Great wine is on the radar of the international elite in a way that it has not been before. Combine this with activity from several bespoke wine funds and significant interest from Russia, China and now India, and great wine presents some very interesting investment opportunities.
The principle is simple: demand for the truly great wines, which are made in extremely small quantity, vastly (and increasingly) exceeds supply, so prices rise. As the wines mature and are consumed, they become rarer and correspondingly more expensive.
As demand for fine wines worldwide has increased the appreciation of great wines has been seized on by consumers as an alternative to traditional investments like the stock market, property and bonds.
A huge amount has been written recently on the investment potential of wine. Long-haul investment tends to centre on Bordeaux, Burgundy and some highly coveted cult new world wine and it is fair to say that money can be made if you pick well, generally buy en primeur and have enough to spend in the first place (for investment purposes you're better off spending $3,000 on a case of a big name than buying five $600 cases).
However, as with any investment and the more so with wine which is not covered by any regulatory body, there is absolutely no guarantee that you will realise a profit. The only result that can be guaranteed with any confidence is a cellar full of wonderful wines.
Why Does Fine Wine go up in Value?
Fine wine matures once bottled, and improves with age. A limited amount is produced at each property every year so, when bottles are drunk, the wine becomes rarer and therefore the price increases. While supply dwindles, demand for mature wines can make early purchases a very good wine investment.
We recommend seeking advice when investing in wine. Not all wines are suitable for investment and so it is possible for potential investors to put funds into the wrong type of wines.
What are the Advantages of Investing in Fine Wine?
Finite Product: A chateau, domaine or estate produces a finite quantity each vintage which then diminshes over time as the wine is consumed. This in turn leads to limitations on availablity and prices can subsequently rise.
Tangible Asset: Wine is a physical product rather than just a certificate. If the worst happens the wine can always be drunk.
Potential Returns: If the correct wines are bought at the right time and at a good price then decent returns can be made. As a rule we estimate 8-12% compound interest per annum on your investment. Of course some wines do not perform as well and some far outperform these figures. Hence we advise seeking advice before investing in wine.
Wine is an International Commodity: There is a limited supply of the finest wines. The annual production of the top 16 Bordeaux wines is less than 250,000 cases. In addition to the traditional markets in Europe and the USA; Japan, Hong Kong and Malaysia have become important and China, Russia and now India are emergent markets. Inevitably, the consumption of great wine follows economic power.
What are the Risks Involved in Investing in Wine?
Wine investment is speculative and, like stocks and shares, prices can go down as well as up
The fine wine market is unregulated and is therefore open to abuse. It is very important to deal only with reputable merchants - there is no redress if you lose your money.
Investment Term - To maximise returns a realistic investment term is between 10-15 years, but at the very least 5 years.
Wine Types - Only certain wines will accrue value and only certain wines will stand the test of time. Seek advice before investing.
Lessons from the Past...
Very few vintages have appreciated significantly within the first five years following release 'en primeur', whereas most vintages have shown uplift after ten years.
Classed Growth wines that are both produced in large volumes and are recognised as high quality tend to have provided the most stable appreciation patterns.
Scarcity attracts a premium at the outset, but such wines can fluctuate at the mercy of narrow markets.
The 'penny share' phenomenon can apply to wines, but only very occasionally. Few inexpensive wines have demonstrated long-term appreciation, especially when the costs of holding the wine are taken into account.
...and Some General Pointers:
Wherever possible store your wines in bond rather than paying duty and VAT up-front. You may not recover these costs upon resale.
Your wines should be stored at all times in a recognised wine storage environment, and you should keep all necessary documentation in case it is necessary to authenticate provenance.
Make sure your wines are insured at current value.
Buy - and store - in sealed, original cases. These contribute to demonstrating provenance and care.
Costs of storage are pro-rata to the number of cases and costs of resale are pro-rata to value.
There is no particular benefit in buying several cases of one wine.
A run of consecutive vintages of highly rated wine can attract a premium.
As a general rule of thumb, larger bottle formats age slower than their smaller cousins.
Consider adding a few large format wines en primeur as these big bottles are relatively rare and often command a significant early re-sale premium over standard bottle sizes.
Whilst buying en-primeur is an excellent method of ensuring a sound portfolio of wines, do not over-look the potential value of older wines from great vintages.
Which Wines to Invest in?
Great Bordeaux wines have consistently provided satisfactory returns on investment - they are the most famous in the world and production is finite, defined by specific geographical areas. Over a period of time, demand exceeds supply and prices rise. It is important to remember that great Bordeaux wines have a long life; in good vintages a minimum lifespan of 20 years is to be expected from the top wines. The best vintages have always outperformed the rest. In the last 20 years these are 1982, 1986, 1989, 1990, 1996, 1998, 2000 and 2005. Initial investment should be concentrated on these vintages, but seeking value in less well regarded vintages is a sensible approach for more established portfolios. Other wines, including great Burgundy, can offer price appreciation, but selection is even more critical and the right advice key.
Selling Wine
If you have wine that you wish to sell then please Contact Us. We will either buy wines outright or broke them on your behalf, subject to market availability and demand.
