A single bottle of rare 1874 Perrier-Jouët Champagne was expected to fetch £15,000 but sold for £42,875, but Lot 544, 11 bottles of Domaine de la Romanée-Conti, Romanée-Conti 1971, with an upper estimate of £180,000 sold for £269,500.
Those where just two of the sale prices achieved at Christie’s Finest and Rarest Wines and Spirits auction in London earlier this month, where £7.6million of sales were made.
It seems that almost two years of the pandemic and its lockdowns have only increased investors’ demand for fine wines.
But such mind-boggling prices, you’d be forgiven for thinking that investing in wines is not within reach of the average person on the street.
Cult Wines has launched a new wine investment platform where you can invest in wine from £10k but you can invest for far less through wine merchant cellar plans
However, wine merchants and online platforms have made it possible for people to invest in wine from a few hundred pounds.
It is not for the faint-hearted though and an alternative investment like this doesn’t offer any Financial Conduct Authority regulation or Financial Services Compensation scheme protection.
The wine world, as with those of art and classic cars, is also one where it is easy to get scammed or come a cropper.
So investors must make sure that they are dealing with reputable businesses, keep their wits about them and realise that investments can fall as well as rise – and be tough to sell in a hurry.
How much do you need to invest?
The entry level sums on wine investing varies and depends on who you talk to.
Jack Chapman, head of private clients at Lea & Sandeman in London, says it’s possible to invest in wine with a small lump sum but points out that storage costs need to be offset against the investment.
Tom Gearing, boss of Cult Wines, says its important to invest in wine for the long term
He says: ‘There isn’t a minimum and it depends on who you approach. There are some fine wine asset management companies that ask for a certain threshold.
‘You would be paying for storage though. So, my advice is to buy larger value cases to mitigate storage costs as much as possible.’
Merchants like Berry Bros & Rudd and Corney & Barrow offer cellar plans which enable people to start to invest in wine collection with the help of a dedicated private account manager.
These wines can either be stored to drink later or kept as an investment.
Both allow investors to choose the amount they’d like to pay in every month, but recommend at least £250 – an amount that may put investing beyond the realms of many, as wine should only be a small part of a broader investment and savings portfolio.
Global fine wine collection platform, Cult Wines, has just launched a new wine investment platform, which it claims is ‘accessible’.
It offers four different account types – Cru Classe, Premier Cru, Grand Cru and Cult Cru but the minimum investment point is £10,000.
Tom Gearing, chief executive and co-founder of Cult Wines. and a former Apprentice candidate on the TV show, argues that investing small sums in wine is akin to holding just one share in Apple.
He explains: ‘You realistically you can’t get a portfolio of wines with risk adjusted returns unless you are investing at the £10,000 mark.
‘To do well, you need broader access to a variety of wines otherwise the chances of making money are a lot lower. It’s like putting one chip down on a roulette table.’
Lot 544, which contains 11 bottles of Domaine de la Romanée-Conti, Romanée-Conti 1971, sold for £269,500 at the Christie’s sale
Tips to invest in wine
If you’re on a tighter budget it’s possible to still invest in wines as there are ways you can cut the costs:
1. Invest in lesser-known wines
Wines from Bordeaux and Burgundy in France have typically dominated in the world of fine wine investing but the market has changed greatly over the last couple of decades.
Wines from Germany’s Rhone Valley, Italy, Australia and Latin America are also now investable, although be aware that they do not have the same blue-chip reputation as the finest French wines.
Of investing in lesser-known areas, Chapman says: ‘It’s certainly possible, but higher risk. One example of an Argentinian wine that’s done well is Bodega Chacra.
‘Their 2018 ’55’ Pinot Noir was released at £150 per case of six in bond and now trades for £300 per case of six in bond.
‘It’s a project by two huge figures in the wine trade (Piero Incisa Della Rochetta and Jean-Marc Roulot) and they’ve made some phenomenal wine in a very short space of time.’
Get advice before taking the plunge and investing in a lesser-known wine.
There is, after all, a reason why wines from certain areas have proven to be the best investment choice, time and again.
While some overseas wines are gaining in prestige if you want stability and the ability to sell the wine easily, it’s best to stick to recognisable brands.
2. Invest for the long term
Jack Chapman, head of private client sales at Lea & Sandeman, says it’s possible to invest in lesser known wines, but there’s a risk
Too often, investors in fine wine panic that they’re losing money over the short term.
Investing in wine, especially in the beginning, can be a volatile experience particularly if you have bought your wine at peak prices.
