Walk into any room filled with wine collectors, proprietors and connoisseurs, and the inevitable conversation will arise: Young people aren’t drinking wine. That is, certainly, not as much as the boomer generation, which gave wine its strong foothold in the U.S. back in the 1990s.
Much of this impression has to do with the annual Silicon Valley Bank State of the Wine Industry Report, which has tracked a decline in wine consumption among millennial and Gen Z drinkers for the past decade. Understandably, anyone whose revenue depends on wine sales is concerned, especially when the media tout apocalyptic headlines about the demise of the industry.
Turns out, though, that younger people are buying wine. They just aren’t drinking it.
Investments in wine have steadily increased over the past 20 years — the Liv-Ex Fine Wine 100 Index has averaged 12% annually — and it’s driven in part more recently by millennial and Gen Z investors looking for alternative assets to add to their portfolios. Bain & Co. notes that 60% of millennials are expected to have invested in alternative assets by the end of this year, and more than 50% of ultra-high-net-worth individuals already do.
Many of those assets are collectibles, a term used for valuable items across fashion, art, sports, history, and wine and spirits. Bank of America notes that 94% of Gen Z and millennials are considering buying collectibles, and nowhere has that been more evident than during the pandemic. Everything from Air Jordan sneakers to Hermes handbags have seen a spike in the past five years — with the latter, the venerable Hermes Birkin, reportedly outperforming the S&P 500 as well as gold.
What else has continually outperformed the S&P 500? Wine and spirits.
Savvy investors take a close look at assets that consistently accrue value over time, and it would be foolish for even young investors to not consider the beverage space. Public auction data is often paired with insights from specialized databases such as Artory, The Wine Market Journal and Liv-Ex, enabling investors to make data-driven decisions based on provenance, market trends and historical performance.
Luckily, they have. As someone who leads a fund focused on wine and whiskey assets, I can attest that millennial investors take what we do seriously. The majority of our investors range in age from 30 to 50 and are increasingly viewing fine wines and rare spirits as tangible, alternative assets with long-term appreciation potential.
They have seen the numbers. Single malt scotch surpassed $2 billion in exports for the first time in 2023. The market share of anejo tequila is expected to rise from 30% in 2021 to 40% by 2026. Bottles of Domaine de la Romanée-Conti, a red wine from Burgundy, France, increased 75% from 2020 to a peak in 2022.
Speaking of auctions, more than one-third of Sotheby’s wine and spirits bidders in 2022 were under the age of 40.
Their reasons for investing in wine and spirits do differ from those of the previous generation. Whereas earlier investors may have focused on blue-chip regions and renowned producers such as Domaine de la Romanée-Conti or Château Petrus, younger investors are excited by emerging categories such as whiskey casks from craft distillers and lesser-known wine regions that are doubling their return on investment in a matter of months. The younger investors are thrilled to learn about the benefits of blockchain technology in the process to ensure authentication, provenance and ownership. They appreciate brands with transparency into their sustainability and other ESG efforts.
On an even more important note, they very much care about diversifying their portfolio. Millennials have lived through more volatile global financial times than the boomers, making younger generations more wary of throwing all their funds into traditional buckets and expecting the same sort of return. Instead, their investment thesis reserves a healthy percentage of their portfolios for more nontraditional assets.
Since fine wines and rare spirits are historically uncorrelated with traditional financial markets, they offer the sort of desired hedge against inflation and economic downturns that millennials seek. Some 36% of investors under the age of 43 want wine and spirits as part of their portfolio; that’s more than 2.5 times the number of boomers looking at the same category.
Younger investors believe, as I do, that wine increases the stability of your investment portfolio, which is a great foreshadowing for the future of wine. As Gen Z and millennials age into the core luxury consumer segment and continue to diversify their investment portfolio, the anecdotes and data suggest that wine will be a part of that.