BUYERS STALK SA VINEYARDS
Local industry has more to cheer about, with wine regaining global favour as the tipple of choice
Amarked uptick in global wine and champagne sales last year has injected some muchneeded fizz into the vineyard investment market. That follows a dismal 2020, when pandemic-related restrictions on social gatherings and tourism put a cork in exports for most of the world’s wine-producing regions.
While wine has seemingly regained its status as the tipple of choice for many consumers across the world, the industry’s recovery has also been buoyed by renewed interest among collectors. In fact, fine wine emerged as the top-performing asset — alongside watches — in last year’s Knight Frank luxury investment index, on the back of record-breaking sales volumes at major global auction houses.
The index, included in UK-based Knight Frank’s recently published “The Wealth Report 2022”, tracks the investment value of 10 luxury collectables, or “passion assets”.
These include art, cars, coins, rare whisky, jewellery, coloured diamonds, handbags and furniture. Performance is measured by the prices achieved at auction and private sales, and on other trading platforms across the globe.
The value of fine wine and watches both increased by an impressive 16% in 2021. That was followed by the art market, with returns of 13%, apparently aided by demand for digital artworks. Business has boomed in the nonfungible token (NFT) market, which has introduced younger investors to art collecting. Rare whisky and coins both achieved average price growth of 9% last year.
Over a 10-year period, fine wine was the third-best-performing passion asset, with average price growth of 137%, pipped by rare whisky at a colossal 428% and cars at 164%
(see table).
According to “The Wealth Report”, renewed demand for investment-grade wine was fuelled by investors looking to secure good vintages as supply chain issues affected availability and prices.
Commenting on industry trends in the report, Miles Davis of online wine collection management platform Wine Owners, says: “There has been a new wave of investment money coming into the wine market, some of it led by macro factors, such as inflation worries — with wine being seen as a hedge — but also more localised factors, such as supply shortages due to weather conditions, particularly frost, and supply chain issues.”
He notes that demand has also been lifted by consumers drinking more expensive wines at home due to Covid restrictions.
Sales of wines from Champagne and Burgundy were particularly strong last year, with prices surging 31% and 25% respectively. Davis expects inflation and supply-chain concerns will continue to fuel demand.
He adds that Australia’s Penfolds is
the first wine producer to make an NFT announcement to meet the demands of a new generation of tech-savvy investors. “No doubt more will come,” he says.
David Bourla, Knight Frank’s chief economist and head of research in France, believes the healthy increase in wine exports in 2021 will spark renewed interest in vineyard investments, with more private capital likely to flow to prime wine-growing regions across the globe this year.
Buyer interest in SA’s world-renowned wine farms seems to be on the rise already. In late August, Morgenhof Wine Estate in Stellenbosch was sold to a European buyer for R52m at a virtual auction hosted by High Street Auctions, in partnership with Lew Geffen Sotheby’s International Realty.
The 210ha farm, founded 330 years ago, is believed to be the oldest property yet to go under the hammer in SA.
The exact prices paid for SA’s top-end wine farms are typically shrouded in secrecy. But the Morgenhof sale is believed to be the highest price fetched for a big-ticket winery since a Slovak family reportedly forked out about R94m to buy the Knorhoek Wine Estate, on the slopes of the Simonsberg mountain near Stellenbosch in 2019.
Chris Cilliers, CEO of Lew Geffen Sotheby’s International Realty in the Cape winelands, confirms that large commercial farms are changing hands again, with interest coming from a mix of local and international investors.
“Buyers are looking for value for money, a solid brand with an established commercial operation and other going concerns that offer multiple income streams,” she says. “International buyers usually look for properties with a strong management team that will ensure an unhindered continuation of business.”
Cilliers also reports a noticeable uptick in demand for lifestyle vineyards, with the group clinching several sales of smaller farms over the past 12 months. The Devon and Ida’s Valley regions are particularly popular in this regard.
It seems buyer demand has been supported by a rebound in wine production and consumption, which were heavily affected in 2019/2020, not only by the pandemic but also by the Western Cape’s crippling drought.
In addition, Cilliers says lifestyle farms have regained favour on the back of the pandemic-induced “race for space”.
Pierre Germishuys, licensee for Seeff winelands, reports particularly high demand for boutique wine farms in the
R30m bracket. The “golden triangle” of Stellenbosch, Franschhoek and Paarl remains the most sought-after destination among vineyard buyers. However, he notes that areas further afield — towards Wellington, Tulbagh and Riebeek Valley — are also attracting renewed interest.
Germishuys says boutique farms in the Cape winelands typically sell for R20m-R40m, depending on location and how well-developed they are, while commercial wine farms usually fetch between R50m and R75m. Top-end wine farms with strong brands attract a premium, and can sell for anything from R100m to R250m.
Clarence Collins, Pam Golding Properties’ agricultural agent in Stellenbosch, confirms that wine-farm prices can range extensively, depending on a host of factors. These include land size, quality of terroir (soil, topography and climate), age of vines, type of grape cultivar, quality of building infrastructure, production yield, water sources and whether it’s a lifestyle or commercial farm.
Latest data from industry body SA Wine Industry Information & Systems shows an encouraging increase in local wine consumption as well as exports last year, as alcohol bans and other Covid restrictions were eased.
SA wine sales, as well as export volumes, were both up about 24% last year. Domestic consumption reached 388Ml in 2021, which is not quite back to the peak of 421Ml recorded in 2018, but is virtually on par with 2019’s 390Ml.
Wine exports rebounded to 394.4Ml last year, after a dip of nearly 25% between 2018 and 2020 (see graph).
SA ranks as the world’s seventh-largest wine-producing country by volume, just behind Australia, according to the latest (2020) data from the Paris-based International Organisation of Vine & Wine (OIV). Italy, France and Spain occupy the top three spots (see graph).
In terms of cross-border sales, SA is the world’s eighth-largest wine exporter, coming in slightly behind the US but ahead of Germany, Portugal and New Zealand.
SA has about 122,000ha under vine, spread across more than 500 wine farms and vineyards, according to OIV.