Wine is an investment based on passion. Indeed, wine is originally meant to be drunk, not to be a financial investment. However, some bottles can have a great value which, like luxury products, attract the interest of investors. We will try to determine the main rules to invest in wine.
Why invest in wine?
First of all, to diversify your investments. But also because investing in wine is still accessible. It is quite possible to acquire very nice bottles for a few hundred euros. Moreover, the market is not very volatile. Global wine consumption is constantly evolving, especially at international level where demand is growing, and wine prices continue to rise.
How is wine different?
Several elements characterize an investment in wine.
- The availability of certain wines is lower than the demand, particularly for appellations with limited production.
- It is a rare product: wine is consumed, so the number of bottles on the market decreases over time.
- Unlike other products, wine improves with time. If it becomes better, its value increases.
- Investing in wine is a long-term investment: it is important to take into account changing tastes and consumption habits, especially those of the “millenials”. They are in demand for wines that are different from their elders, more international wines, mostly organic and natural, but also sparkling, etc.).
- Finally, international expansion requires to consider the habits and tastes of consumers, particularly Asian and American.
Who should invest in wine?
To invest in wine, it’s better to know about it. Indeed, wine is a complex product and to build up a high value cellar, you need time and knowledge. The informed and passionate wine lovers will therefore be more inclined to do research, to follow the vintages, the peaks, the estates, to distinguish the particularities of the wine-producing regions of France and the world. It is also better to have some basic knowledge of economics to follow the courses, the trends, to know when to buy and at what price. Finally, you will certainly have to move around, to build up your cellar and maintain it until it increases in value.
This is a collector’s job that requires passion, patience, and a certain expertise.
How do we do it?
After having carried out research work, it is therefore necessary to set up a cellar, which means, to buy bottles! Several options are available:
- The “Primeurs” (New wines)
- Wine producers/winemakers
- The authorized distributors or retailers
- Wine merchants
Whatever option you choose, the essential points are to check the origin (beware of counterfeits!) and to buy “at the right price“. And when it is possible, it is better to buy a full case than a bottle. Packaging and conservation will guarantee traceability and authentication.
The key criteria to take into account
As we have seen, investing in wine means spending time doing research. But it also involves an investment that goes beyond simply buying wine.
You’ve done your research, you’ve bought wines at the right price, great. Now you have to store them and keep them in the right conditions. Indeed, wine is a living product that continues to evolve over time and improper storage can be disastrous. If it’s not already done, you will have to invest in a cellar (whether you choose to buy your own cellar to keep the wine or to store it in a rent cellar), which generates an additional cost you’ll have to take into account in the investment.
To this, you will have to add the price of an insurance in case of breakage or theft. Finally, you have gone through all these steps and you want to resell your wine. Be aware that, even if the tax system is rather advantageous in France for example, resale, which takes place in certain limited circuits, involves costs. (In terms of taxation: investing in wine depends on the country).
The “all-inclusive cellar” solution
As we have seen, it is better to be a connoisseur and passionate when investing in wine. That being said, if you know nothing about it but still want to invest in wine, or if everything you have read previously slightly discouraged you, you can always get help from specialized patrimonial cellar managers.
These specialized companies offer to manage the whole process for you: they select and purchase great vintages, store, insure, transport and resell them. Often presented in the form of a management mandate, the amounts depend on the package you choose. From the simple “creation of a cellar” to investment, from the purchase of boxes to shareholding, these companies offer all kinds of services in France and abroad, the rates of which can quickly rise for the more “premium” ones. On average, the average entrance fee is around €20,000.
What you need to know/remember
Like most investments, there is a risk in investing in wine.
- Both demand and availability evolve,
- If you don’t have the necessary knowledge and patience, it’s better to be accompanied. It is also important to consider all the costs involved in investing in wine.
- We say it again: it’s crucial to store your wines properly.
- Think about diversifying the bottles in your cellar: you’ll multiply the chances to increase its value. Although the idea of building a cellar should be motivated by pleasure, and even if you are a fervent defender of Bordeaux, think about acquiring Burgundies or Côtes-du-Rhône and Champagne. And beyond the ” safe values ” you can always add one or two original products that will give originality to your cellar.
- Last advice from economists specialising in wine investment: do not dedicate more than 5 to 7% of your assets to wine.
Does it pay off?
Compared to other financial investments, an investment in wine can be very profitable, if we compare the evolution of the stock market indexes with the evolution of the constantly rising price of wine. On the other hand, as mentioned above, all the costs related to the investment can have an impact on the financial return.
Moreover, the wine market is a cyclical market, with both rising and decreasing periods. It is a long-term investment and if you want quick returns on your investment, wine is not the right value to consider.
Finally, buying at the right price, even for “safe assets” does not guarantee an easy resale or an assured capital gain. The search for profit should therefore not be the primary motivation for an investment in wine.
What are the current market trends?
To find out about the trends, several sources of information are available:
- The press specialized in wine regularly covers the economy and investment in the wine industry.
- Many websites specialising in wine from all angles are also excellent sources of information.
- Wine Decider and Liv-Ex, two references to follow the prices and transactions of wine in the world.
- You can also get an idea by browsing the auctions on specialized websites.
As we have mentioned, a well-constituted cellar for a better investment is a varied cellar. We can oly recommend to keep an important place for traditional wine-producing regions. Indeed, the trio of Burgundy, Bordeaux and Rhône still accounts for nearly 70% of the amount of transactions in auctions; Bordeaux still holds the top position but is constantly falling in favour of Burgundy and Rhône. Nevertheless, other wine-producing regions in France and abroad are beginning to see their ratings rise significantly (especially Italy, but also regions such as the Loire and the Jura in France).
TYPES OF WINE
The trend is to invest in organic, biodynamic, natural, ecologically grown, health and environmentally friendly wines. This trend is particularly strong on the French, Japanese and US markets.
In addition to wines, it can be interesting to enrich your cellar with rare spirits and rare wine estates, or even exceptional beers whose value could increase in the coming years.
Is this the only way to invest “in wine”?
We have chosen to talk about investment in wine, in its most concrete and best-known form, i.e. in the bottle. But there are other ways of investing in wine which again require knowledge and sometimes a lot of money!
- The FCP (Fonds Commun de Placement – Mutual Investment Funds – aka “Paper wine”).
- Wine Funding: the first platform for participative financing in the capital of wine companies,
- The GFV (Groupement Foncier Viticole – Viticultural Land Group),
- Invest in the purchase of a vineyard,
- Renting vines.
If you decide to invest in wine, you are definitely embarking on a passionate and long-term investment! The lure of profit is not a sufficient reason to invest in wine. On the other hand, the last and undeniable advantage of investing in wine is not the least: even if you don’t sell it, you still have the possibility to console yourself by tasting it, and why not with Aveine!