The City of Cape Town’s new liquor legislation that came into effect on 1 April, regulates that no-one may keep more than 150 litres of wine in their home without a liquor licence. That is a mere 200 bottles.
Being passionate about wine, my collection is slightly bigger and I know that many of my wine friends also have treasured wine collections. For us the value of having a cellar at home stems from our love of wine. We collect wines from all over the world, from various styles and vintages. Some bottles may have some kind of sentimental value, but for the most part we are interested in how the wines mature. We love the idea of selecting a special bottle for a special occasion or meal during which we will tell the story of the wine, where it comes from, who made it and why it is such a special choice.
But wine can be collected for a different reason all together. Internationally wine is collected for its appreciation in value – buying wines to sell them in future at a better price.Well, if there has ever been a reason!
As a financial investment, the focus, even more than with having a collection to mature for your own drinking (and story-telling) pleasure, is on top wines from the best vintages. Only a fraction of wines would justify the risk and expense of investment and to make the correct selection is crucial.
To be a serious wine investor one has to be up to date with vintages and quality expectations and it would be beneficial to employ the opinion of a sommelier or trusted wine guide. Expert opinion – your own or that of someone else who is knowledgeable and trustworthy – is essential. Quality is of course key to your wine purchase and so is maturation potential. It is of no use investing in wine that will reach its peak quality-wise long before it becomes a profitable resell.
From an investment point of view, it would also be better to buy the wine during the “En Primeur” stage when the wine is still in barrel. When the wine has finished barrel maturation and have been bottled, labelled and released into the market place, the value will already have increased significantly which will impact the purchasing price and your eventual return on investment.
The problem with this is that many vintages only show their true quality after at least five years of maturation by when the wine price has already appreciated. So, if you want to play save with the quality of your investment, it might impact the return on your investment.
Of course, the brand also makes a big difference. There will always be more interest in a bottle of Château Lafite Rothschild or Château Pétrus than in a bigger production, commercial brand name, but your initial investment will also be much more. There is a fine balance and that is why investing in wine should only be considered when you are either an expert of both wine and the market yourself or can obtain the services of someone who is. Investors, much like us who collect for the love of wine, understand the importance of heritage and the story around the wine. Perhaps the quality of the wine has gone, but it is the last bottle left from the cellar of some famous king or the first bottle ever produced by an iconic cellar. Sentiment and story sells.
So does scarcity.
A limited production or availability will up the value. And then, as it should be with any work of art, the investment should be stored and maintained in optimal conditions, preferably in a temperature-controlled cellar. The wine’s potential to mature well will have a direct influence on its commercial value. Not all wines mature well – not even when kept in the perfect conditions – it requires constant monitoring of the ageing potential of wines to determine at which stage of maturity they are at any given time. This monitoring can only be done by actually tasting the wines and the results of these tastings should be carefully considered by any wine investor.
Wine Auctions are usually the place to sell your investment wines and the London auctions often determine prices. Serious investors in wine have to stay up to date with auction results.
WineEducation.com offers great insights into how much wine increase in value over time. Ultimately low costs in storing your wine and a combination of an exceptional wine and an exceptional vintage will of course yield the best results. Wine Investment can be a profitable business when enough knowledge and time is spent in making the selections and you are staying up to date with trends and prices. It does have it risks though and it might be ideal for the wine investor to also be a wine lover – someone who will be just as satisfied enjoying the wine at maturity when selling conditions are not ideal.
Saying that, the fine wine investment market is currently looking positive. Have a look at this CNBN interview with Peter Shakeshaft, founder and chairman at Vin-X Limited, a UK-based fine wine investment company who feels that the market will continue to grow as it represents a safer option than more mainstream investment opportunities.
Perhaps we should get him to share his thoughts on the investment value of wine with the legislators of the new liquor act in Cape Town?