A single bottle of rare 1874 Perrier-Jouët Champagne was expected to fetch £15,000 but sold for £42,875, but Lot 544, 11 bottles of Domaine de la Romanée-Conti, Romanée-Conti 1971, with an upper estimate of £180,000 sold for £269,500.
Those where just two of the sale prices achieved at Christie’s Finest and Rarest Wines and Spirits auction in London earlier this month, where £7.6million of sales were made.
The pandemic, and the lockdowns that followed it for almost two years have increased investor demand for high-quality wines.
It’s easy to think wine investment is beyond the reach of ordinary people when prices are so high.
Cult Wines has launched a new wine investment platform where you can invest in wine from £10k but you can invest for far less through wine merchant cellar plans
Wine merchants and online marketplaces make it possible to purchase wine starting from just a few hundreds pounds.
This alternative investment isn’t for the weak-hearted. It doesn’t provide any protection under Financial Services Compensation or Financial Conduct Authority regulations.
It is possible to scam or cropper in the wine business, just like with classic cars and art.
Investors need to ensure they deal only with trustworthy businesses. They also need to keep an eye on their finances and realize that investment can be difficult and fall.
Which amount should you invest?
It all depends on the person you speak to.
Jack Chapman, head of private clients at Lea & Sandeman in London, says it’s possible to invest in wine with a small lump sum but points out that storage costs need to be offset against the investment.
Cult Wines boss Tom Gearing says it is important to make long-term investments in wine.
According to him, there is no minimum. It all depends on whom you are talking to. Some wine asset management firms may ask for a minimum threshold.
“You’d be spending money on storage.” My advice to you is to purchase larger cases in order to reduce storage costs.
Merchants like Berry Bros & Rudd and Corney & Barrow offer cellar plans which enable people to start to invest in wine collection with the help of a dedicated private account manager.
The wines can be kept for future consumption, or invested as an investment.
Both allow investors to choose the amount they’d like to pay in every month, but recommend at least £250 – an amount that may put investing beyond the realms of many, as wine should only be a small part of a broader investment and savings portfolio.
Cult Wines is an international platform for fine wines. It has recently launched a new platform to invest in wine.
It offers four different account types – Cru Classe, Premier Cru, Grand Cru and Cult Cru but the minimum investment point is £10,000.
Cult Wines co-founder and chief executive Tom Gearing. Former Apprentice contestant, Gearing argued that small amounts of wine investment is similar to owning one Apple share.
He explains: ‘You realistically you can’t get a portfolio of wines with risk adjusted returns unless you are investing at the £10,000 mark.
You need to have more access and a wider range of wines in order to succeed. It is similar to putting just one chips down at a roulette table.
Lot 544, which contains 11 bottles of Domaine de la Romanée-Conti, Romanée-Conti 1971, sold for £269,500 at the Christie’s sale
How to invest in wine
It’s possible to invest in wine even though you are on a strict budget.
1. You should invest in wines that are less well-known
Bordeaux and Burgundy wines have always been the best in investing in wine, but this market has evolved significantly over the past few decades.
It is possible to invest in wines from Australia, Italy, Australia, and Germany’s Rhone valley. However, they don’t have as much blue-chip status as top French wines.
Chapman suggests that investing in areas less well-known is possible but more risky. Bodega Chacra, an Argentinian wine which has performed well, is one example.
‘Their 2018 ’55’ Pinot Noir was released at £150 per case of six in bond and now trades for £300 per case of six in bond.
“It is a project of two great figures in wine trade, Piero Incisa Della Rochetta (Piero Incisa Della Rochetta) and it’s produced some amazing wine in very little time.
Ask for advice before you invest in unknown wines.
It is not hard to see why wine from particular regions has been a top investment.
Some wines come from abroad, but if you are looking for stability and a way to make the wine sell easily, stick with well-known brands.
2. Invest in the long-term
Jack Chapman, head of private client sales at Lea & Sandeman, says it’s possible to invest in lesser known wines, but there’s a risk
Investors in fine wines panic too often that they are losing money quickly.
It can be risky to invest in wine in the beginning especially if your wines are at their peak.
