How to Invest in Wine

With the stock market a mystery to many, buying wine for future appreciation may be an option

Sotheby’s Wine auctions are eagerly anticipated by wine investors seeking the rarest vintages for their collections. Courtesy of Sotheby's

To say wine is popular is a massive understatement, with an estimated $339 billion spent worldwide on fermented beverages in 2020, according to WineDeals.com.

The United States and France top the list in terms of consumption, with many indicators suggesting that global consumption will continue to rise significantly. But while it’s a popular drink, with the vast majority consumed very soon after purchase, could it also be a viable investment? What constitutes an investment varies based on who you ask, with antique toys, artwork, and even vehicles vying with traditional stock and bond options.

The goal of an astute wine investor is to select vintages for which there is strong demand to help ensure asset appreciation. Louis Hansel/Unsplash

Ongoing stock market fluctuations, rampant inflation, and trade wars have some investors seeking alternative havens for cash, with many giving wine serious consideration. Even if the market goes completely sideways and you’re using stock certificates as napkins, you can at least drink the wine. Which raises the question: What wine qualifies as an investment? The short answer is nothing you can buy at the local grocery store.

As might be expected, rare wines and those with historic significance tend to bring high prices; as an example, a 1787 Château Lafite that might have been owned by Thomas Jefferson (it has his initials etched into the bottle), sold for $156,450 in 1985. More recently, a 1945 Romanée-Conti sold for $558,000 during a Sotheby’s auction. As expected, these are the exception rather than the norm; FinanceBuzz.com reports that wine has seen annualized returns of 13.6 percent over the past 15 years, outperforming many traditional investments.

Once acquired, treat investment wines as you would any other physical asset, cataloging them as you add them to the inventory. Kim Woojeong/Unsplash

However, wine investing requires in-depth product knowledge, and purchasing requires proper storage, a topic we addressed several issues ago. To be considered an investment-grade wine, it should first of all have a great taste, which takes mass-produced wines out of contention. The taste can be shaped by the region in which it was produced, the skills of the winemakers, and certain weather events that may have shaped the resulting vintage. Some investors choose to select wines from certain regions, such as Bordeaux, the Rhône Valley, or even California.

By limiting the choices to one or a few specific areas, it’s theoretically easier to keep track of factors affecting the quantity and quality of wines produced. Rarity is always a good thing, but investors can do well by adhering to the basics of supply and demand, looking for vintages that are currently in high demand and expected to remain in high demand.

Christie’s is another top auction house regularly organizing auctions of fine and rare spirts and wines. Courtesy of Christie's

When it comes to actually purchasing wine, in order to simplify matters, some investors utilize a service such as Vint in which, rather than an individual buying, housing, and reselling cases of wine, shares of a specific wine collection can be purchased. Other options include CultX, a digital platform based in London operating its own warehouse to accept, distribute, and store wines, or Liv-ex, the London International Vintners Exchange, a marketplace bringing buyers and sellers together.

Collectors tend to fall into several groups: those who buy and store their wines in their own facilities, those who store their wines in a commercial facility, and those who purchase strictly for investment, never actually taking possession of the wines, but rather working with a firm that handles all the details involved from purchase to sale. An example is Vinovest, where an individual can create a wine portfolio with as little as a $1,000 investment.

This bottle of Romanée-Conti from 1945 fetched a tidy $558,000 when offered at an auction by Sotheby’s. Courtesy of Sotheby's

While this method certainly works for those with a broad knowledge of wines and their acquisition and sale, it also presents a unique opportunity to invest in wines without needing to have an encyclopedic knowledge base or even having to store or insure the wines. Beginning wine investors can choose to rely on the firm’s expertise in selecting, purchasing, and eventually reselling fine wines. Just as a real estate investment trust allows an investor to share ownership and hopefully profits without having to do all the work or take all the risk, these wine investment firms allow casual wine fans to invest while they learn.

Rapid appreciation of investment wine can certainly occur, but as a rule of thumb, many investors hold wine for at least three years, which clearly affects the issue of liquidity. While wine has clearly become a recognized investment vehicle, as is the case with all investments, there are serious considerations to take into account, starting with never investing more capital than you can afford to lose. There are also tax implications to consider, which is why it’s prudent to discuss any potential investment plan with a knowledgeable financial adviser and tax counselor.