How and why Invest in Wine in 2023? | Part 2
In our previous article, we explained what wine investment is, going over reasons to invest, profitability and risks. If you're here, it's probably because you want to know exactly how to invest in wine. So today, we will see the different ways to invest money in wine, as well as give you our best advice to choose your bottles. As always, if you don't have time, you can find a brief summary at the end of this article!
1) How to invest in the wine industry and how much?
You all know Cheval Blanc, Mouton Rothschild, or Angelus. When we look at these references, we quickly realize the importance of these wines. However, it is not necessary to put 10,000 euros for a bottle to make your investment profitable. This investment can appeal to all budgets! Moreover, it is strongly recommended not to put all your eggs in one basket with wine. Your investments in this sector should not exceed 5 to 10% of your wealth. As developed above, you must first and foremost be motivated by passion!
Which bottles do I choose?
The reason why: buying a bottle of Mouton Rothschild would probably cost you several thousand euros. Due to the fact that the reputation of this estate is already well-established, the value of the bottle will only increase slowly. On the other hand, a small producer, whose bottles can be found for 50 euros and are rated 97/100 by wine critics such as Parker, will likely see a faster increase, sometimes up to 3 times its initial price or more! It is therefore not necessary to go for the most famous ones. To monitor the value of a bottle, don't forget Liv-Ex! You can also compare different prices for the same vintage among various suppliers on websites like Wine-Searcher and Wine-Decider.
The auction sales of auction houses
Sotheby's, Christie's, Baghera Wines... These auction houses allow you to try your luck in the race for the best bottles. In theory, anyone can participate in these kinds of sales. However, some conditions need to be met, as they are often reserved for prospects with enough funds to purchase the products up for auction. For most of these platforms, participants must register and provide financial guarantees proving their ability to honor the bids they win. If the client wins a bid, they must pay the price of the bid as well as buyer fees to the auction house. It should also be kept in mind that shipping fees for the item in question will be added so that the client can store it in the location of their choice. Sotheby's and Christie's offer various types of goods (artworks, jewelry, watches, wines...) while Baghera Wine specializes in wine.
Furthermore, investing in wine does not only involve buying bottles. You can also create an investment cellar, which avoids having to think about wine storage and all the problems that come with it. In other words, it's a form of online wine investment. When you invest in a wine cellar, you can be accompanied by professionals during the creation, management, and resale of the cellar. Several specialized companies allow you to create your own online cellar, such as Cavissima or U'Wine to name the most well-known. This represents a more considerable budget, with entry fees between 5,000 and 20,000 euros.
Joining a vineyard land investment group
Why stop at wine cellars? Why not buy vineyards? The price per hectare is very high and difficult to assume alone. That's why you can form a vineyard land investment group with other investors. The management of the vineyards is entrusted to a winemaker who sells 1/3 of the production for you, the investors. Arrangements also exist to receive dividends in the form of bottles. The resale of shares and hectares works like selling individual bottles: depending on the prices, you will make profits.
Wine investment funds
Investment funds also exist in the wine industry, although they are slightly more difficult to access than the other solutions listed above. You can inquire with platforms such as Nobles Crus and Uzès Grands Crus, which are the most renowned in this field. The primary advantage of this investment method is that you do not have to worry about storage and product security. It is simply a matter of "injecting" money on the same principle as the stock market. To simplify things, imagine that a wine investment fund is a collective investment cellar for several investors. This is managed by wine investment professionals, and the bottles are stored in secure facilities.
Investing in a vineyard
Finally, you could also become a shareholder in a vineyard or participate in a crowdfunding campaign. In the first case, you own a portion of the vineyard. In the second, you give money to the winemaker to help them carry out a project. This alternative allows you to become a part of the development of the winemaker and therefore invest in a more social and human dimension. They then thank you with interests, most often bottles. The return on investment is generally quite low, but you still help a vineyard to develop! If you are interested, you can go to the WineFunding platform, which will be your intermediary for investing in a winemaker's vineyard.
Good to know: You can be exempt from taxes if your resale price for the bottle is less than 5,000 euros, leaving you with a small margin. However, if you exceed this price, you will have to pay a 34.5% tax on the realized capital gain. A 5% deduction per year is made from 2 years of holding the asset. This makes it non-taxable after 22 years.
2) How to choose bottles for investment?
You have followed our advice and decided that you want to invest by starting a cellar or simply by buying a bottle. But which wine should you buy for investment? Follow the guide! Pleasure Wine will show you the steps.
