FINE WINE INVESTMENT GUIDE
2011
IFWIC.ORG
I n t e r n a t i o n a l F i n e W i n e I n v e s t m e n t C o m m u n i t y
Content
Chatper 1 Introduction, Pros and Cons
Chatper 2 Investment Wine
Chatper 3 Which Wines to Choose
Chatper 4 Buying Investment Wine
Chatper 5 Transporting and Storing
Chatper 6 Selling Investment Wine
Chatper 7 Costs of Investment
Chatper 8 10 tips for Investing in Wine
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Introduction
For the last quarter of a century the fine wine market has remained stable and has
shown continuous growth, despite the world s economic crises. Unaffected by
swings in interest rates and stock market crashes, investments in wine have continu-
ously provided high returns for over two hundred years.
Although wine does not belong to the classical commodities that are traded on
commodity exchanges, it has, in recent years, surpassed gold and oil with its returns.
Wine is even being traded on the principles of futures contracts (so-called En Primeur
or Wine Futures): it is purchased at the stage when it still has to age in casks for two
years or more in the producer s wine cellars.
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Pros and Cons of Investing in Wine
Of course, as with any form of investment, there are pros and cons to investing in
wine. If you are considering diversifying your investment portfolio or simply dab-
bling in wine investment for fun, then you need to consider the advantages and dis-
advantages of investing in this liquid commodity. Do your research, watch the mar-
ket and take expert advice to determine if this is a suitable investment type for you.
THE PROS OF INVESTING IN WINE
High Profitability
An investment purchase of top quality wines can bring a higher return than investing
in oil, gold or other precious metals. Well-selected wines can easily grow in net value
by more than 12% p.a. and do not tend to fall, even in times of economic crisis.
High Stability
Another plus of investing in wine is that prices tend to remain stable, meaning that
investing in wine is relatively low-risk. Whilst stock markets and commodity prices
can climb dramatically, equally they can fall just as rapidly. The value of wine, how-
ever, simply remains constant at worst or increases. This can be illustrated by taking a
look at the market for Grand Cru Class� Bordeaux over the last 30 years, the value of
which has not once fallen below its purchase price.
Continuous Growth
The growth in the wine market has been brought about by several economic and
societal factors, including:
" An enormous growth in the number of people who enjoy fine wines, particularly
recently in emerging economies.
" The limited but constant long-term availability of fine wines.
" The desire factor inherent in investing in and enjoying a refined and luxurious
status symbol.
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THE CONS OF INVESTING IN WINE
Price Volatility
Although the wine market is generally one of growth, there is no guarantee that a
specific wine s price will not go down instead of up. Only a relatively small number
of labels and cellars have a guaranteed constant growth, due to their limited supply
and consequent permanently high demand. Wine prices, on the whole, depend on
current trends, quality of vintage, wine experts ratings and other factors.
Liquidity
Compared with other commodities, wine investments may be harder to sell off. Of
course an investment s liquidity depends not just on the asking price but also on its
quality. Wines that are in the best condition, come from established cellars, are prop-
erly stored in bonded warehouses and that have a proven track record will always be
easier to sell than relatively unknown or poorer quality wines.
Expertise
There are a few wines, such as Lafite Rothschild, Ch�teau Latour, Chateau Margaux
and other Bordeaux 1855 1st growth wines, which are always safe bet. You would be
very unlikely to lose your money if you invested in any of these wines. But there are,
of course, many other wines, some of which could bring even greater profits, but
some of which could make a loss. Apart from those few wines mentioned above, it
requires a great deal of expertise and experience to identify potentially profitable
wine investment opportunities. Besides knowledge of the wine market, some finan-
cial knowledge is also beneficial.
Additional Costs
Broker commissions, storage, insurance and transportation are the most typical ad-
ditional costs that need to be taken into consideration when investing in wine. These
costs lower the total profit on your investment. Most of these costs are necessary if
you want to minimize the risk to your investment and maintain the wine s quality in
order to keep your investment liquid (easy to sell) because, as mentioned previously,
only wines with a proven history of good storage keep their investment value.
Lack of Regulation
The wine investment market is largely unregulated, so there is very little protection if
things do go wrong. Therefore only deal with reputable, long-established merchants
or companies offering wine investment advice or services. For extra security, you
should also consider storing your wine under your own name at an independent
bonded warehouse.
