Fine Wine Investment

FINE WINE can be a worthwhile investment if the view on this investment is to gain over the medium to long term.

Historically, investment in the Bordeaux wines from the 1855 classification, the wines from leading burgundian domaines, such as Domaine Romanee Conti, Vintage champagne from the `Grand Marques’ houses and more recently selected estates in Piedmont and Tuscany in Italy, have established a proven, successful track record in terms of investment returns, I repeat, over the medium to long term.

An advantage of investing in fine wine is that it is viewed by HM Revenue & Customs as a `wasting asset’ and therefore, in general, is exempt from Capital Gains Tax.

In the mid 2000’s, there were many new companies selling wine as an investment, particularly after the 2005 Bordeaux En Primeur campaign in 2006. These companies offered huge financial gains to potential investors. Indeed had one invested in the 2005 Bordeaux vintage, buying En Primeur (i.e. 18 -24 months before bottling) from a reputable wine merchant, then solid gains of between 40% to 50% would have been made over the next 5 years.

Had you however, bought from a `new company ’, who had little previous knowledge of the industry and who sold the wines at inflated prices, I doubt that you would have made any gains at all. In the period 2010 to 2014, over 50 young companies that had started up since the 2005 Bordeaux vintage, closed their doors, with many investors losing all of their invested money.

It is important to choose an established Fine Wine merchant to guide you through the difficult choices.

My view is that the next 6-12 months will be a good time to re-enter the fine wine investment market, as there are numerous buying opportunities.

In the period from 2010 to 2014, there has been a major market correction in the International Fine Wine market, especially for the wines from Bordeaux. Over inflated prices, (especially the prices released by the Bordeaux chateaux for the 2010 vintage En Primeur) were unsustainable and from the market highs in mid 2011, many vintages of the 1st growth Bordeaux chateaux, have lost between 30 – 40% of their values. All markets are cyclical, but not many in the International fine wine trade had anticipated such a major decline to the Bordeaux element of the market.

That said, the brighter part of the market has been in Burgundy, where selected Premier Crus and Grand Crus from well known domaines have performed well. There have also been reasonable price increases for the rarer wines, produced in smaller quantities, from Piedmont and Tuscany from Italy and in vintage champagne from the 2002 and earlier top vintages.

So as we see the Bordeaux chateaux prices bumbling along on what must be the bottom of the current cycle, there might be some daylight on the horizon, if the Bordeaux chateaux price the 2014 En Primeur wines sagely. It is apparently a good to very good vintage, with generous volumes produced, so the Bordelais chateaux owners have a great opportunity to re-ignite confidence in their wines, by pricing this vintage whereby the En Primeur investors paying for the wines almost 2 years before receiving them, will actually gain something financially, when the bottled wine comes to market in 2016.

Otherwise what is the point of buying now ?

My view is that the next 6-12 months will be a good time to re-enter the fine wine investment market, as there are numerous buying opportunities and as we have seen the Bordeaux prices stabilise over the past 3-4 months, I do not believe these prices will drop further. Therefore, with a medium term view, my view is that this is a good time to re-invest selectively in fine wine.