Wine Investment – Better Than FTSE

Budding investors would do well to examine investment options beyond stocks and shares. Wine investment is a growing market that is significantly outperforming the FTSE at the moment.

Despite the recent recession, the wine investment market has continued to grow at a staggering rate, shattering all previous records of its own value, largely fuelled by expansion of the market in Asia. It is currently up 166% over the last five years compared to 16% for the FTSE 100.

The growth in demand from previously untapped markets is staggering, and certainly explains how the wine investment market has managed to grow steadily throughout a recession that affected western economies far more than those in the Far East, Asia, Latin America and Russia.

The figures for China alone are amazing. Between 2005 and 2008, Chinese wine consumption grew by 65%, making China the sixth largest consumer in the world, totalling a full 10% of the international market. What’s more, experts predict that consumption is set to rise a further 31% by the end of 2011. This has significant implications for wine investment as a great deal of this wine is imported, increasing at a rate of around 125% per annum. 15 years ago the amount of imported wine was negligible.

What is particularly interesting about this is that the Chinese per capita consumption is tiny. Although collectively the market is having an enormous effect on international wine markets, the Chinese only consume an average of 0.31 litres per annum. Compare that to 27 litres a year per adult in the UK, 60 litres for France and 62 for the Vatican (all Holy communion we’re sure).

If China’s consumption per head reaches even 25% of what we drink in the UK, then all the wine currently produced in the world would be needed to meet demand.

This demand, set against an always struggling supply has driven prices up considerably, with one bottle of Lafite Rothschild 1996 going for £15,000 at auction in Hong Kong. With Chinese demand set only to rise, and 2009 being hailed as another vintage year, the growth of the wine investment market only looks set to carry on full steam.

Naturally, investing in wine requires just as much specialist knowledge, if not more, as investing in stocks and shares. But with demand constantly rising, with supply staying the same, this looks like one market set to remain lucrative.

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