Red Gold: a Safe and Lucrative Asset
The wine market is rapidly expanding around the world. Enough to make enthusiasts of investment incomes turn their back on the stock market to start investing in wine.
Wine is no longer the private hunting ground of French people. Wine demand has skyrocketed throughout the world, with brand new consumers jumping on board in the United States and in China. Some countries have also gotten into production of wines that are equally valued in France. That is the case of wines made in California, Italy and South Africa. Initially exclusively seen as a drink, wine has slowly become a safe investment.
A Carruades de Lafite 2005 has seen its value double within just four years. This can be explained by the fact that each vintage year, the wine offer is limited, while demand is growing exponentially. After racing towards prestigious Bordeaux labels, new consumers, who are more numerous in developing countries such as China, Russia and Brazil, are starting to turn to bourgognes and champagnes, a trend which is favorable to investors.
The Winedex 100, an index that takes into account the 100 best French wines, is in constant growth. According to a graphic presenting the variation of the index, the Winedex 100 was following, between 2006 and 2012, a strong growth curve much less unstable than that of financial products. Indeed, correlation between wine prices and financial markets is weak. In 2008, while the stock markets were crashing in the aftermath of the subprime crisis, wine itself enjoyed growth momentum, which has encouraged a lot of investors to start investing in the market.
Invest – but how?
There are several ways to invest in wine, depending on your budget, your knowledge in the field of wine production, and the time you have to dedicate to the investment. The investor can choose to invest by owning bottles directly, via financial assets that track the wine market as a whole, or by way of consulting specialists.
It is possible to create your own wine cellar at home. It is an idea that is quite pleasant and very comforting at the same time, to the extent that the investor directly owns the item he invests in. However, it is hard to store bottles at home. Lack of space can be a problem. And it also is essential to know that when you invest in perishable goods such as wine, certain conditions have to be met as far as preservation, in order for the wine to age properly. If wine is not preserved at good temperature, with a hygrometry rate equal to 70-75%, and if the bottles are not properly maintained, the investment will quickly lose its value.
To solve this problem, some cellars are made available to individuals and professionals so that they can store their wines in best conditions. Each customer has a personal space where they can add or remove bottles whenever they wish, as if they were at home. It is why cellars such as Montquartiers, Wine Sitting and Jefferson?s have become quite renowned in France.
Investment in wine in the form of shares is possible through companies known as “legacy cellars”. They buy, store and then sell vintage wine in order to generate ROI in the long run. Their investment policy is directly based on the Liv-Ex. It is possible to become owner of part of these cellars, and shares can be purchased a a typical starting price of €1000.
The SICAV (Société d?Investissement à Capital Variable, or “Investment company with variable capital”) comprise shares from different investors so that they can invest them in securities. Some SICAV are specialized in wine. The investor then becomes the owner of a certificate that can be compared to a part of these funds.