Investment

wine Wine is an alcoholic drink typically made from fermented grapes. Yeast consumes the sugar in the grapes and converts it to ethanol and carbon dioxide, releasing heat in the process. Different varieties of grapes and strains of yeasts are m ...

, like gold bullion, rare coins,

fine art In European academic traditions, fine art is developed primarily for aesthetics or creative expression, distinguishing it from decorative art or applied art, which also has to serve some practical function, such as pottery or most metalwor ...

, and tulip bulbs, is seen by some as an alternative investment other than the more traditional investment holdings of stocks, bonds,

cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-im ...

, or

real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more general ...

. While most wine is purchased with the intent of consuming it, some wines are purchased with the intention to resell them at a higher price in the future. A wine's

value Value or values may refer to: Ethics and social * Value (ethics) wherein said concept may be construed as treating actions themselves as abstract objects, associating value to them ** Values (Western philosophy) expands the notion of value beyo ...

often goes up as time passes and

consumption Consumption may refer to: *Resource consumption *Tuberculosis, an infectious disease, historically * Consumption (ecology), receipt of energy by consuming other organisms * Consumption (economics), the purchasing of newly produced goods for curren ...

increases as the

market Market is a term used to describe concepts such as: *Market (economics), system in which parties engage in transactions according to supply and demand *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an ...

becomes tighter and access to ''good wine'' is more elusive.

Background

Wine investment is usually conducted through one of two main methods. The first involves purchasing and reselling individual bottles or cases of particular wines (wine for investment tends to be sold in sets of 3, 6, 9, 12, or 13). The other option is purchasing shares in an investment wine fund that pools the investors' capital. In the former instance (directly buying specific cases of wine), it is recommended that inexperienced investors work with a broker, merchant, or a consultant, to minimize risk. Many authorities also publish independent guides for the investor to help navigate this investment class. Indeed, complex models and formulae have been applied to tracking investment wine's historical returns. While there may be tens of thousands of wine producers across the globe, it is estimated that perhaps only 250 produce the sort of premier wines that are worth considering as a financial investment. It is also estimated that about 90 percent of the world's investment grade wine is produced in the Bordeaux region of France, which explains why the region is the main target for investment wine fraudsters. Vintage ports historically have made up much of the rest of the market inventory, but now more and more varied and global selections of wines are finding their way into the investor market. Outstanding vintages from the best vineyards may sell for thousands of

dollars Dollar is the name of more than 20 currencies. They include the Australian dollar, Brunei dollar, Canadian dollar, Hong Kong dollar, Jamaican dollar, Liberian dollar, Namibian dollar, New Taiwan dollar, New Zealand dollar, Singapore dollar, U ...

per bottle, though the broader term "''fine wine''" covers bottles typically retailing at over about US$30–50. Investment wines are considered by some to be ''

Veblen good A Veblen good is a type of luxury goods, luxury good for which the demand increases as the price increases, in apparent (but not actual) contradiction of the law of demand, resulting in an upward-sloping demand curve. The higher prices of Veblen ...

s''; that is, demand for them increases instead of decreases as the price rises. The most common wines purchased for investment include those from

Bordeaux Bordeaux ( , ; Gascon oc, Bordèu ; eu, Bordele; it, Bordò; es, Burdeos) is a port city on the river Garonne in the Gironde department, Southwestern France. It is the capital of the Nouvelle-Aquitaine region, as well as the prefect ...

, Burgundy,

cult wine Cult wines are wines for which dedicated groups of committed enthusiasts will pay large sums of money. Cult wines are often seen as trophy wines to be collected or as investment wine to be held rather than consumed. Because price is often seen ...

s from

Europe Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a subcontinent of Eurasia and it is located entirel ...

and elsewhere, and

Vintage port Port wine (also known as vinho do Porto, , or simply port) is a Portuguese fortified wine produced in the Douro Valley of northern Portugal. It is typically a sweet red wine, often served with dessert, although it also comes in dry, sem ...

History

While premium wines have been around for centuries, the formal and organized sale and resale of the best wines for profit became a more established phenomenon in the late 1970s and early 1980s. Indeed, at least in the United States in the 1960s and early 1970s, newspaper articles about investing in wine were more likely to warn that it is illegal for individuals to sell wine, and that the "investment" would be drunk by the investor. However, by the mid-1980s, in the state of

Illinois Illinois ( ) is a state in the Midwestern United States. Its largest metropolitan areas include the Chicago metropolitan area, and the Metro East section, of Greater St. Louis. Other smaller metropolitan areas include, Peoria and Rockf ...

, and in special cases in

California California is a state in the Western United States, located along the Pacific Coast. With nearly 39.2million residents across a total area of approximately , it is the most populous U.S. state and the 3rd largest by area. It is also the m ...

, it was legal to sell wine without a retail license, and more investors were learning how to transact their trades through legal brokers with the necessary licenses. In Europe, laws are much less restrictive regarding wine selling and reselling.

Drawbacks

Wine as an investment does have some concerns, including the fact that (unlike dividend-paying stocks and bonds) stored wine produces no return for the investor until it is sold, and insurance and storage costs will mean the investor is losing money while waiting for the wine's value to appreciate. There is low liquidity in US wine inventory, as most US states will only allow private wine sales through auctions, which themselves may take a commission of 15% to 25%. Investment in fine wine has attracted fraudsters both in the UK and US, who prey on their victims' ignorance of this sector of the wine market. Losses by investors to rogue wine investment firms can be significant, made more acute by the fraudsters willing to re-offend.

Wine fraud Wine fraud relates to the commercial aspects of wine. The most prevalent type of fraud is one where wines are adulterated, usually with the addition of cheaper products (e.g. juices) and sometimes with harmful chemicals and sweeteners (compensati ...

often works by charging excessively high prices for off-vintage or lower-status wines from famous wine regions, while claiming that it is a sound investment unaffected by

economic cycle Business cycles are intervals of expansion followed by recession in economic activity. These changes have implications for the welfare of the broad population as well as for private institutions. Typically business cycles are measured by examini ...

s. Efforts made by regulators to stem losses to rogue investment firms include the closing down of companies in the public interest, and cease and desist orders.

References

External links

American Association of Wine Economists

London Association of Wine InvestmentInvesting in wine
{{Authority control Wine classification Commodities used as an investment