Wine Investment in the Tabloids.

The Sun this week published an article (that can be read online here) about investing in wine, and whilst the entire wine trade should laud their efforts for bringing this excellent alternative investment vehicle to their wide readership, we felt compelled to highlight a few inaccurate bits and offer some slightly broader tips with regards to their article.

Firstly: “A £1,000 collection bought then would now be worth a whopping £2,760.

Whilst this isn’t necessarily wrong, it’s rather vague and seems to be a reiteration of the previous comment that “wine” has increased by 176%. To be blunt, which wines have gone up by precisely £1760 and how was that measured? Furthermore, how was this return realised? In life before Vinetrade, brokers would charge upwards of 10% commission to realise your return, netting you £1484 if not less.

 Secondly: “International Wine Challenge Awards, handed almost a quarter of the gongs to supermarket tipples”

Very rarely can you buy investment grade wine off a supermarket shelf, and were you to do so  (Supermarkets have been known to offer the occasional deal on mid-level Bordeaux) there are several more problems with buying investment grade wine this way.

A) It’s highly unlikely that the wine will come with its Original Wooden Case (OWC), and thus be worth less as loose bottles.

B) As you’re purchasing it in a supermarket it will already have the duty and the V.A.T. paid on it, and so it is in a far less appealing state for when it comes to resale and realisation of your returns. Duty Paid stock signifies that the wine might not have been always been stored in ideal conditions, such as a bonded warehouse.

Thirdly: “Five top tips”

Ignoring the fact that there are only two tips and that this section is more of an FAQ, advising people to invest with as little as £500 is somewhat misleading. To make any kind of serious return on such an investment you’d be looking at over 10%, ignoring the fact that if you went through traditional methods you’d lose 10% realising your investment.

What the “Top Tip” hasn’t factored in, and really should, is the cost of storage. Certainly if you kept it in your own personal cellar then there is no storage cost (however see above the problem with Duty-Paid stock). The cost of storage at a bonded warehouse is around the £15 per annum mark, so that if your wine makes a 15% gain over 5 years, increasing to £588, it will have cost you £75 to store it for that long. To seriously invest in wine, consider at least 10 times the amount suggested to make it worth your while.

Fourthly: “Budget” – Prices per bottle?!

We would sorely like to know where one can buy Lynch Bages 2008 for as little as £33 a bottle today, whilst this is a somewhat pedantic criticism of the article we felt we should highlight the error (the cheapest bottle in the U.K. today is around the £70 mark, duty and V.A.T included). The main concern is listing wines by the bottle, as the article mentions in the “top tips”, wines in their OWC are worth more, and certainly to be serious about investing in wine you should only ever buy by the case.

The basics: “speak to a wine merchant

Probably the best piece of advice in the article was advising people to speak with an expert, and so we summarise below the basic points for investing in wine:

  1. Buy the right wines, investment grade wines, from the best of Bordeaux, Burgundy, Italian, Spanish, Champagne, New World Cult producers and not from the aisle in a supermarket.
  2. Buy by the case and store in a bonded warehouse, or better yet, as suggested have someone with experience store it for you, Vinetrade offers this service.
  3. Buy to make your investment worthwhile, consider storage costs, financing costs and inflation, again at Vinetrade we’re more than happy to advise.
  4. Know your exit, how and when do you plan to sell? Often merchants will take a large commission on your investment to realise your return, at Vinetrade we only charge a small handling fee.

3 Factors That Make a Wine Investment Worthy

Over the past two years there’s been a distinct broadening in the wine investment market, both in terms of nationality of the investors and of the wines in which they invest. In this week’s post we thought we’d take a look at  the key factors that make wines “investment grade”.

Photograph of dusty old wine bottles in a wooden case

Only wines that mature and get better with age are suitable for investment.