Keep in mind that no one can predict whether your choice of bottle will be the most judicious to make a capital gain in 10 or 20 years. Some aspects of wine should be taken into account to limit the risk of loss, and we will examine this together.
The origin of the bottles
Certain regions are conducive to investment. Bordeaux is one such region as its wines have a good aging potential, but demand is declining. Nevertheless, there are still exceptions and safe bets. It can also be interesting to look at Burgundy and Rhône Valley wines. Ideally, you should diversify your cuvées. If you intend to build a small collection, don’t just buy bottles of Romanée Conti for example. Vary the regions, vintages, and estates as much as possible to secure your investments. If you lose some money on one bottle, another one that is not from the same region may see its value skyrocket!
Let wine take its time
Think long term! Be careful when buying an old bottle, as its value may have already peaked and there is no guarantee that it will continue to rise. If buying old bottles is already complicated, resale may be even more so. Instead, focus on wines less than 20 years old. Store them carefully and monitor the market for increasing demand. You need to take care to choose a wine that ages well. Moreover, as we saw earlier, your asset is not taxable upon resale after 22 years of acquisition. Think about it when buying!
The price of the bottle
We remind you that your purchase price is crucial in view of your future return on investment. It may be tempting to buy a Petrus for thousands of euros, but it is risky. However, we strongly advise you to find bottles under 200 euros. These are potentially more profitable investments.
The rarity of the wine
Before rushing into what seems to be the deal of the century, pay attention to the quantity available on the market, by checking the estate’s output (you could even call the estate directly to know their numbers). Favor wines with low yields, while still remaining qualitative. Stocks will sell out faster and bottles will become rarer, increasing the demand. This is also a way for you to be able to resell your asset without too much effort.
Vintage is an important factor to consider before trying anything. Indeed, not all vintages are equally conducive to aging wines. Weather conditions, presence or absence of diseases, pay attention to these determining elements in production quantities and wine quality. Pay attention to the region and type of wine to find the best possible bottle. For example, the 2015 vintage is a safe bet for all wine regions and colors due to its favorable climate. If you’re looking for a 2012 vintage, we recommend that you check out the Champagne region instead.
The wine rating
You have certainly heard the names Parker, Robinson, or Suckling. These famous wine critics assign ratings to wines on scales that are specific to them:
- From 50 to 100 for Robert Parker's ratings. Wines are considered excellent above 90, good between 80 and 89, average between 70 and 79, and bad below 70.
- From 0 to 20 for Jancis Robinson's ratings. Wines are considered exceptional from 19 to 20, good from 15 to 18, acceptable between 12 and 14, and bad below 12.
- James Suckling uses the same procedure as Robert Parker for his ratings. One thing to be noted: The wines rated above 95 are considered exceptional and those between 90 and 95 as very good.
These ratings can be taken as an indicator of quality for a wine based on criteria such as appearance, flavor, aroma, structure, and length. As you may have guessed, the higher the ratings, the greater the demand, leading to an increase in value. For your investment, it is recommended to bet on wines with a score of 90/100 or higher. Some may be very expensive, but you can find some gems for less than 100 or even 50 euros!
There are several options available for investing in wine:
- Buy one or more bottles and store them at home (storage fees to take into account)
- Participate in auctions (registration and shipping fees to be expected)
- Wine investment cellars (your bottles are stored with specialists like Cavissima or U'Wine. Registration fees to be expected)
- Investment funds (additional entry fees)
- Investment in a domain with the WineFunding platform
Tips for choosing your bottles:
- Don't put all your eggs in one basket, vary the regions! If some regions fall in value, others will surely rise.
- Don't resell your bottle too quickly! Let it gain value slowly and wait for the right moment to sell.
- Don't buy the most expensive bottles. These will have a slow increase in value. Try small but promising estates, the potential added value might be more interesting.
- Look for the rare gems. Rare and exceptional wine is produced in small quantities, and is more difficult to find. You can then increase your margins when reselling!
- Be smart: find a vintage suitable for quality and long aging wines.
- You may already know the names of Parker, Suckling, or Robinson. To bet on the best bottle, rely on the ratings given by these wine critics. A score of 90/100 or higher is ideal!
For our next and final article, our team will give you an additional boost to start your collection. Pleasure Wine is preparing a list of bottles you should definitely invest in. While not exhaustive, it can help you find inspiration in your search for good investments!