Wine has outperformed jewelry and watch to become Hong Kong consumers’ first choice of luxury item, says Patti Wong, chairman of Sotheby’s Asia.
Speaking at a recent wine seminar hosted by HKTDC and WWXplorer during Hong Kong International Wine & Spirits Fair, Wong reveals that when comparing wine with traditional luxury spend of jewelry and watch, wine in the past five years has emerged as the top item on consumers’ luxury shopping list.
Compared with 5 years ago, 77% of Hong Kong consumers opted for jewelry as their top luxury purchase, the percentage now dropped to 22%, while wine surged from 17% to 56%, says Wong.
“They now spend it on wine, not on jewelry or watch. These are traditional ways of how people spend,” she explains. “Obviously very bad news for jewelry. The other two are trying really hard to combat that wine being really the first hit of people’s share of wallet.”
While Hongkongers are swapping Rolex for DRCs, the spending trend echoes the city’s blistering auction scene, where leading auction houses are bent on breaking world records one after another.
Since the government eradicated wine taxes in 2008, Hong Kong has become a growth engine for global wine auction market. Today it is the world’s biggest wine auction market, ahead of London or New York.
In 2009, it only accounted for 36% of the world’s US$40 million wine auction market. Ten years later, it has surpassed London and New York to account for 58% of US$98 million global wine auction market, according to Wong.
Compared with other traditional investments such as contemporary art and watches, Wong explains, wine has a distinctive feature that is it gets drunk. This means that scarcity of the liquid is expected to drive up demand, and ultimately price, she says.
Based on past 10 years’ trading prices and market analysis, Wong points out that in terms of lot value, wine enjoys higher growth rate compared with contemporary art and watches (11% v.s. 8% v.s. 3%), despite its relatively lower lot value.
“This means that wine is very consistent,” she concludes. “It’s one of the best ways to invest your money or to spend or park your money because you get the double effect”.
Though wine investment has gained in popularity in the past decade, it lacks 90% of financial investment criteria, cautioned Roland Muksch, executive director of LGB bank and chairman of Hong Kong Wine Society and a fellow panelist at the wine seminar.
It is nonetheless a passion investment, and one overlooked aspect related to wine investment is investment in wine estate and wine technology. “If you can find land where they are making wines that are not priced as they are priced, you can invest in that,” he urges.
Advancement in technology has been gradually used to tackle some of the most controversial areas of wine investment, traceability and provenance. Authenticity of fine wine, as stated by Greg De’eb, principal of Crown Wine Cellar, “has a direct impact on wine investment value.”
Of all investment grade wines, more than 95% high-value wines are French based on an analysis of wines collected by over 2000 high-net-worth collectors who store their wines with Crown Wine Cellar.
When it comes to choosing wines to investment he advised “one simple rule” which is to evaluate a winery’s back stock. “If a producer has that much confidence and belief in their stock and keep stocks back, and have a museum stock access, then probably these wines are going to be good investment,” he explains. Reviewing auction catalogues for investment-grade wines is another way to decide on what wines to invest in, he adds.
One of the leaders in using technology to ensure wine provenance is WWXplorer, a leading wine trading platform in Asia. “The role of technology in this arena includes authenticity assurance and, provenance tracking, both of which essential to the development of a healthy and sustainable wine investment ecosystem,” says Mariana Lam, founder of WWXplorer.
The company uses smart identification tags called VinoGuard to track wine movement and store key provenance data including a log of ownership details, which are then encrypted and store in our soon-to-be-launched fine wine ownership and transaction blockchain.
The goal is to warrant the ultimate integrity of any bottle of fine wine once tagged and traced. Wineries are also become more proactive to ensure not just provenance but also storage conditions during logistics.
Citing an example, Darius Allyn MS, founder of GenWine, says Burgundy producers such as Laurent Ponsot installed a tag that has temperature sensors to trace temperature conditions of wine bottles from leaving wine cellar to arriving at the homes of end consumer to ensure integrity of storage conditions.