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Understanding wine grape farmland investing

Jonathan Griffiths
Associate Investment Manager
Matt Parker
Executive Vice President, CEO Silverado
Grape bunch

Introduction

This research outlines the nuances of investing in wine grape properties. It identifies why the U.S. could be the most attractive destination for institutional capital and highlights the most appealing regions within the U.S. to invest. Further insights are provided into total returns, risk, correlations, and portfolio considerations of wine grape investments.

Wine grape industry background

Wine demand

Growth in incomes worldwide has led to an increase in demand for wine. This can clearly be seen in developed markets – U.S. wine consumption per capita has grown by 10% per year over the last forty years. This demand growth is even more pronounced in developing markets such as China, which has experienced 14% annual per capita wine consumption growth over the same period. A strong correlation exists between Chinese GDP per capita and Chinese purchases of U.S. and Australian wine, both considered premium products in China. Wine has become an affordable luxury item and caters to a range of consumer price points.

Wine production

Not surprisingly, wine production is dominated by European countries such as Italy, France and Spain, as highlighted in Exhibit 1. These countries are considered “old world” wine regions as wine production dates back to thousands of years B.C. as it played an important role in religion. Most wine varietals used across the world today have their origins in Europe. However, over the last forty to fifty years, there has been significant growth in wine production outside of Europe in what are known as “new world” wine growing regions such as the U.S., Argentina, Chile, Australia and South Africa.

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Head of Americas Institutional Advisory Services

The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on factors such as market conditions or legal and regulatory developments. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions made in preparing this material could have a material impact on the information presented herein. Past performance is no guarantee of future results. Investing involves risk; principal loss is possible. This information does not constitute investment research as defined under MiFID. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

A word on risk

As an asset class, agricultural investments are less developed, more illiquid, and less transparent compared to traditional asset classes. Agricultural investments will be subject to risks generally associated with the ownership of real estate-related assets, including changes in economic conditions, environmental risks, the cost of and ability to obtain insurance, and risks related to leasing of properties. Nuveen provides investment advisory solutions through its investment specialists.

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