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Investment Wine
INVESTMENT WINE CHARACTERISTICS
For a wine to be considered a good wine for investment, it must have several charac-
teristics. Probably the best definition of an investment wine comes from Decanter s
Wine Investment Guide. According to this guide, an investment wine is a wine that:
" Has a good track record of both quality and price and is an immediately recog-
nizable brand or label.
" Has had a steady global demand for previous similar vintages and has shown a
consistent growth in value.
" Comes from an excellent vintage and is highly rated by global wine experts.
" Has the ability to age (and therefore improve in quality) over the years.
EN PRIMEUR
A special section of our Wine Investment Guide concerns En Primeur. En Primeur, or
 wine futures , is a method of purchasing wines early while a vintage is still in a bar-
rel, offering the customer the opportunity to invest in a particular wine before it is
bottled. Payment is made at an early stage, a year or 18 months prior to the official
release of a vintage. An advantage of buying wines En Primeur is that the wines may
be considerably cheaper during the En Primeur period than they will be once bot-
tled and released onto the market. However, this is not guaranteed and some wines
may lose value over time. The wines most commonly offered En Primeur and that are
potentially interesting for investment purposes are mainly wines from Bordeaux and
Burgundy.
However, it should be mentioned that while En Primeur has been exceptionally
profitable in the past decade (and even though it still is profitable) it is question-
able whether the potential profit outweighs the risk of not knowing the future price
evolution. In recent years the release prices being charged by estates for their En
Primeur wines have been very high and wine merchants do not help the situation
either, often charging a 50% or more margin. So it can happen that by the time wine
in En Primeur reaches a potential independent investor (who does not have the op-
portunity to buy wines directly from estates), the price is so high that there is little
scope left for potential future price increases in order to deliver a satisfactory return
on investment (ROI).
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Which Wines to Choose
REGION, PROPERTY AND LABEL
The vast majority (around 90-95%) of all investment wines come from the French
wine region of Bordeaux. Bordeaux is the ideal region to begin your search for in-
vestment wines to start building your portfolio because, if you are new to wine in-
vestment, you can find several high-return-low-risk labels here. Other regions, such
as Burgundy, Rhone, Champagne and Italian Tuscany also produce some fine wines
that investors could consider, but we recommend that these wines are only included
in the portfolio of experienced investors or upon a recommendation from your mer-
chant.
The relative importance of particular regions in wine investment can be seen in the
Regional Weighting table of The Liv-Ex Fine Wine 100 Index. This index is the indus-
try s foremost benchmark and shows the price movements of the 100 most sought-
after fine wines. As one would expect, the majority of the wines are Bordeaux but
there are also wines represented from the Burgundy, Rhone and Champagne regions
as well as some Italians.
The Liv-Ex Fine Wine 100 Index Regional Weighting (June 2011)
Bordeaux Red 95%
Bordeaux White 0.9%
Burgundy Red 1.7%
Champagne 2%
Italy 0.3%
Rhone 0.1%
You can find the full list of investment wines (including indicators of their investment
performance) at http://www.ifwic.org/wines.php.
Bordeaux
As mentioned above, around 90-95% of all wines for investment come from Bor-
deaux and its wines are the foremost to consider for investment purposes. However,
it is important to mention that only a relatively small proportion of the Bordeaux
wine production is truly interesting for the investor. From around 8500 wine-produc-
ing estates in Bordeaux, only around 30-50 can be considered worthwhile for wine
investment purposes.
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The most important wine making areas in Bordeaux include St. Emilion, Graves,
Medoc, Pomerol and Sauternes. Wines from the Graves region are ideal investment
wines, with an aging period of between ten and twenty years, whilst Sauternes need
to be aged for anything between seven and twenty years to be at their very best.
Bordeaux wine classification plays important role in judging wine potential for invest-
ment. The top Bordeaux wines are mostly 1855 1er Cru wines and their 2nd wines:
Bordeaux 1855 1er Cru 2nd Wine
Ch�teau Lafite Rothschild Carruades de Lafite
Ch�teau Margaux Pavillon Rouge
Ch�teau Latour Les Fots de Latour
Ch�teau Haut-Brion Le Clarence de Haut-Brion
Ch�teau Mouton Rothschild Le Petit Mouton
However, the classification system in Bordeaux is not uniform. There are several clas-
sifications, depending on the sub-region, and some sub-regions have no kind of clas-
sification system at all. Hence there are some exceptional wines that are considered
top wine investment opportunities, despite not being 1855 classified, or classified at
all, such as:
" Ch�teau Le Pin (Pomerol, no classification)
" Ch�teau Petrus (Pomerol, no classification)
" Chateau Cheval-Blanc (St. Emilion 1955 Premier Grand Cru Class�)
" Chateaux Ausone (St. Emilion 1955 Premier Grand Cru Class�)
Many wine merchants often also talk about La Mission Haut-Brion and consider this
wine to be another top Bordeaux wine to invest in with the belief that if there were
to be an 1855 re-classification, Mission Haut-Brion would become a 1er Cru wine.
