The wine boom first began in the mid-1980s, when prices for finer beverages began to rise.
Today it’s a serious sport for investors. If you have money to spare, vintage wines could be your ticket to an early retirement. To put this into perspective, it was only in October that the most expensive lot of wine ever sold went under the hammer. 114 bottles of Romanée-Conti Burgundy were purchased for an incredible £1,035,000 – that’s around £9,800 a bottle!
However, as with every investment, there are risks to encounter, which means it’s important to follow a few top tips when investing in wines…
Only invest money you don’t need
The wine industry, although a lucrative one, shouldn’t be used as a gambling card. When investing in wine, use funds you don’t require for living.
The best vintage wines to invest in
If you’re looking to invest in a wine that guarantees a steady profit, opt for Bordeaux.
Bordeaux Grand Cru Classés make up a vast sum (75% to be precise) of the investment-grade market for vintage wines. Another top tip is to invest in wines with a good track record and also, those in demand! This is when listening to the critics comes in handy.
In addition to Bordeaux, Tuscan wines, including the likes of Ornellaia, Sassicaia and Tignanello have performed extremely well in recent years. If you wish to invest in such wines, you’ll need to be prepared to put in a little hard work as these beverages are becoming more and more difficult to source.
How to tell the difference between good and bad grapes
One of the reasons for the wine boom is down to the success of wine critics. People in the industry take notice of connoisseurs such as Robert Parker, who often predicts which wineries will produce the best wines. Collectors choose to find and purchase these rare wines, all of which are highly regarded by the critics. This in turn causes their value to increase. If you wish to buy a good vintage, it’s important to do your research and listen to the experts.
If you’re looking to invest in wine, first and foremost, you must understand how France’s premium wine market works— after all, it’s said to be the most important. From reading up on the history of wines, to learning about the highest yielding wineries, there are a number of ways to educate yourself. Visiting events such as the en primeur market in Bordeaux is a must, as it’s the annual highlight of the wine merchant’s calendar and the nearest thing to a futures market. It’s there you’ll be able to invest in a number of wines from notable winemakers even before they enter the bottle.
This market is a great place to visit if you’re looking for wines at a discount price.
Another top tip when it comes to accessing insider knowledge is the Liv-ex — the international wine trading exchange — which boasts an investable wine index, which features a series of top Bordeaux wines from various vintages, some of which date back to the 1990’s.
Location is key
Asides from France, the UK is a prevalent location for vintage wine investors; this is down to a number of reasons. One advantage is capital gains tax protection. Another benefit is the ability to store wine free of customs and VAT, for the entire span of the investment. Buying into the UK market is a great idea in this time, as it boasts stronger-looking fundamentals, comprising tighter spreads and good bid and offer ratios at no extra cost.
On top of this, overseas interest has brought a great deal of business to UK wine merchants, with buyers from Hong Kong being the most active. Bordeaux is another location key to the wine industry, both for retail and investment. The region is responsible for the majority of France’s fine wines.
Why invest in vintage wine?
Top estates in Burgundy, including the likes of Domaine de la Romanée-Conti, measure their output on individual bottles as opposed to cases, which is certainly something to consider when investing in wine. Rare wines in minimal supply (particularly from the Bordeaux region) are some of the priciest wines available. It’s wise to choose single quality vintage wines, as they are often valued at a much higher price than that of cases of wine. Quality certainly overrules quantity in this market.
Knowing what to look for
The majority of expert wine investors prefer top Bordeaux, especially the older, long-lived vintages. These not only last for decades, but they’re often the ones to make the most gains.
Wines vary in price from seller to seller. If you wish to grab a great deal, you must be prepared to shop around – and to recognize the differences between wines that are the same value.
Invest for a minimum of five years
Those who invest in vintage wines nearly always see a positive return if they’re willing to be patient.
You’ll quickly learn the highest investment-grade wines are produced in small quantities (this figure is usually a mere 20,000 cases). One factor that causes their value to increase overtime is the demand-supply imbalance. On top of this, as the wines age, they not only improve in taste, they become rare, and more desirable as a result. This of course causes prices to soar.
For best results choose wines created in small batches that boast diverse characteristics and allow them to mature. Buy into this market with a medium to long term view is a must. Should you have a chance of heart further down the line, you can always sit back and enjoy the delicious wine that you invested in!
If you’re a keen to invest in wine, it’s important to know what to look for. We hope we’ve provided some of the basics here, but don’t be scared to ask questions if you’re unsure when making a purchase. If you have any other top tips, we’d love to hear from you too.