knowledge of wine.
Additionally, these wine investing platforms actually handle the storage and insurance, reducing the barrier to entry significantly.
So, what are the factors that determine the value of wine?
What Is Vintage?
First, let’s define “vintage.”
Vintage is a term that refers to the year in which a wine was made. Wines are typically made from grapes that are grown and harvested in a specific year.
Vintage is a significant factor in determining the quality and value of a wine for a few reasons.
The weather and other environmental conditions in a particular year alone impact the quality of the grapes and the resulting wine drastically. Some years may produce grapes that are more suitable for making high-quality wine than others.
Wines that are made from grapes grown in exceptional years are often considered to be more desirable and can therefore be more valuable.
These wines are sometimes referred to as “vintage wines.”
Vintage wines are typically made from grapes grown in a single year and are made in smaller quantities than non-vintage wines.
Some wines, such as non-vintage Champagnes, are made from a blend of grapes grown in multiple years and are not identified by a specific vintage year.
Additionally, some wine regions, such as Burgundy and Champagne, have strict regulations that dictate which wines can be labeled as vintage. In these regions, vintage wines must meet certain criteria in order to be labeled as such.
In general, vintage is an important consideration when it comes to wine, as it can have a significant impact on the quality and character of the wine.
What Other Factors Impact The Value Of Wine?
In addition to vintage, there are a number of other factors that drive the value of wine.
Let’s take a closer look at a few of them here.
1. Where It Was Made
Wine is produced all over the world, but not all areas are treated equally.
We’ve highlighted a few top wine regions below:
- France is known for producing a wide variety of high-quality wines. Iconic regions such as Bordeaux, Burgundy, Champagne, and the Rhône Valley are home to some of the most famous vineyards in the world.
- Italy is home to many famous wine regions, including Tuscany, Piedmont, and the Veneto. Italian wines include a wide range of red, white, and sparkling wines.
- Spain is the third-largest wine-producing country in the world, with a wide variety of red, white, and sparkling wines. The country is known for its iconic Rioja wines, as well as wines from other regions such as Ribera del Duero and Priorat.
- The United States is also a major wine-producing country, with California being the largest producer. The state is known for its Napa Valley wines, as well as wines from other regions such as Sonoma and the Central Coast.
- Australia is a major wine-producing country, with a focus on red wines, particularly Cabernet Sauvignon and Shiraz. The country is known for its wines from regions such as the Barossa Valley and the Margaret River.
These are just a few examples of the many wine-producing countries and regions around the world.
Other major wine-producing countries include Argentina, Chile, and South Africa.
2. The Vineyard And Producer
More specifically than the country, the actual vineyard and producer of the wine is a major consideration.
The reputation of a particular vineyard, much like an iconic clothing brand, allows it to command a higher price in the market.
Here are 5 highly famous vineyards around the world:
- Château Lafite Rothschild. Located in the Bordeaux region of France, Château Lafite Rothschild is one of the most famous and highly regarded wineries in the world. The vineyard is known for producing high-quality red wines, particularly Cabernet Sauvignon-based Bordeaux blends.
- Domaine de la Romanée-Conti. Located in the Burgundy region of France, Domaine de la Romanée-Conti is a highly regarded winery known for producing some of the world’s finest Pinot Noir and Chardonnay wines.
- Opus One. Located in Napa Valley, California, Opus One is a joint venture between the Château Mouton Rothschild winery in Bordeaux, France, and Napa Valley’s Robert Mondavi Winery. The vineyard is known for producing high-quality Cabernet Sauvignon-based Bordeaux blends.
- Penfolds Grange. Located in the Barossa Valley region of Australia, Penfolds Grange is a highly regarded winery known for producing iconic Shiraz wines.
- Cloudy Bay. Located in the Marlborough region of New Zealand, Cloudy Bay is a well-known winery known for producing high-quality Sauvignon Blanc wines.
These are just a few examples of the many highly regarded vineyards for wine around the world.
Other notable vineyards include Château Mouton Rothschild, Château Margaux, and Vega Sicilia.
Of course the age of the wine is a significant factor.
Generally, the older the wine, the higher the price.
For example, 2016 was an excellent vintage year.
An investment grade wine from 2016 would likely cost more in 2022, compared to 2017.
Some investors are surprised to learn that the storage of wine can impact its quality, and therefore value.
When purchasing a bottle of wine, investors should inquire about the previous storage of the wine in question.
If not stored properly, the quality can diminish over time.
There are five main considerations when storing wine:
- Temperature. Fine wine should be stored at a consistent temperature, ideally between 55-58°F (13-14°C). Fluctuations in temperature can impact the wine’s quality and aging potential.
- Humidity. Fine wine should be also stored in an environment with relative humidity of about 50-70%. Higher humidity can cause the cork to become swollen and allow air to enter the bottle, while lower humidity can cause the cork to shrink and allow air to escape.
- Light. Wine ages best when it is free from direct sunlight and other sources of bright light. Light can cause wine to age prematurely.
- Vibration. Fine wine should be stored in a place that is free from vibration, as it can disrupt the sediment in the wine and potentially impact its quality.
- Orientation. Wine should be kept on its side in order to keep the cork moist and prevent it from drying out. This will help to prevent air from entering the bottle and potentially damaging the wine.
Many wine investors pay for professional storage or have a wine cellar or wine fridge in their homes.
Scarcity can have a major impact on the value of wine.
If a wine is in short supply or is difficult to find, it may be more valuable due to the limited quantity that is available. This is a classic example of “supply and demand.”
This can be the case for wines that are produced in small quantities, such as certain vintage wines or wines from highly regarded wineries.
Vintage wines already have a limited supply. As people consume the wine, the remaining bottles tend to increase in value.
6. Critical Acclaim And Consumer Preference
Critics also have an impact on the value of wine, as reviews and ratings can influence consumer demand and perception of a wine’s quality.
If a wine receives positive reviews or ratings from wine critics or other industry experts, it may be more likely to sell well and potentially increase in value.
It’s worth noting that wine critics and reviewers are subjective. Thus, their opinions vary. What one critic considers to be a high-quality wine may not be considered as such by another critic.
As a result, investors shouldn’t buy a fine wine based solely upon the review of a critic alone.
Final Thoughts On Wine Valuation
A bottle of wine has numerous factors that determine its worth.
Most notable is the area and vineyard in which it was produced. Many vineyards have powerful branding that commands higher prices.
Supply and demand also impact the price. Many vintage wines are produced in small quantities and are therefore more rare. This rarity, or scarcity, can drive the price up.
Also significant is consumer preference and the reviews of critics.
Despite other factors, if a particular vintage of wine receives multiple negative reviews, the value could be driven down.
When looking to invest in wine, be sure to review a particular vintage for a number of factors.
If you want a more hands off approach, you can look at investing through a wine investing platform.
If you want to learn about wine investing in general, be sure to check out our complete wine investing guide here.