Our View On Investing In Wine
At Renaissance Vintners we take the view that good wine is one of life’s greatest pleasures, so we are always delighted when our customers want to purchase great wines to drink. However we cannot ignore the way wine has become an ‘investable’ over the last decade – and indeed we have profited from the appreciation of fine wines ourselves.
Wine Investment – The Renaissance Vintners Difference
- Renaissance Vintners are not a wine investment company. We are differentiated from wine investment companies because we offer free advice and do not charge any management or performance fees at all. Nor are there any hidden charges whatsoever should you make a purchase from us (please see our standardised delivery charge structure). Our policy is simple – should you wish to buy wines for investment purposes, Renaissance Vintners will undertake to sell you wines suitable for investment purposes at fair and competitive market prices, without charging you a premium for any advice we may give you. We currently sell to many wine investment companies so you can benefit from buying at their cost prices…….without paying their mark up.
- We are also happy to offer you unbiased advice on reasonable and secure storage solutions that are completely independent of Renaissance Vintners. Unfortunately very few wine investment companies or wine merchants subscribe to a policy of openness or disclosure regarding storage, instead encouraging their customers to store their wines in accounts which do not identify the cases you have bought by rotation (in fact they sometimes do not even identify the owner). This is a practise which we do not believe is remotely in your interest, particularly in the event of the merchant or wine investment company ceasing to trade, as the ownership of your wines may be difficult to prove.
- Should you decide to sell wines that you have bought for investment purposes through Renaissance Vintners, we are very happy to offer you an extremely competitive rate of commission. We are able to do so because we do not have a shop, we do not employ a lot of staff, we do not have expensive office premises and crucially, we are not a significant stock holder. Consequently we are able to operate on a much lower margin than many of our competitors and we are able to focus on transacting the sale of your wines for you in a timely and efficient manner.
Wine Investment – A Market Overview
Pre-1990 ~ The Europeans
Investing in wine is by no means a new concept. Even before fine wine became a globally traded commodity European wine collectors would often buy more than they intended to drink, selling the excess a few years later to fund additional purchases or, as the adage went ‘to pay the children’s school fees’. This pattern of business remained unchanged for decades. As recently as the 1980s Europe was by far the most important market for the top wines of Burgundy and Bordeaux. British collectors, who often had a preference for older wines than on the continent were amongst the first prepared to pay a significant premium for mature stock. A lot of the important British wine publications during this period lauded the qualities of ancient vintages of Bordeaux and Burgundy.
By the 1990s the USA and Japan had also emerged as major markets and fine wine lovers in those countries caught the bug of collecting wine. However even during the 1990s the fundamentals of the ‘traditional’ market remained unchanged – wine generally became more valuable as it became more mature. The ‘end user’ when one collector sold some stock, was another drinker or collector who was prepared to pay a premium for a more mature wine. Consumption of mature wines meant a paucity of supply of those wines – which justified the premium paid. During this period, a collection of fine wine offered relative stability in comparison with the financial markets, with increasing global demand contributing to a general upward price trend and the consistent consumption of mature stock justifying further price appreciation. An investment in wine – which at the time as good as meant ‘an investment in Bordeaux’ – was a relatively risk free class of asset to hold.
By the early-mid 2000s two things had changed. Firstly institutional investors had become seriously interested in making money from Bordeaux. Secondly Hong Kong, mainland China and even Russia were starting to emerge as significant markets. This brought an entirely different dynamic to the wine market: institutional investors have zero interest in consumption and the majority of newly fledged Chinese drinkers were more interested by brand than in maturity or rarity. Indeed the Chinese market tended to favour the consumption of young red wines. Spending on Bordeaux began to boom. The purchase of a portfolio of top Bordeaux almost invariably produced a return of over 10% per annum when taken over a five year term. Meanwhile a portfolio of Bordeaux exclusively comprised of the ‘first growths’ – historically the most famous and prized wines of the region (Cheval Blanc, Haut Brion, Lafite, Latour, Margaux and Mouton Rothschild) produced a significantly greater average annual return.
From 2005 to 2011 – The Boom
From 2005 to 2007, and then after the banking crisis in 2008, from 2008 to 2011 the price of top Bordeaux spiralled upward at an unprecedented rate. Only now, the buyers were not European drinkers and collectors; instead they were investors who only cared about their return or new, Asian buyers who had a different ethos of consumption and collection. Demand from both sectors was enormous as were the corresponding price rises for Bordeaux. Chateau owners in Bordeaux consequently felt justified in hiking up release prices and were encouraged by excitement about an undisputedly great Bordeaux vintage in 2005. The boom finally culminated with two more great vintages in 2009 and 2010. It was a perfect storm.
