Peter Lunzer of Lunzer Wine Investments looks at opportunities and challenges for wine investing in Asia, and addresses common mis-understandings

Date: Dec 2011

Tags: Wine, Asset allocation

• Emerging markets represent an opportunity in relation to the development of wine as an asset class which is not yet fully understood by most people
• Wherever there are wealthy individuals and five-star hotels and restaurants, there are bottles of fine wines in demand
• While the Asian market is going to become more responsible for storing more stock of wine in the future, people should still look to the UK for this over the next five years or so
• The lack of consistent weather patterns in France in general, and in Bordeaux in particular, makes it important whether someone buys wine produced in one year versus another

In terms of the increasing importance of the emerging markets in relation to the development of wine as an asset class, Peter Lunzer said in an interview that they represent an opportunity which is not yet fully understood by most people.

For example, he said, with the rate of urbanisation in China currently at about 1%, meaning 13.6 million people, as these people go through process of buying white goods, cars and looking at symbols of sophistication, wine is a natural path.

Asia’s wine potential

Outside of China, Lunzer said he has worked with a South Korean company which still has a major wine division and intends to keep large volumes of prime wines to supply the domestic market as well as the rest of Asia.

In addition, he added, the result of Hong Kong reducing duty on wines has had a great impact on the local market being hub for the storage of fine wines.

In general, however, no particular market in Asia stands out, he explained, because wherever there are wealthy individuals and five-star hotels and restaurants, there are bottles of fine wines in demand.

Keeping wine close to home

Although it seems to be important to Asian investors to keep wine close to home, Lunzer said he would advise that they store it in the UK.

It remains an important hub because of its proximity to France, he explained, so that if when the wine is sold to the US, for example, there would have been no point it having already travelled to Asia previously.

One short journey from France to the UK warehouses is always natural, said Lunzer, adding that two or three additional journeys can impact the quality.

As a result, custodianship of wine is important, especially given the extra issue of the environment.

While Lunzer said the Asian market is going to become more responsible for storing more stock of wine in the future, people should still look to the UK for this over the next five years or so.

Areas of mis-understanding

What has not yet been fully understood in Asia in terms of wine investing, said Lunzer, is that the lack of consistent weather patterns in France in general, and in Bordeaux in particular, makes it important whether someone buys wine produced in one year versus another.

He said he has seen portfolios sold to Asian buyers which have had a lot of content of wines that Lunzer said he wouldn’t buy for investors. While they would be ok to drink at some point, they will not become legends, he explained.

As a result, he said he expects the Asian market to slowly begin to realise that following the best vintages will give the best returns as that stocks become scarce.