Fine Wine Brokerage Services

How to invest in Wine

… a guide from Capital Vinters

In recent years, the fine wine market has opened up to new investors beyond the traditional moneyed elite. Nevertheless, potential investors are often discouraged by a lack of basic knowledge of the marketplace. Here at Capital Vintners, we firmly believe that this is a market with something to offer everyone- from the first time investor to the seasoned portfolio manager- and is easy to understand, as long as you remember three key things:

1. Big Château
2. Big year
3. Big Parker score

At Capital Vintners, all the wine that we source and sell to clients is guaranteed to meet these three points, which is why we are so confident of making great returns on your portfolio. 

We have put together some important and fundamental advice for first time wine collectors, which we hope will help you when entering this market place.

Supply and demand

Supply of French wine is regulated by an organisation called the Insitut D’Appellations d’Origine, whose mandate is to restrict the production of each wine to a maximum of 177 cases per acre, with the remaining vines being put towards what are known as ‘second’ wines.  In addition to this limited supply, there will always be those consumers rich enough to purchase investment calibre wine to consume. As a result, supplies of fine wine are constantly diminishing, while worldwide demand grows. It is this age old premise of supply and demand which fuels the investment potential of this market.

Top-class French wine was traditionally the preserve of the European elite but the rise of the Asian tiger economies has led to a burgeoning middle-class in India and China, who have developed a taste for the market.

Fine wine carries an association with luxury and with the finer things in life, and this consistent demand for it makes the marketplace far less susceptible to the impact of external financial factors, such as the stagnating British economy or the ongoing Euro crisis. This is why, since 2003, wine has outperformed Oil, the FTSE-100 and Gold.[1]

Which wine to buy?

Despite the recent flurry of press surrounding other top-class fine wines, Bordeaux remains the wine of choice for many. If you opt for one of the Bordeaux first growths- Lafite Rothschild, Mouton Rothschild, Haut Brion, Latour or Margaux- you are guaranteed to be making a great long-term investment decision. Nevertheless, there has recently been a great deal of publicity surrounding the top class Burgundys and they are tipped to do very well in the coming years, as current sales bear out. DRC Romanee-Conti- the premier wine of Burgundy- headlined both the recent Sotheby’s auction in December of last year and the Acker Merall auction in Hong Kong that very same month. At that event a vertical lot of Romanee-Conti, spanning vintages from 1952 through to 2007, was billed as the ‘most important wine lot to be sold in 2011 anywhere in the world’ and fetched a staggering £519,020.

While it is possible to make reasonable returns from investments in other wines, in order to optimise profit for our clients, Capital Vintners deals primarily with Bordeaux and Burgundy.

It is also possible to purchase wine prior to bottling, while it remains in the barrel, in what is known as the ‘en primeur’ stage. Wine usually stays in the barrel until the third spring after harvesting, when it is bottled. Traditionally, Asian investors were disinclined to purchase wine in this form, which enabled en primeur purchasers to capitalise on a rise in price once the wine came to be bottled. However, there have been horror stories of investors being duped into parting with money for ‘en primeur’ wine and the tangible goods never appearing when it came to the bottling. This is why it is so important to use an established and trusted brokerage, such as Capital Vintners.

Wine scoring

Bordeaux is scored on a system of ‘Parker points’. These are points out of a hundred which are awarded by Robert Parker, the world’s most influential Bordeaux critic. A similar system is in place for rating Burgundy wine. Investment grade wine is that which achieves a score of 90 or above and you should not be considering investing in anything lower than that. We at Capital Vintners only source wine with a score higher than 90.

Storage

One of the most important things to think about when purchasing fine wine is storage. We at Capital Vintners have recently entered into an affiliation with the storage facility, Locke King. This exclusive bonded warehouse offers our clients all the security and top-class environmental conditions needed to best protect your wine collection and is the facility used by Christie’s Auction House, amongst other well known companies. Keeping your wine in a bonded, climate-controlled facility such as Locke King is fundamental for when you come to sell it- no serious auction house or investor will purchase wine that has not been stored in this way.

Wine collectors should always seek to open a private, named account with their storage facility. This ensures that all your wine is technically owned by you, and protects you against any financial hardship which may befall the brokerage. At Capital Vintners, we ensure that each of our account holders has their own personal, named account with Locke King. This allows for optimum transparency and gives the utmost piece of mind to our clients.

The cost of storage at Locke King is £15, per case, per year (plus VAT).

Tax

One further benefit of storing wine in a bonded warehouse is that the investor avoids paying VAT and Duty. Additionally, wine is classified as a wasting asset by the HMRC and, as such, is exempt from Capital Gains Tax; however on disposal of your portfolio, it is always advisable to seek advice from a qualified accountant.

Portfolio management

As with any investment portfolio, diversity is the key. The wine market experiences rises and dips much the same as any other and so it worth hedging your bets and developing a diverse cellar. Our WSET qualified brokers have all the knowledge and experience to guide you in making purchasing decisions and to assist you if and when it comes to selling your wine.  However- as a rule- the longer you keep your wine, the more your collection will increase in price.

In addition to portfolio management, we provide a valuation consultancy service. One of our team of professional and experienced brokers will be happy to offer a valuation of your cellar, at a cost of £25+ VAT.  This is, of course, free for our customers.

Cost of entry and exit

The cost of entry into the fine wine market is probably less than you think; a first time investor can get started in this market with as little as £1,000- making this an accessible marketplace for even the most modest of investors. 

We are more than happy to sell wine for clients who did not originally purchase it through us, although we do charge a modest fee of 10-15% on this sale. If we sell wine for Capital Vintners clients who have held their wine for less than 24 months, then we charge 10% of the sale price. However, if we sell wine that has been held for longer than this, we will only charge 10% of the profit realised.

…And finally

Remember: if you have any further questions relating to the fine wine market, please do not hesitate to call one of our team of experienced and professional brokers who will be happy to answer any queries you may have.