Investing in Wine

This page gives an introduction to the main things you should think about and help you decide whether wine investment is the right choice for you. The page covers the following topics:

Is Wine a Good Investment?
Best Wines to Invest In
How to Buy Investment Wine
Costs to Consider
Research / Further Reading

Wealth Warning!

Just like stocks and shares, the value of wines can fall as well as rise.

But at least you can enjoy drinking your losses!

Is Wine A Good Investment?

Generally speaking the best returns from wine investment can be up to 30% per year. However, average returns are generally between 10% and 15%.

There is a market for fine wine because demand exceeds supply, which is strictly controlled.

Best Wines to Invest In

If you are new to investing in wine then your first investment should be in Bordeaux. These are some of the finest red wines and have a good track record. The following factors make Bordeaux attractive:

The Bordeaux region produces fine wine with exceptional regularity.
Supply limits are imposed and high worldwide demand for the top vintages makes them a good investment to consider. A chateaux in Bordeaux can produce no more than 500,000 cases of wine in any one vintage.
There is plenty of information on the region's past and present wine prices and on the quality of particular vintages.
Bordeaux has a thriving auction market in which wine is bought and sold.

Bordeaux wines are classified into five ranks. The top rank being first growths, followed by super seconds; then come the third, fourth and fifth growths. The better the wine, the longer it takes to mature; first growths taking 15 to 20 years.

How to Buy Investment Wine

High quality wine takes time to mature. Once it reaches its best it then begins to deteriorate (in quality and financial value). As a general rule it is best to buy a good vintage wine and quality that will last. Buy it as early as possible in its life.

You cannot buy wine directly; you will have to buy through a merchant. The best merchants tend to be those that are most well known.

Brokers should not charge a consultation or buying fee but they will take 10% commission when you sell, so factor this in before buying. Brokers will advise you on investment choices and give you expert advice. Don’t forget to check in advance that it’s not costing you.

Warning!

Choose your broker carefully.
Drink investment scams are common and can appear quite genuine.

The usual investment unit is one case of 12 bottles. Buy a small amount of the best wine rather than a lot of a lower quality. For example, if you wish to invest £1,000, buy two £500 cases of a top wine from a top vintage rather than five at £200 of a lower vintage.

Warning!

Independently check the price of any wine before you invest to make sure you're paying a fair price.

Wine experts usually advise a minimum investment of £3000, to ensure a balanced portfolio.

Wines are priced at three different stages:

En primeur
On arrival into the country two years later (in bottle through a merchant)
On maturity

Buying wines en primeur is risky because the wine has not yet matured and it may turn out to be nothing special. The wine is bought after it has been produced and after an initial tasting but before it's bottled for the mass market. However if you are prepared to take the gamble you will be able to reserve stock which may be scarce when comes onto the open market. You will also be able to secure it at a cheaper price.

Costs to Consider

Selling fee: Generally a 10% selling fee is charged by your broker.

Storing: Fine wines can be ruined if they're not stored at the right level of temperature, humidity and light so most wine brokers will advise you to store your wine in a temperature-controlled bonded warehouse. This can be independent; or one run by the broker.

Import Duty and VAT. It is best to store your wine 'in bond' in a customs-controlled warehouse. As the wine is kept under bond it is treated as not having entered the UK. This means you won't have to pay duty or VAT on it.
- If you store your wine at home, or want to release it from bond, you will have to pay an import fee of £13 a case plus 17.5% VAT on the purchase price. To store in bond you need to set up an account with a broker and pay an annual storage charge of about £6 a case.

Capital Gains: The Inland Revenue views some wines as a 'wasting chattel' - an old tax term used to describe something which will ultimately deteriorate in value – so you may find that you will not have to pay capital gains tax on the profits you make (capital gains tax).

Research/ Further Reading

Read what the experts write and wait until they start writing and talking about a certain wine. Monitor what American journalist Robert Parker has to say. He gives wines a score out of 100 and any wine he gives a score of 90 or more is likely to be an investment worth looking into.

There are numerous books written on the subject, here are 3 I recommend:

Liquid Assets: Uncorking Profits in Today's Global Wine Market: Explains how to take advantage of the information sources currently available and defines the key players and principles that govern the world of fine wine.

Wine Investment for Portfolio Diversification: How Collecting Fine Wines Can Yield Greater Returns Than Stocks and Bonds.

Investing in En Primeur Wine: Explains the benefits of wine investing, and gives a simple, semi-automatic system for selecting investment grade wine and investing in wine futures.