“AMONG LIQUID ASSETS WINE IS THE BEST EARNING”, ACCORDING TO EDOARDO NARDUZZI WHO IS SPECIALIZED IN WINE ECONOMICS AT THE UNIVERSITY OF BORDEAUX

With a specialization degree in Wine Economics from the University of Bordeaux, professional journalist and commercialist, Edoardo Narduzzi has also earned a Master’s in Applied Environmental Economics at the Imperial College of London, a Master’s of Science (MSC) in Public Management and the Economics of Regulation from the J.F. Kennedy School of Government at Harvard (Fulbright Fellow), a Master’s of Science in Finance from the London Business School, and an MBA from the Warwick Business School.
He has published various books and articles in specialized magazines. He is visiting professor of Systems and Technologies of Communication at the University of Rome, President of Feudi San Gregorio, President of Techedge Spa, Italian leader for Sap NewWeaver technology, and General Manager of EvaBeta Spa.
He is also one of the managers of the Telecom group, head of the professional web services area, and has coordinated the industrial reorganization of the entire IT department. His resume is also full of administrative council member roles for various companies (Datamat, Mediocredito Centrale, Banksiel, Webegg, Netesi, Netikos Finland, and member of the ICE consulting committee).

Below, is the transcription of a discussion made recently by Narduzzi, who is currently the president of Synchronya and team leader on the advisory panel for the food and agriculture and wine sectors as well as for the environmental investments for Synchronya.

Panta rei, everything flows, noted the philosopher Heraclites. And everything fluctuates on the markets, above all during times of economic crisis. Today, to bolster portfolio earnings it is necessary to follow original strategies of diversification and hedging, aiming towards anti-cyclical assets or those not perfectly correlated with stock indexes. One of these “defensive” assets, though it may seem strange to most, is represented by wine.

A winemaking company is a very particular investment, the synthesis of three different assets. There is an incarnate property component from the land especially in those zones that are certified, a specific up-start made up of the product sales and from the commercialized vineyards and, finally, an immaterial aspect connected to the value and the notoriety of the brand of the winemaking company, in many cases an immaterial good consolidated at an international level in dozens of commercial activities.

In fact, an investment in a winemaking enterprise is already a diversified investment in the sense that it synthesizes trends from the largest to smallest appreciation between each other and that are not necessarily correlated: if the cycle of property values is positive while the consumer demand is stagnant the economic value of a winery will unite these two trends diluting, for example, the more purely agricultural aspects of the business. Obviously, a joint depreciation could be verified among the three components of the business even if rapidly diversified. As well, statistics on consumer compartments, above all Anglo-Saxon ones, indicate that economic crisis and recession are favourable to wine because, not only is the average consumption of the drink steady, but there is even a slight increase.
During times of crisis alcohol consoles and attenuates the bitterness of the situation. The problem with wine is that at a global level there are few connected financial tools on which to invest. The winemaking enterprises on the stock exchange are very few and usually of very large industrial dimensions. Thus signifying that, for example, it is not possible to invest through stocks in the more profitable segment of the industry represented by the icon wines. Though rare, however, some wine stocks are acquirable and detainable in portfolios.
But is wine an alternative investment that is useful during slow down phases to impose earning strategies of diversification? The data elaborated by Rabobank, the most important bank of the sector worldwide with over 1 billion euros invested in the business and the only one that still has a triple-A rating after the Wall Street crash, is very interesting.

Over the past year, the MSCI World Index that represents the progress of the world market has gone from a value of 100 on October 1, 2007 to a level of 62.4 on October 31, 2008. In one year the global market has lost almost 40% of its value. During the same temporal period wine stocks have done much better: the Spanish Cvne earned 94.7%, Baron de Ley 93.5%, Bodegas Riojanas 83.8%, Chilean Concha y Toro 80.9%, and American Constellation 49.9%.

Therefore, apart from one case, very influenced by the awarded acquisitions made in recent years by Constellation, the investment in wine has been well protected against stock market corrections. In two cases it permitted almost perfect strategies of conservation of the initial index value and therefore almost complete sterilization from stock corrections.
If the view is widened to quoted shares that, as well as investments in wine also express added activities in the alcohol sector, like Campari and Pernod Ricard, we discover an analogous, though attenuated, defensive capacity.

Campari, in fact, earned 10% more in respect to the MSCI World Index and Pernod Ricard over 3%. Unfortunately, there are no shares for Italian enterprises of the sector to use in order to understand whether the positive diversification effect of the wine investments is the same for our market as well, but some general considerations can still be made. Investing in wine stocks in times of crisis best protects the investor from falls in prices offering stocks that have an anti-cyclical nature reinforced by property investments and by the peculiar course of the demand for alcohol during times of economic crisis.

If the crisis isdestined to last long and Wall Street may possibly be pushed, as some have predicted to a quota of 5,000 by the recession, then a thought should be given to wine stocks that may become fundamental for those who don’t want to be completely liquidated.