What you need to know about fine wine investment

When it comes to fine wine investment, there’s one golden rule – don’t drink your collection! It’s one of the few asset classes that can’t be used in some way. Even with fine art collecting, you can generally look at your purchases. But serious fine wine investors store their wine in bonded warehouses.

 

Fine wine investment and bonded warehouses

Bonded warehouses are licensed by the Government, and the wine stored in them is therefore exempt from VAT (value added tax). Wine stored in bond means the bottles are stored safely in a controlled environment, and any wines not aimed at the UK market avoid customs duty.

Wine collectors who choose to sell ‘in bond’ is usually sold in the standard 12 bottle case. However, there are exceptions to this. Collectors with wine stored in bonded warehouse accounts can also get condition reports for a fee. The fee is usually relatively small, and certainly makes sense if you have a collection worth thousands of pounds.

There are, of course, fees and insurance costs when you choose to store wine in bonded warehouses. And, should you choose to drink it after all, you can arrange for bonded delivery. This will mean that you will have to pay VAT and customs duty. The VAT will be charged at a rate based on the original price of the wine rather than its current value.

 

Follow the global marketplace listing for trading wine

Of course, the idea of fine wine investment is to ensure your assets are increasing in value. You’re not looking to enjoy drinking the wine but making as much money as possible on your chosen asset class.

The global marketplace for wine trading is called Liv-ex. Following this regularly will help you keep on top of the wines that are hot right now. According to the Liv-ex Fine Wine 1000 wine index, the top one thousand bottles have increased in value by 48.35% since 2014. While that sounds very encouraging, it’s worth noting that the index has only gone up by 0.11% during 2019.

 

Which wine regions should you invest in?

Traditionally, Burgundy and Bordeaux have been popular regions for fine wine investors and collectors. The Liv-ex Burgundy 150 index shows that Burgundy has gained by 94.9% over the five years. And in 2018, a bottle of burgundy made a record smashing £434,850 ($558,000) at Sotheby’s. The bottle of 1945 Romanee-Conti wasn’t alone, with another bottle selling at the same auction for almost as much (£386,533/ $496,000).

After such highs, perhaps it’s not surprising that the French fine wine market is showing signs of fatigue. In the 12 months up to the end of June 2019, the index dropped by 6.2%.

 

Head for Italy for Tuscan and Piedmont wines

As for wines that are worth investing in right now, Italian wine is always a good bed. There is evidence to show that wine has been made in Italy for at least six thousand years. But when it comes to the investment market, Italy is relatively new. Just like France, the Italian wine market is dominated by two regions – Piedmont and Tuscany.

Examples of wines known as ‘super Tuscans’ include Sassicaia. The most coveted wines from Piedmont are probably Barbaresco and Barolo. In terms of the Liv-ex indexes, the Italy 100 was the highest performing. It gained 3% and while it’s not the best yet, it is definitely worth considering for wine investors.

What goes into the art of fine wine collecting?

Fine wine collecting is a fascinating asset class for investors. The fine wine market offers numerous financial opportunities for the discerning wine collector. Understanding how industry trends play out is important to understand how to take advantage of it.

 

Why is fine wine collecting so popular?

Wine is a drink that has always been in fashion. Back in the time of the Ancient Greeks, it was extolled as a source of pleasure, as well as a product that boosts economic growth. Thucydides, a Greek historian, wrote in the 5th century BC about civilisation and how it only really began when people learned to “cultivate the olive and wine.”

Many centuries after he wrote about wine, the market continues to thrive all around the world. And in the luxury wine sector, there are plenty of big money deals to be done. In 2016, French wine collector Christian Vanneque laid out an astonishing £75,000 for a single bottle of wine. He bought a bottle of Ch.d’Yquem 1811, and made it the single most expensive white wine sold in history.

 

What makes a successful fine wine collector?

Technological developments and a global economy have transformed wine from simply a pleasurable drink to a source of great financial reward – if you know what you’re doing as a collector. So, how to you build a collection of fine wine?

Successful wine investors and collectors generally have two main qualities. These are an instinct for a good deal, and a passion for fine wine. It’s important to understand the wine market itself, and that fine wine is a luxurious product. It also is one of the few asset classes that improves as it ages. Because it is produced in small, limited quantities, fine wine also becomes rarer over the years.

 

Fine wine is an ever-evolving market

And to successfully invest in fine wine, it’s vital to understand how the market is changing. There have been many changes for the fine wine market during the last ten years. New routes have been opened up, making it easier for fine wine collectors to buy wine from across the world. For example, there has been a surge of US interest in wines sold by traditional London vendors, which has put pressure on an already limited supply.

Buying fine wine online has also become much more accessible and has had the added effect of making fine wine prices more transparent. Social media has also increased the sway and influence of wine critics. In many ways, the fine wine market has become more mainstream. Check out our Collector’s Guide for information on fine wines and how to begin your personal collection.

Changes we are seeing this year include a diminished appetite for Bordeaux fine wines. Around ten years ago, the Asian market upped their interest in this marketplace, which only covered a few wine estates in the region. Due to this interest from Hong Kong and China, prices shot up faster than the secondary growths. By 2013, there was a marked contraction of this market as prices fell away. However, since then it has levelled out into a more mature market.

In 2019, Burgundy is seeing huge price polarisations. For example, the very top of the scale, including Roumier, Leroy and DRC have increased hugely. They are now going for more than £10,000 per bottle. However, other wine estates that used to be considered on a par with these are reaching far lower prices. Ponsot Clos Roche is selling for £3,500 per case of 12 bottles. This is the case for even the finest vintages.

For newcomers to fine wine collecting, the marketplace can appear confusing. It is packed with many different wine merchants, producers, regions and vintages. The best advice is to only buy the finest wines from the best winemakers. Identifying the best wines for your collection is the first step. Second, ensure you buy wines that have been kept under bond. This means in Government controlled warehouses that ensure proper temperature control. This also adds a layer of security that helps to stop the possibility of buying forgeries of fine wines.