The Collapse Of Bordeaux Prices – 2011 to ?
It is impossible to attribute the start of the downturn of the Bordeaux market in summer 2011 to a single cause. Certainly amongst the causes was the lack of an end-user for wines that had risen to prices that only a very tiny minority could afford to drink. The traditional European collector had bowed out, so when institutional investors released large volumes of wines a decade from maturity back into the market, there was little demand. It rapidly became clear that prices were hypothetical and based on speculation as opposed to consumption. The institutional buyers had gambled on demand from the new markets soaking up all the supply and for the first time, it wasn’t working. From summer 2011 to summer 2014 the Liv-ex 50 (an index showing the performance of the ten most recent vintages of first growth Bordeaux) has fallen around 40%.
The Market Today
Today (October 2014) the Liv-ex 50 is at its lowest point since Spring 2010 and prices for Bordeaux generally are at similar levels to those in 2007. What is clear, perhaps unsurprisingly, is that the Bordeaux market has become vastly more volatile since wine became widely accepted as an investable commodity. Likewise the ethos of Bordeaux buyers in Asia and other emerging markets has considerably changed the way these wines are consumed and collected. So today’s buyer of Bordeaux who is principally interested in return as opposed to consumption now takes a greater risk – and has a higher potential reward – than was traditionally the case.
The Opportunity Today?
As far as Bordeaux is concerned the big question is whether the first growths have now fallen as far as they are likely to? If so, todays 4-year low in pricing would appear to offer the shrewd investor a considerable opportunity. Meanwhile away from first growths or even Bordeaux, the last three years has seen the prices for top Burgundies rise at an alarming rate, as well as reinvigorated interest in Champagne, top wines from Tuscany and the Rhone Valley. But the apparent hunger for wines from these regions may also be temporary – many merchants and traders have desperately tried to substitute some of the income previously derived from Bordeaux through the sales of wines from other regions. It may now be that many of the Burgundies that have leapt in value now lie in portfolios belonging to investors, in lieu of the drinkers who previously would have consumed them. It now remains to be seen whether the drinkers will pay the investor’s prices when it comes to drinking those wines…
The Risks Of Investing In Wine
- Having been professionally involved in the sale and purchase of fine wines for over 15 years we are happy to offer ‘informed opinion’ about which wines –may- have the potential to appreciate. We would however remind clients interested in purchasing wine for investment that the fine wine industry is not regulated and that Renaissance Vintners is not a financial institution. As such we do not offer any guarantee that any wine purchased from Renaissance Vintners will rise in value and we believe that any company that makes such a claim is being disingenuous. Any investment has the potential to lose money as well as make money. Fine wine is no different.
- As previously stated, the fine wine market is not regulated and so there are many potential pitfalls for the novice or unwary investor. One obvious pitfall is being overcharged for the wines you purchase. We recommend that anyone considering buying wine for investment researches their buy price – prior to committing to the purchase. We are happy to provide you with a variety of independent sources of information on pricing – and are confident that our prices are always highly competitive.
- Another issue is the price you may be charged for advice by wine investment companies, often through “management” fees or via other hidden fees. Renaissance Vintners does not charge customers for advice and charges no management fee on any wines bought from Renaissance Vintners. Likewise Renaissance Vintners have no hidden charges.
- One very real risk for the unwary investor is storing wines with a company which does not specifically identify your ownership of the wine(s) via individual rotation. We believe storing wine by rotation and customer is paramount to the security of your investment for two reasons. Firstly, if a wine is not identified by rotation, when a customer wishes to take delivery of that wine or sell it, it is unclear which case actually belongs to them. This generally means that the last customer withdrawing their case of that particular wine is likely to be left with any case that may previously have been discovered to be in poor condition…
- Secondly in the event that the merchant you store with is forced into liquidation or ceases to trade you risk being left as a creditor of that company. As a creditor, unless you can prove ownership of specific cases of wine, you may be paid a nominal percentage of what you are owed, rather than being able to withdraw all the wines you actually purchased. Renaissance Vintners works in partnership with Nexus Wine Collections – the leading independent wine storage specialist – and your portfolio is completely independent of ours or anyone elses. In short, the ownership of your wine is crystal clear.
I Want To Invest…
If you have read the information on this page and you would like to find out more, please do not hesitate to contact Renaissance Vintners.
Phone: +44 (0) 208 563200 or
+44 (0) 203 6691265