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.