Idea - Investing in fine Wine? Anyone know much?

Ok, well I was thinking up some different investing strategies, apart from the typical three, direct shares, managed funds and property.

And I thought about wine, theres some bottles worth thousands of dollars.

Does anyone already do this? Or have any experience in wine at all?

I was thinking of buying expensive not so matured bottles of wine, perhaps holding em for a few years, then sell em, surely theres got to be a market for it, and im sure theres some sort of going prices for 'x' year old wine.

For example say you buy like a bottle of Don Perin Yon (dont have a clue on the spelling, just know its an expensive one) and then hold it for say 5 years, you should be able to make a certain % gain, not to mention it would more than likley be tax free, unless you did it on a huge scale, in which case I think you can say its a hobbie, and not pay tax or something.

 

you cant really do whites or champs, its mainly on reds...

most people who cellar them or invest, invest to drink not to sell

its very hard to sell wine unless their is proof it has been cellared properly (consistant temp) so you really need to hire space of a known cellar company, this is very expensive...

depends on the vintage yr more than age, such Dan Murphys sell a 1951 bottle of grange for $52,000 however it would taste like turps if you wanted to drink it...

Just coz its expensive doesnt mean its good....

 

By vintage year, you mean the year it was made..?

I wasn't thinking on a massive scale either, I was just thinking of it as some sort of a side thing. Maybe buy like 10 bottles of a good wine, store it somewhere for a few years, and then sell it.

So the cellaring is a vital part of the scheme?

 

Sketchy

Your first investment should not, in my view, be something "exotic" if I can call it that.

An asset (which is what you should be investing in) should fulfill three criteria. These are the fundamental criteria against which you should measure investments.

1) Does it increase in value? For some wines I suspect the answer is yes. so a qualified tick on this one. But you'd need expertise to pick the right wines as Sim suggests.

2) Does it generate an income? Big black cross against this criteria for things like wine. No income generated. Same goes generally for art too (altho for some there may be scope to rent to galleries etc).

3) Can you use it as collateral to secure loans? Ha ha ha not a chance! So it fails this criteria.

So it gets only 1 out of 3 ticks.

A fourth criteria you might also apply is to not investing in anything that can die or go off. Imagine the disaster if your investment wine ends up being "corked".

ps. As I gather you're just starting out in investing can I humbly suggest that you don't get distracted by exotic investments. Stick to shares and property to begin with and then once you've got a significant asset base you could take more "chances" and dabble in art, wine, horses etc.

 

Thanks Nigel, some wise words there.

I think some people are perhaps taking my idea a little out of proportion. I'm not thinking of becomming some hardcore wine investor, I was just thinking of it on a smaller scale, with simplicity.

Perhaps buying one of them small refrigerated wine racks, and perhaps buying like 5-10 bottles of expensive wine, and holding them for a couple of years and then selling.

I'm sure theres some sort of typical pricing out there for 1-2-3 years old bottles of Dom Perignon for example.

I'm just making up a complete hypothetical here to just give you an idea;

Buy 5 bottles of 2007 Dom Perignon @ $500 each, $2,500 all up.
Hold them in my little wine storage cooler thing.
Sell them 3 years later in 2010 for $X on something like ebay perhaps.

I mean the value of the wine might not go up enough in 3 years to make it worth my while, but thats why I made the thread, to find out about this sort of thing, perhaps there are some wines that may double in value over 3 years? Perhaps a 2007 bottle of wine that you bought for $500 may be worth $1000 in 2010..?

 

Wine

Hi guys,

I think my wife would drink my profits if I invested in wine. She'd also drink the capital invested as well and say it was a good drop

Cheers,

Dan

 

The point Sim so tactfully puts is that the incredible power of leverage is what accelerates you from small starts with 4 or 5 figure equity numbers into the 6 or 7+ figure category...

 

\

however the issue is you cant start small.... If your going to do investing in wine most people want to buy cases, not single bottles...

i bet if you went around to 20 bottle shops in sydney and looked at their wine, you would find 3 year old on the shelf that just havent sold. I know this happens as i collect vodka (for personal drinking) and continually search new bottlo's for new styles, brands, flavours that are sold. (PS, if anyone knows a good bottle shop around sydney id love to hear about it)

if you talk to the more successful business people, they have their own cellars and buy them when their released and do their own "investing"...

