An introduction to fine wine as an investment
Fine wine has been consumed, loved and enjoyed by people worldwide for thousands of years. Bordeaux is at the centre of producing the finest wines in the world, having done so for in excess of 2,000 years. It was around 150 years ago that wine began to be viable as an investment, when Napoleon III asked a number of brokers in the wine industry to come up with a classification system to rank wines – so that France could select only the very best wines to show at the International Exposition, in 1855.
Over the last 150 years Fine Wine has matured as an investment, with one of the huge steps being the introduction of Robert Parker’s rating system in the 1970′s. Prior to 1970, most wine critics were in some way affiliated with the production or sale of wine, meaning that reviews and scores tended to be biased, and made it very difficult for people to determine whether a wine was truly of quality, or a sound investment likely to appreciate in price. Robert Parker devised a 50-100 point scale, and took a very critical, unbiased approach to grading wines. He always prefers to underestimate a wine’s quality than to over-estimate, resulting in a strong correlation between a wine’s Parker Score and value. His rating system is now widely accepted as a quality rating worldwide.
The parker scale goes from 50 up to 100 points, with 50 being the worst ranked wines, and 100 the best. When looking to invest in wine you should choose a wine with a score between 90 and 100 points, to generate the best returns. Historically, any wine graded between 90 and 100 points is almost sure to be a solid investment, that generates a positive return. Other things you should bear in mind when investing wine are to always choose a Bordeaux wine, as wines outside of the region typically do not perform nearly as well, and to consider the harvest for the particular vintage too. Not every vintage makes money, so the quality of the harvest should always be taken into consideration. A reputable wine merchant will consider these aspects for you, to determine the best wines for you to invest in.
How has fine wine performed historically?
There is very little correlation between financial markets and fine wine prices. For example, whilst many stocks, shares and markets crashed during the financial crisis of 2008, most wines continued to significantly appreciate in value. Whilst wine prices are not always free of volatility, the market tends to be far more resilient than many traditional investments that investors go for. The reasoning behind this is actually very simple. Fine wine is a completely tangible asset, a luxury product in which supply is always exceeded by demand. As a particular vintage wine is consumed, more of that wine cannot be produced, so the wine appreciates in value.
Fine wines frequently outperform share indices, for example between May 2010 and May 2011, whilst the FTSE 100 appreciated by 15.6%, the fine wine index increased by a considerably higher 21.1%. The Live-Ex 100 Fine Wine Index is the industry’s main performance benchmark, and represents the price movement of the 100 most sought-after fine wines. The price index is calculated on a monthly basis, with the vast majority being Bordeaux wines. Over the last 25 years the very best wines have appreciated by 15-25% per annum, a staggering return on investment very difficult to find anywhere else without very high risks. It is important that when you choose to invest in wine you choose a reputable merchant, who can recommend good wines highly likely to appreciate in value. If you are interested in investing in wine, you can contact us and we will put you in touch with a qualified, reputable merchant to assist you in your decision making.
Apparently there are tax benefits when investing in wine?
Due to wine being classed as a “wasting chattel”, it is treated from a tax point of view very similarly to food and other products which degrade over time. There are a number of tax benefits, however we cannot provide much advice on this ourselves, as the tax world is always changing. If you need advice on tax, you should always speak to a tax specialist, before taking a wine broker’s word.
What is “En-Primeur” Wine?
All that buying wine en-primeur means is that you are buying the wine before it has been bottled and released to the market for consumption. Buying wine en-primeur typically provides the best return on investment. Buying wine en-primeur can be considered much like futures on the stock market. Effectively, you agree to a price with the intention of purchasing the wine at a set date in the future. En-primeur wine can sometimes be referred to as buying wine futures, because of this similarity.
Typically most wines are available for bottling and consumption 3 years after their original harvest. So if you were to buy wine en primeur in 2010, for example, in the summer of 2011, you’d have to wait another 2 years for your wine to be available in their bottled form. These wine futures can still be traded in the mean time, and prices typically fluctuate before the wine is bottled, due to variations in supply and demand in the en-primeur market. If you work with the correct merchant, they can recommend you the very best en-primeur wine futures, which give the highest expected annual returns.
What is driving up wine prices?
Demand for fine wine is now very much global, where as prior to the earliy 1990′s, fine wine demand was typically only really coming from western europe and the United States. Recently as developing countries are becoming wealthier, and their markets begin to mature, other countries are importing vast quantities of wine as both an investment vehicle, and for consumption. One of the leaders in this movement is China.
Prices on some of the top vintages are increasing by around 40% year-on-year due to massive demand coming out of Asia. These gains are set to continue over the coming years, as no slow-down in demand is currently anticipated.
How do I find a legitimate wine merchant?
Unfortunately, there have been a few con artists involved in the industry who have made poor recommendations to people, not gone through with their wine orders and otherwise cost investors substantial sums of money. This is much the same as in every investment market – where there are big returns and money to be made, unfortunately there are always people looking to make a quick buck and take your hard earned cash.
This small minority of merchants however does not reflect the market as a whole, and most investors report having very good experiences with their investments. We only recommend the best wines and wine merchants to visitors. We thoroughly vet any company in which we recommend to our visitors, ensure that they have a fault-free trading record and check to ensure that they own contracts for the wine that they say they do, before passing on our recommendations to you. You can be confident that the information provided on our website is reliable, and that we would never attempt to put you in touch with an illegitimate wine merchant.
Interested in learning more about investing in fine wine?
We have a vast array of knowledge spread throughout this website, which we are always adding to as new fine wines become available, news is released and investment strategies continually improve. If you wish to learn more about how you can actually buy wine as an investment and begin to profit yourself, subscribe to our mailing list by filling in the form seen at the top right of this page. We occasionally send emails updating you on the wine investment market, and can also help you to find a reputable fine wine merchant to deal with. You can unsubscribe with one click, at any time. We will never share your personal information with a third party, without your prior permission.