Wine prices are determined by supply and demand.
The sweet investment spot is typically when the supply wanes and the demand increases.
Gearing says: ‘As with most investments it is important to take a long-term approach when investing in wine.
‘Generally, we advise clients to set a minimum three-to-five-year horizon for their portfolios to benefit from a typical market cycle, with an optimum term of five to 10 years.
‘Our research has proven that you can enhance your returns as well as reduce volatility when investing for the long-term.’
3. Get advice
A tip from a neighbour or family member won’t result in the best investment advice when it comes to wine.
It’s important to bear in mind that alternative investments such as wine and diamonds are not regulated by the Financial Conduct Authority.
Your money is not protected and you can’t claim compensation if things go wrong.
Don’t accept cold calls from people offering wine investments and don’t let anyone pressure you invest.
Chapman says: ‘Wine investing is something you need to get advice on as you could be stuck with something waiting to accumulate for 10-30 years without it doing a lot whereas you could’ve made money elsewhere.’
It’s possible to make good returns on your wine investment. This year Dom Perignon 2000 has increased in value by 42.86%
4. Avoid the sharks
It’s not unheard of that some players in the industry will engage in malpractice to tempt people to overpay.
Some offer tales of unrealistic bumper returns, flog low-grade wine for more money, or just simply take your money and run.
Unless there is something ultra rare then stick to normal bottle formats as the bigger bottles are difficult to sell
One way to find a reputable merchant, is to consult a list offered by a coalition called The Bunch, see bunchwines.co.uk.
It says it lists the best independent wine merchants that adhere to their Code of Practice.
Members of The Bunch include Yapp Brothers, Corney & Barrow, Adnams, and Lea & Sandeman to name but a few.
5. Compare costs
There are lots of costs associated with investing in wine. Storage is a big cost but is unavoidable, because if bottles or barrels aren’t stored properly, they can lose their taste and market value over time.
Find out if the storage include insurance and ask about any other related costs such as management fees or commission on selling. Chapman says: ‘There are fairly high transactional costs to consider which can around £12 per 12 bottle case per case year.
Selling the wine on can be expensive too. Chapman adds: ‘Most merchants will take between seven to 10 per cent commission on sale value. That’s one of the biggest inhibitors of investing and trading fine wine.’
Not all investments in wine pays off immediately. This year the Penfolds Grange 2010 has depreciated by -0.23%
What returns can you expect?
Long term returns on investing in wine have been good with annual returns of between 10-15 per cent according to some reports.
But often it’s down to luck and good timing. The price of the best Italian wines have gone up by 20 per cent over the past 12 months, according to fine wine trading platform LiveTrade, beating the returns of some French wines.
Some wines have done exceptionally well, others have struggled.
For example, Cult Wines says that Dom Perignon 2000 has increased in value by 42.86 per cent, but equally point out that those who invested in the Penfolds Grange 2010 would be -0.23% down on their investment this year.
You don’t need to find exotic wines to get good returns. Will Hargrove, associate director and head of fine wine at Corney & Barrow advises: ‘Don’t obsess with finding the next big thing.
‘Have a good variety of wines from different regions. Unless there is something ultra rare then stick to normal bottle formats as the bigger bottles are difficult to sell. Keep it simple.’
Investing in wine can have tax benefits too. If you keep your wine cases ‘in bond’ in a temperature-controlled warehouse you won’t have to pay duty or VAT. Profits can also be free of capital gains tax, as it is a wasting asset.
Will you make a profit?
There are many pros and cons to investing in wine, but as with anything profit is not guaranteed.
The fine wine market is driven by outside factors and anything from famed tasters’ scores, to harvests and crackdowns on the wealthy in China can and have affected prices.
It may seem a good alternative if you want to invest in something that is not correlated to the stock market, but it’s not something to put all your savings into, as it can be difficult to get your money out.
Chapman says: ‘It really depends on what you’re selling but it can be easier to sell a Bordeaux wine than say a Californian one, which can be a bit sticky. It’s not always possible to sell wines at the drop of a hat.’
While it’s possible to lose money, there is little chance – unless of course the wine isn’t stored properly, or you get scammed – of the overall investment becoming completely worthless.
Gearing says: ‘One of the great things about wine is there’s an intrinsic value. The thing about wine is that if you take the best wines from Bordeaux and Champagne that they don’t have zero value in the market.
‘There may be chance that a producer has priced it too highly. But it will never be worth zero. I can’t guarantee that they won’t go down and there are examples of this, but what I can guarantee is that they are never worth nothing.’
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