The supply and the demand for wine determines how much it costs.
The best investment time is when there’s less supply and more demand.
Gearing states that wine investing is like all other investments.
“We recommend to clients that they set at least a three-to five year horizon for their portfolios, in order to get the most out of market cycles. With an optimal term of 5-10 years, it is a good idea.
“Our research has shown that investing long-term can improve your returns and decrease volatility.
3. Take advice
When it comes to wine, a tip from a neighbor or family member is not the best investment advice.
Important to remember that the Financial Conduct Authority does not regulate alternative investments like wine or diamonds.
You can’t get compensation for damages if your money goes missing.
Do not accept calls offering to invest in wine.
Chapman states that wine investing can be a tricky business and you should seek advice. You could end up with a bottle of wine sitting around for 10-30 year without making any money, whereas it could have made you money somewhere else.
You can make great returns on wine investments. Dom Perignon 2000 saw a 42.86% increase in its value.
4. Beware of sharks
Some players will resort to malpractice in order to get people overpaying.
They tell you stories about unrealistically high returns or flog lower-grade wines for more money. Or they just take your money.
Stick to regular bottle sizes unless you are selling something very rare.
You can consult the list of The Bunch to identify a reliable merchant. See bunchwines.co.uk.
The website lists only the most respected independent wine merchants that follow their Code of Practice.
Members of The Bunch include Yapp Brothers, Corney & Barrow, Adnams, and Lea & Sandeman to name but a few.
5. Compare prices
Wine investment comes at a high cost. It is important to store wine properly. If they aren’t kept in a proper manner, their flavor and market value can decrease.
Make sure to ask whether storage includes insurance. Also, inquire about other costs like management fees or commissions on sales. Chapman says: ‘There are fairly high transactional costs to consider which can around £12 per 12 bottle case per case year.
It can also be very expensive to sell wine online. Chapman says that most merchants take a 7-10% commission on the sale of wine. This is one of the greatest obstacles to investing in and trading fine wines.
Some investments in wine are not immediately profitable. This year the Penfolds Grange 2010 has depreciated by -0.23%
Which returns are possible?
According to certain reports, long term investments in wine yielded good returns with returns between 10-15% annually.
It’s often luck and timing that make the difference. The price of the best Italian wines have gone up by 20 per cent over the past 12 months, according to fine wine trading platform LiveTrade, beating the returns of some French wines.
Some wines do exceptionally well while others struggle.
Cult Wines claims Dom Perignon 2000 is now worth 42.86%. However, Penfolds Grange 2010, which was also purchased by Cult Wines in 2010 reported a loss of -0.23%.
To get great returns, you don’t have to look for exotic wines. Will Hargrove, associate director and head of fine wine at Corney & Barrow advises: ‘Don’t obsess with finding the next big thing.
A good selection of wine from diverse regions is a must. If you don’t find something rare, stick with the normal bottles. Bigger bottles will be more difficult to sell. Be simple.
There are tax advantages to investing in wine. If you keep your wine cases ‘in bond’ in a temperature-controlled warehouse you won’t have to pay duty or VAT. Capital gains taxes are not payable on profits, since it is considered a wasted asset.
Are you going to make a profit?
While there are numerous pros and cons to wine investing, profit isn’t guaranteed.
External factors are important in the wine industry. Prices can fluctuate depending on whether they’re affected by famed tastes or harvests.
Although it may appear to be an attractive alternative for those who want to make a long-term investment that’s not directly correlated with the stock markets, this is not something you should do. You can find it very difficult to cash out.
Chapman states that it all depends on the product you are selling. However, it is easier to sell Bordeaux wines than a Californian wine. Californian wine can be quite sticky. Sometimes it’s impossible to sell wine at once.
While it’s possible to lose money, there is little chance – unless of course the wine isn’t stored properly, or you get scammed – of the overall investment becoming completely worthless.
Gearing states that wine has an intrinsic value. It’s not that the top wines of Champagne or Bordeaux are worthless on the market.
“There is a chance the producer may have priced it too high. It will not be worth nothing. Although I cannot guarantee they won’t fall, there are plenty of examples. However, I can assure you that they’ll never become worthless.