With inflation at its highest levels in decades and the stock market down significantly in 2022, investors are looking for alternative assets to round out their portfolio. Because investing in wine and spirits offers steady growth with low risk and volatility, it can be an excellent way to diversify your overall portfolio. Additionally, with domestic and global demand rising, particularly in emerging markets in Asia, now could be a good time to jump into this market.
There are a few reasons that wine and spirits offer consistent growth with low volatility. First, the nature of wine and spirits themselves lends to this return profile. Wine gets better with age and particularly for investment grade wines, there is an optimal period of time when they should be consumed. As that period of time gets closer, the wine gets more valuable as restaurants and collectors seek it out. Oftentimes, they would rather buy a wine at its peak maturity rather than hold onto it for years. Whiskey is slightly different as it will maintain its peak indefinitely as long as it is stored properly.
Limited Production Quantities
Second, high-end wine and spirits are usually produced in very limited quantities, leading to increased demand. With wine, there are only so many areas of the world that have the right weather conditions, soil and terrain to sustain vineyards that produce top quality wines. With spirits, the finest whiskeys are produced in small batches as the processes that lend themselves to high quality whiskey are not seen when mass produced.
Finally, because they are consumable goods, there is also a forced scarcity as the supply continues to dwindle. Bottles of wine and spirits are meant to be enjoyed. Once they are, the bottles that remain become harder to source and that much more in demand. As time goes on, it only makes sense that as the supply decreases, demand and prices will increase.