Bid au revoir to the Bordeaux region in France as South African fine wines present a rare yet growing investment opportunity

Bid au revoir to the Bordeaux region in France as South African fine wines present a rare yet growing investment opportunity
Bid au revoir to the Bordeaux region in France as South African fine wines present a rare yet growing investment opportunity

With a history that can be dated back 300 years, investment in luxury wines is by no means a new sensation. However, gone are the days of the classic connoisseur buying additional Bordeaux to sell off a few years later. Wine investment is becoming an option for both confident collectors and a growing phalanx of “newbies” who are venturing into wine collection for the first time. As a result, wine has grown to be the fourth most popular luxury investment globally.

Initially, wine investment was limited to only the top wines of Bordeaux, France. However, with growing global interest in wine investment, wines from other top French regions, such as Burgundy and the Rhône, are positioning themselves for investment, along with selected top wines from California, Spain and Australia.

Another country making its case for investment in its fine wines is South Africa. Poised between the elegant restraint of Old World wines and the ripeness of New World wines, South African fine wines present an incredible investment opportunity for both experienced collectors and those beginning to build a collection.

In tandem with global penetration, investment in South African wine is growing in prevalence among the local market, too. Total auction sales at this year’s Cape Fine & Rare Wine Auction (previously the Nederburg Auction) reached 2.2 million Rand.

“We have seen a surge of private buyers recognising the top South African wine producers for finely crafted, luxury wines, and they are willing to pay for the enjoyment of these well cellared gems,” says Michael van Deventer, Vinotèque Manager and Private Buyer Liaison of the Cape Fine & Rare Wine Auction.

The growing demand for South African fine wines in the global market is a further signal that South African wines are the way forward.  Last year, the South African super-premium segment showed export growth of 37% in volume while the premium segment, comprising wines in the over R40 per litre price point, also continued to grow.

The numerous accolades and awards bestowed upon South African wines reinforces this global repositioning. Acclaimed US-based title Wine Enthusiast awarded a magnificent 94 points to De Toren Private Cellar’s Book XVII 2017, and globally respected UK-based critic Tim Atkin has highlighted wines such as the Kanonkop Paul Sauer 2015. These are just a few standout examples with an array of local wines consistently performing exceptionally at awards such as the Concours Mondial de Bruxelles, regarded as the world’s toughest and most acclaimed wine competition.

Despite being of the most exceptional quality, these wines are currently the lowest priced worldwide – making them excellent value for money. This gives potential investors the rare opportunity to acquire wines of superlative quality at a lower price point.

“Investing in South African wines can be profitable as well as pleasurable. A combination of profit and pleasure might be the best option where investment gains, paying for your enjoyment (consumption) at a later stage should you decide to keep your wine!” states van Deventer.

Of course, with any investment, the potential for value growth needs to be present. South African wines do not disappoint in this area either. Confidence in the investment returns offered by South African wine continues to grow. Wine Cellar SA predicts that fine South African wine can yield annual long-term returns of 10% to 20%.

Age and scarcity are also crucial considerations for rare wine investment. While very few South African wineries have back-dating vintages, many are producing wines with exceptional ageing potential, in limited quantities.

De Toren deserves mention here again. Both its internationally acclaimed Book XVII and The Black Lion have phenomenal ageing potential. If stored and cellared in optimal conditions, they hold the potential to be matured for up to 40 years. Scarcity is guaranteed with Book XVII, with a mere 1000 bottles meticulously hand-produced each year.

In addition to this, with Book XVII being a Bordeaux-style blend and The Black Lion being a Shiraz, both are placed in the red wine category. Red wines have long been hailed as the true investment choice for fine wines because of the tannins and other compounds within the wine, which give it greater propensity to improve with age.

De Toren’s Fusion V is also a noteworthy example of the investment gains offered by wine. While the 2018 vintage is currently available for R600, the 2002 vintage averages at R4 916 per bottle, demonstrating the standout growth in value presented by investing in a wine of exceptional quality and ageing potential.

Other standout examples of South African fine wines include Meerlust’s Rubicon 2017 and Thelema Rabelais 2018. Rubicon 2017 is a classic Cape wine – a Cabernet Sauvignon, Merlot, Cabernet Franc and Petit Verdot blend with an ageing potential of 15 to 30 years. Again, a Bordeaux-style blend, Rabelais 2018 lends itself perfectly to long-term cellaring of 10 to 15 years.

Each of these wines showcases South Africa’s ability to create world-class wines while making themselves easily accessible for investment. For collectors and investors, these South African wines represent an exciting new avenue. For those investing for the first time, they could mark the beginning of a lifelong passion for collecting and investing in the world’s most excellent wines.