Youd make more money looking through the specials at Dan Murphys/First Choice and buying stuff which is really discounted and then selling it on ebay than from actually holding it...

 

lol, that too...

Although I dont think you'd be able to beat a 100% gain in 3 years. Especially a tax free one. May as well see what this type of investment is capable or simmo muh man.

If I can put like $2,500 into a few bottles of wine and sell em for $5,000 three years

 

Ahh ok fair enough. Well I guess i've gotten my answer heh.

Only way to learn is to ask questions I spose.

So there isnt any bottles that increase in price dramatically after a few years of aging?

 

May be I can share my experience about wine investment here as well. I did some reading about wine investment in the past. Initially thought about buying some of the mid-range wine when they are young and cellar them and sell a few years later, knowing from stores that older wine get more expensive after a few years in the cellar. In the worst case I just invite a few friends over and have a few wine nights if I can't sell them. I concluded that it won't work for me because:
1. To make money I need to know what wine to pick. And a lot of the wine that actually make big gains are so called "cult" wine that was sold in US or Europe.. And I don't think they will pay a few thousands to a small self-claimed wine collector to ship the wine from Australia to them.
2. The hardest is to proof to the other party that the wine is cellar properly and in good condition.. I think the term used was "commercially". So a small wine fridge at home won't work.
3. I need a liquor license to sell wine, or the wine auction service charge >10% to sell.
4. For some of the wine that I was happy to cellar, it is more economical to buy from Dan Murphy's cellar release if I want to drink. (The rate of return is just not worth the effort) I have to do it in big scale to get the wine at a price that would allow me to make a profit. (It is probably also because of the wine glut and Southcorp throwing out a lot of the good wine cheap at the time as well. At the moment I would be happy to store some good wine for my own consumption later give that wine price has stabilised and price for some of the good wine has gone up fair a bit).

Then another friend found this wine investment company that packaged a basket of wine to sell to investor. They have this nice broucher and story about cult wine going through the roof in US, nothing in Australia. For $5,000 they promise a few bottles of wine and store the wine for 3 years in a facility in Europe or something. He was very interested, but wasn't very sure. So he asked me to go in together. I have a lot of doubt and went online to find out that I can actually get the wine cheaper from some of the online wine store, and still cheaper even I use one of the commercial wine cellar for 3 years. Then I asked the question about how do I access my wine after 3 years (in case I have to drink them myself if I can't sell them). And whether they will shift the wine and sell in US for us given all the examples are in US and a few others questions. It got to a point that my friend said the sales don't want to answer his call (he was calling his mobile from his mobile a few times). So I told him not to join at all. Lucky us a few months later the company went in administration, and the administrator said they couldn't find most of the wine that was meant to be in storage.

This is an interest article about wine investment.
Is wine a sound investment?

 

Hi Sketchy

You should have a look at www.langtons.com.au for price information from the mid-market (ie before the retail outlets add their margin). They also offer en primeur (first season) wine futures from bordeaux which tend to hold their value better. The site also has charting and prce index information. Like any investment you should really know what you are doing first...

Hope this helps

 

Ahh thanks for all the feedback.

Looks like it wouldn't necessarily be very beneficial unless I was to do it on a large scale, which I don't think would be a very good idea.

If you can't sell the wine, your scewed.
If you can't cellar if properly, your screwed.
If it accidently gets corked, your screwed.
If your cellar/storage area were to be raided, or burnt down, your screwed.

Juz too many variables that can cause you to get screwed.

Originally I was just thinking of maybe buying a few bottles of expensive stuff, and holding em for a few years, then selling, but it seems It wont be worth the time.

 

I could be wrong, but I think the high class, expensive wines all use corks, rather than screw tops. I think it has something to do with helping the wine age/tase better or something.

Kind of like having coke from a glass bottle, as opposed to a plastic one.

I could be wrong tho, i'm by no means an expert, i've just heard this comment a few times.

 

I saw thise thread and must admit I haven't read any of it other than the heading. Just wanted to add that I have a Superfund client who invests in wine. They haven't yet traded any of it yet so I don't know if they have made a gain yet.

Cheers