1. Ageability – Wine with legs.

When one hears about wine investment, it’s usually spoken in the same breath as Bordeaux/First Growths/Top 50 Châteaux and other references to expensive claret. However, Bordeaux is one of the largest wine producing regions in all of western Europe and it is only a tiny proportion of its annual production that is considered worthy of investment. So how do you know which Château to buy, or even whether to buy Bordeaux or not?

For the truly uninitiated, the simple reason that makes certain wines investment worthy is their ageability. That is to say that, these are wines that can, and do improve with age, and from particularly good vintages, age and improve for many many years. This does somewhat beg the question as to “how do you know which wines age the best?” and this is where the role of the critic or expert wine advisor comes to importance.

2. Critical Score – The role of the experts.

Today, thanks to the ubiquity of the internet, there is a wealth of information available with regards to wine history, price, quality, condition, storage location, critical opinion and analytic research. Of course, discerning which websites or people are worth your time and which are mere speculation/biased opinion is much harder, below we offer several sources which we think deem close reading:

  • Robert Parker Jr’s Wine Advocate and associated internal sites are considered the top resource for Bordeaux and New World wines.
  • Likewise, Allen Meadows’ is The invaluable source of experienced and critical  Burgundy opinion.
  • James Suckling launched his own namesake site after leaving his position as Senior Editor of the Wine Spectator in 2010; both websites contain a wealth of knowledge on the finer wines of the world.
  • Jancis Robinson, through both her own website and her tireless work on The Oxford Companion of Wine, provides some of the most concise information on the world of fine wine.
  • Stephen Tanzer, another respected American critic, has his own site focusing on Burgundy, northern Italy and California.

All of the above experts and critics have their own rating system, which they judge wines with; from Jancis Robinson’s straight forward “points out of 20″, to Robert Parker’s famous “100point scale”, aped by so many other critics since inception. The key with all of the scores, and a point of contention for many in the trade, is the review that goes with the score – several journalists and critics have decried the use of a point system; but for many the numerical value is paramount. To wit, most would consider that any wine that gets 95 or more points out of 100 from Robert Parker is investment-grade.

3. Brand Appeal – the importance of a good name.

A key feature in the investment quality of a particular wine is it’s “brand appeal”, and this can be quite a hard aspect of a wine to place a discerning quantity or number on. What we mean by this is, that while a wine may come from a storied producer and receive good scores from the leading critics, the actual demand for the wine may be rather small or not command a price that it’s pedigree would suggest. For instance: Château Saint Pierre, outside the village of St Julien in Bordeaux, consistently out-performs the likes of Château Beychevelle, and yet the latter is considered far more investment worthy; simply because of demand from Asia.

Further afield in Burgundy, the importance of brand is further reinforced, simply due to the number of producers, making wine from the same named sites. To the extent that, there are hundreds of vignerons producing wines from Gevrey Chambertin, but the range of prices between the best producers and the inconsistent ones are huge. Even within one of the famed Premier Cru sites, for example Gevrey Chambertin Clos St Jacques there are five famed producers all asking different prices for the same-named wine from the same vintage. With Vinetrade’s Watchlist feature we collate the best of the critical opinions and weekly recommend wines that we think merit watching.

Summing up – How to choose investment grade wine.

Ultimately, with any investment there needs to be a reason for adding it to your portfolio. For wine to be worthy of inclusion in your portfolio it should, at the very least, have:

  • A good brand appeal, or sufficient demand to make it worthwhile.
  • A high score from respected critics; typically 95+ from the likes of Robert Parker
  • Sufficient ageability, that is with ageing potential and not at the end of its lifespan and unlikely to improve.
  • Been stored under-bond; as mentioned before in our previous post, a wine stored in a bonded warehouse is VAT exempt and kept in optimal conditions.
  • Come from a good vintage, or have sufficiently good reason for investing in.

Vinetrade only deals with wines that are stored in bonded warehouses, in impeccable condition, and with years of industry experience are more than happy to advise on which wines we consider age-worthy and merit inclusion in your collection.