Benefits of Wine Investments

The upside - some special benefits of wine investing











So why do people invest in wine?

There are some unique fundamentals of wine that lead to its appreciation in value and to the special, often emotional attachment that people have for this investment.

The product improves over time - With very little effort on the part of the owner, investment quality wines inexorably improve, unlike most other investments. Imagine a piece of real estate getting better without any investment in maintenance or upgrades!

The quantity declines over time - Just as inexorably, the quantity of a particular wine declines, making it dearer without any effort on the part of the owner. It's almost as if all publicly held companies regularly bought back more of their outstanding shares then they issued.

There are alternate avenues to liquidate wine. Almost every metropolitan area hosts one or more charity wine auctions. Many local philanthropies also welcome fine wine as a key part of general auctions they hold. There can be some good tax benefits, and of course the satisfaction that comes from donating. Depending on your states' laws, you may also find a local wine distributor, retailer or restaurant that is interested in purchasing your wine, especially if you can demonstrate that it has been well stored. There's even a somewhat active (if quasi-legal) wine barter market. Trade a bottle of old wine for a case of new wine? How about for a fine meal? How about trading a 1989 for a 1990?

Wine collecting brings you in touch with some interesting people. I've worked closely with folks in high tech, in stocks, in real estate and in the wine trade. There's no comparison. Wine professionals and lovers tend to be a very warm, friendly group, into the finer things in life without the pretension. And wine events, be they dinners, auctions, tastings or picnics can be some of the most memorable of one's life. When was the last time you really enjoyed a stock investment seminar?

The product brings pleasure. What other investment truly creates pleasure? A wine collection has been described as "uncashed paychecks". Wandering one's wine cellar can bring the pleasure of anticipation of great wines to come and joyous memories of great wines that were.

And if your investment doesn't go up in value, there's one more way to liquidate it and get you money's worth. Pop!

Top Ten Reasons to Invest in Fine Wine
10. You actually have a good chance of making money.
9. It's something you can hold and caress in the mean time.
8. You get pointed at when the waiter offers the wine list.
7. You have a good reason for going down to a nice, quiet, cool room with a special person (or by yourself) any time.
6. You're not drinking too much wine, you're checking your investment.
5. You always have a housewarming or birthday gift ready at the spur of the moment (watch out for this one!)
4. Wine events are the most fun you've had since your seventh birthday party.
3. The quality of the food you eat seems to be improving.
2. You seem to be celebrating more often.
1. It tastes absolutely FANTASTIC.

WINE INVESTMENTS

Understanding the principles of wine investment


£10,000 wisely invested in a wine portfolio back in 1974 would currently be worth somewhere in the region of £1.4 million (Financial Times Wine Investment Special, June 2005).



Good Wine Investments: Examples

• 1961 Chateau Latour (100 points by R. Parker) cost just £25 a case when released - today, a case could sell for between £20,000 and £35,000 depending on its provenance. That’s a 140000% increase! (Yes, it is a one hundred forty thousand percent increase)



• 15 years ago the 1990 Cheval Blanc (98 points by R. Parker) was released for under £400 a case - today the wine’s current market price is £4,450. That’s a 1112% increase.

The Wine Market: Overview

99% of the world's wine production is not investment grade wine

Poor quality, over-abundance and early-drinking are factors that make these wines non-investment grade (most of the wines you find in supermarkets and wine shops fall into this category)

Two tier market

• Oversupply of low-end wines


• Inherent shortage in the top segment because of strict zoning laws for the top vineyards
  

Wine Investment Packages focus exclusively on the top segment that is known as “fine wines”

The Fine Wine Market: Key Facts

Demand/supply imbalance supports prices

• Ever growing demand. There are an ever-increasing number of high net worth collectors who want to own these wines - mainly from America, London, Japan, Singapore and Hong Kong as well as from newer players such as China and Russia.



• Extremely limited supply. There is a very limited supply of about 20 Bordeaux chateaux producing only a combined 345,000 cases (12 bottles per case) of asset-class wine each year. The 1st growth chateaux only produce about 100,000 cases collectively. The production capacity of these chateaux is fixed due to strict zoning laws enacted in 1855 which do not allow the chateaux to increase their vineyard size for the 1st growth wines.

Fine wines improve as they age

Fine Bordeaux wine is an improving asset in that it becomes more attractive and valuable as it matures. Fine Wines from good vintages generally reach an initial maturity stage after 5 to 10 years and will remain stable or improve further for up to an additional 30 years or more before starting to decline.

Older vintages become rarer with time

As these wines age, they also begin to be consumed, which increases both the scarcity factor and demand, fueling higher and higher prices.

Investment Process

Making your investment
We provide full-service management of all Wine Investment Packages.

Investment security: Ownership, insurance & storage in Bordeaux
The title of the wines that purchases for investors are transferred to the client upon payment. These wines are also insured for replacement value with the client as the beneficiary. Insurance is provided by an international insurance company like AXA. We will provide clients with a statement of accounts for the wines purchased. As part of our services, we offer storage in our state-of-the-art warehouse in Bordeaux. * Fees applicable

It is extremely important to store your wines in professional wine storage facilities in Bordeaux and NOT any other country as the value of these investment wines will drop significantly once they are shipped out of Bordeaux.

Wines stored with merchants or in professional storage in London are usually worth 20-30% less than wines that have never left Bordeaux.

Many of the top auctions houses are very reluctant to accept wines that have been stored in Asia.

Although it is true that there are some very good wine storage facilities in Asia, the perception of the merchants/buyers in the US and Europe is that the quality of the wine cannot be guaranteed once it has been shipped to Asia. Therefore they will avoid wines from Asia if possible. This translates to lower prices and less desirability for wines that have been shipped to Asia.

STORE YOUR INVESTMENT WINES IN BORDEAUX!

Bordeaux vs. London Market

Storage and travel history (provenance) greatly affects wine prices. Wines that have been stored at the chateaux or in professional storage in Bordeaux since the time they were released command the highest prices. Wine that has been shipped out of Bordeaux (e.g. wine sold in the London, US or Asia markets) is worth significantly less. In general, the older the wine, the more of a premium Bordeaux-stored wine will fetch. Bordeaux-stored wine is therefore considered more of an “investment grade” wine than say London-stored wine. Investment wines that are direct from the chateaux/Bordeaux normally achieves a premium of 30% or more (sometimes even more than 100% more).


Here are some examples:


“…(1961 Latour) from Latour’s own cellars at a premium of US$56,400…”
(Financial Times, Sept 2004 hammered at Christie’s auction house)





Compared to a case (1961 Latour) that was stored in London which only fetched US$20,570
(Decanter, June 2005)


Exiting investment


Multiple exit options are available. We will assist clients to sell their wine investments at the current market price. Alternatively clients are also able to use Christie’s, Sotheby’s or any other reputable auction house to sell their investment wines.

Client can exit their investments at anytime as there is NO early exit fees.


Fine Wine has consistently outperformed all other forms of recognised investment. It has remained the steadiest form of investment, generally unaffected by recession, interest rate changes and stock market fluctuations. Fine Wine offers many advantages over other investments - such as unit trusts, life assurance, investment bonds and equities - as it benefits from being stable, tax free, easily reaslisable, consumable, low risk and portable. Above all else, due to decreasing availability, there is increasing rarity.