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Investing in wine seems like the domain of but a few investors – it seems a tad self-indulgent to spend thousands of Rands on a case of wine you have no intention of ever drinking. But it would be unwise to dismiss wine investment as the preserve of the upper crust only, because you don't have to be wealthy to buy wine.
Around R45 000 will get you three or four cases (36 bottles in all) of a top quality wine. A suggested portfolio from Magnum Fine Wines is made up of one case each of Château Latour 1998, Château Margaux 1998 and Château Leoville Las Cases 1998, at a total of just less than R40 000. It may not be chump change, but it means that wine investment is within reach of many ordinary investors. The usual investment unit is one case of 12 bottles. Of course, if you are a serious investor you may contemplate spending much more than the proposed R45 000-odd.
There are numerous brokers and merchants who will be able to offer you invaluable advice when first starting out. They will help you select wine, source it for you, and ultimately help you sell it many years on. It is advisable to ask them to come up with a model portfolio, and then shop around – sometimes you may find the prices offered by them can be bettered elsewhere.
Another route to follow is to purchase wine from a proven vintage, with 1986 picked out as a highly successful year, for example. As a rule of thumb, it is much better to buy wine from a good vintage, rather than a good name but a poor year, for fear of being disappointed by a producer.
Just as the first stock market investments you make are probable to be FTSE 100 companies, your first wine investments really should be in Bordeaux – the finest red wines known for bottling the most outstanding of vintages. The supply of such wine is limited, and it is thus in high demand the world over, making it a very clever investment indeed.
Once you have purchased your wine, attention should be paid to the storage thereof. To ensure its saleability later on, you need to keep it “under bond” in a specialist warehouse. Storing wine this way is beneficial as no duty or VAT is payable – it is only due if an investor wants to take delivery of the wine. If it is held in a cellar and then sold on, the investor has no duties or VAT to pay. The merchant or broker will, however, require a commission, usually of around 10%.
You also need to be prepared to wait at least five years, though more likely 10 years, before you can recoup on your initial investment.
Some investors swear by buying en primeur, which is when the wine is still in the cask. It has only just been put onto the market and thus in theory offers maximum potential for return. A good site to visit for this is ww.winetip.com, which offers much useful information to prospective investors and allows them to access the en primeur market. Users purchase these wines at competitive prices – new release – just as the grapes are harvested and well before they reach the market. Later on, once the wine is bottled, investors can then sell them for a greater market value.
Another way of breaking into the investment market is by using the Uvine exchange – the wine equivalent of the stock market, or the Liv-Ex index – the wine equivalent of the FTSE 100.
It seems that in the last couple of years, the wine investment market has really taken off, in some cases, far outdoing other markets. Since the end of 2004, the FTSE 100 index has risen 33.5%, gold 56% and crude oil 43%. Fine wine is up 84.5%, according to Liv-Ex.com. The success of wine investment is due to two reasons – the rise of investment wine clubs, and the influx of new investors, particularly those from China and Russia.
Experts within the wine industry reckon the best investors can see returns of as much as 30% each year from certain bottles, though the average is between 10 and 15%. Of course, as with shares, wines can fall in value too, but at least you can drink the negative equity!
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