Tuesday, March 31, 2009
Wine investment is not at the top of investors' minds. For some investors, it may be at the back of their minds to keep a few bottles in case the prices appreciate, but no one is explicitly buying wines as an investment.
It's very much by chance to those who discover that their wine collection is worth a lot more over time. The lack of interest in wines as an investment could be due to the fact that investors are still at the appreciation stage and don't view wines as a commodity.
Those who are looking to invest seriously in wine face several issues. The main obstacle is the lack of a marketplace for selling wines. Serious wine investors will have to look to establish markets for fine wines, where they're able to liquidate their stocks and get good prices. For instance, London is traditionally a strong trading market for fine wines where investors can sell to established wine merchants or consign their collections to auction houses like Christie's and Sotheby's, which regularly hold fine wine auctions.
Storage or rather, concerns about bad storage and freight, is also another obstacle that wine investors in this part of the world face.
It's advisable for those interested in wines as an investment to consider 'en primeur' or futures, particularly of blue-chip wines like Bordeaux First Growths. If you want to reap the best benefits, you have to buy 'en primeur'.
However, with futures, it's crucial to get the vintage right. With a good vintage, the prices can appreciate by as much as 50% by the time the wine hits the market 18 months from the sale of its futures.
The key to buying wine futures, however, is that one needs to be an established buyer to actually catch them at the best prices. The current market for wines is not as vibrant as in its heyday in the 1980s, when the 1982 Bordeaux vintage was released into the market and American collectors were eagerly buying it up and also during the year 2000 millennium craze. The market today has softened. The collector's bubble has somewhat burst since the US economic slowdown.
Ninety percent of wines bought for investment would be Bordeaux, which today has become a commodity. First Growth Bordeaux would be most in demand but the supply is not exactly small. On average, most First Growth chateaux produce between 200,000 and 400,000 cases a year.
By and large, however, people still stick to blue chips. Thus, it's advisable for budding wine investors to go for well established First Growth Super Chateaux, if they want to play it safe.
Buy a top vintage at a high price and hope to sell at an even higher price. Then, it's a matter of how much it will rise and what your holding power is. You can also consider taking a punt on top-ranked small production Chateaux like Le Pin, which produces only 500 cases a year. At the end of the day, few in this part of the world take wine investing seriously.
By Michael Russell
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Labels: Wine Guide