The phrase “wine cellar” makes most people think of climate-controlled bunkers connected to extravagant beachfront mansions. Sure, investing and collecting wine is a common hobby among the rich and famous. To some extent, it has a conceited connotation. But there’s more to fine wine than meets the eye. Even if rich investors see the industry as an excellent opportunity to take risks and maybe make some cash, average people know that there are safer ways to make a profit.
Let’s make one thing clear first – very few types of wines are suitable for a long term investment, and finding a vintage that renders eye-popping returns is very unlikely. However, if you do your due diligence and you commit to performing extensive research, chances are that you may end up with a rewarding, profitable and satisfying hobby. Even if you won’t make any cash, at least you’ll have a wine collection that can always be enjoyed together with friends and family.
A closer look at investment grade wine
Can your hobby be transformed into an investment? Sure, providing that you purchase the right type of wine. Investment grade wine for example, is the real deal. It is a type with high chances of increasing in value over time. Be prepared to wait at least 5 years. Experts agree that true investment trade wines are less than 1% of the total wine supply spread around the world. The vast majority originated from notable European wine regions, such as Champagne, Bordeaux, Rhone and Burgundy in France, and Piedmont and Tuscany in Italy. Traits of investment grade wine:
- Critical consensus – noted wine publications (Wine Spectator or Wine Advocate) will have to rate a type of investment grade wine as “classic”
- Producer pedigree – investment grade wines are produced by vintners or wineries with a flawless reputation
- Price appreciation – the product must have a crystal-clear record over a period of time of 10+ years
- Longevity – the product has to reach peak maturity 10 years after it has been bottled; it must also age for a maximum of 25 years
- Production quantity – there has to be a liquid secondary market for investment grade wines. In theory, they may have a high value, although it is also possible for wines produced in small quantities to never be sold.
Building a collection
Transforming your passion for wine into a profitable investment will be challenging not impossible. It’s all about getting to know the industry. For someone to build a collection, he must buy wine first. In order to make a profit from your collection, you have to sell the wine via a legal, reputable platform. Sadly, it’s tough to find investment grade wine in a local liquor store, almost impossible actually. Here are some guidelines to help you trade fine wine:
- In-person auctions – Sotheby’s is a well known auction house you could start with; they provide face-to-face wine auctions all year round. You may also consider charity wine auctions like NYIWA (New York International Wine Auction), although they have an entrance free you should be aware of; it is $175 and it also includes dinner.
- Online auctions – if you’re the type of investor who doesn’t like or doesn’t have time for traveling to a wine auction, you may opt for online auction sites. WineBid, VinFolio, and Spectrum Wine Auctions are reputable platforms.
- Online wine exchanges – Cavex, Berrys’ Broking Exchange and Liv-Ex are three of the most well known wine exchanges on the current market. Even though they’re all based in the United Kingdom, they have the means to ship internationally. Online wine exchanges provide access to low, middle and high priced wines, thus giving every type of investor the chance to transform his passion for wine into an investment with a great potential to appreciate in value.
Who says that a hobby can’t become in time a productive type of venture? Fine wine investment demands a lot of time, patience and knowledge to render a profit to the investor. Providing that you spend enough time assessing and exploring the ups and downs of the industry on a daily basis, we would say that you have high chances of transforming a collection into a business.