In recent years, since the entry prices for the top Bordeaux wines sky-rocketed, other
Bordeaux wines (along with the already-mentioned 2nd wines) have become in-
creasingly interesting and often outperform their big brothers in terms of profitabil-
ity. In addition to Lafite Rothschild and Mouton Rothschild, other Domaines Barons
de Rothschild estates are currently very popular, especially that of Chateau Duhart-
Milon.
Burgundy
Returns on investments in Burgundy wines can be good, as long as the wines are
from the best vintages from the top producers best vineyards. The top Burgundy
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wines for investment purposes are: DRC, Laflaive, de Vog�� s Musigny and Bonnes
Mares, Meursaults from Lafon, Meursaults from Coche-Dury and Ponsot s Clos de la
Roche. These wines are only available in small quantities and only from wine mer-
chants and agents who reserve their stock for their best customers. There are some
 wine futures from Burgundy that are so in demand that they sell out on the day of
their release and some wines never make it onto the public market. It should also be
pointed out that the secondary market for Burgundy wines is much less developed
and therefore much smaller, similar to Domain de Romanee Conti wines.
Champagne
Champagne can be a very lucrative investment. Prestige Cuvees, such as Cristal, Dom
Perignon or Krug certainly represent interesting investment options and some of
them can grow in value by as much as 40% per year. The potential investor should,
however, bear in mind that these wines are produced in pretty large amounts. Dom
Perignon, for example, produces up to three million bottles per vintage, although
Cristal and Krug produce substantially less, at 500,000 and 400,000 bottles per vin-
tage respectively.
Tuscany
Sassicaia by Tenuta San Guido and Ornellaia by Tenuta dell Ornellaia represent per-
haps the best choice amongst the  Super Tuscans and are wines that are worth con-
sidering investing in. Robert Parker came up with the term  Super Tuscans and has
helped make them become globally well-known.  Super Tuscans represent good
investment opportunities and their value has been known to double (or more) over
time.
VINTAGES
History proves that only wines from the best vintages perform well as investments
and this is a ground rule that applies to all regions, estates and labels. The only ex-
ceptions to the rule are Bordeaux 1855 1er Cru wines and the top Pomerol and St.
Emilion wines, where demand is so high (due to the high prestige associated with
their labels) that quality of vintage influences their price, but not the dynamics of
price evolution. With these wines even the less good vintages can become a good
investment, as they are easy to sell. The top wines from top vintages are so expensive
already that not everybody is interested in buying them and instead prefer to choose
the same wine but from a less good vintage with a lower price. For example, in the
case of Bordeaux, where the best vintages in the past 10 years were 2000 and 2005,
it is much easier to sell other vintages because the selling prices are substantially
lower.
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Exceptions always exist, but we can say that to maximize your profit, it is important
to buy a wine as close to its opening price as possible. This means that only the most
2 recent vintages are worth considering for investment. IFWIC works with wines of a
maximum of 10 years of age, with particular focus on the last 3 years.
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Buying Investment Wine
ALONE OR WITH BROKER?
Wine is a commodity that any independent investor can buy on his own although
most people prefer to use a wine merchant or a wine consulting service. The reason
for this is that selecting the right wine to invest in requires a lot of knowledge and
information. If you decide to invest on your own it can actually be a great deal of
fun and any success you have will be truly pleasurable. Beginners should probably
stick with the 1855 1er wines and their 2nd wines, where the risk of losing money is
minimal.
EN PRIMEUR OR BOTTLES?
If you are sure that you won t need your money for next 2-3 years, buy your wine En
Primeur. This way you will probably maximize your investment. Alternatively, another
good opportunity to buy wine is when the En Primeur bottles are physically released
onto the market - right now in September 2011 this is wine from 2008. Do not buy
in May, wait until September because analysts say that over the summer months the
prices of most of newly released Bordeaux wines drop a little.
If you choose to buy already-bottled wine, focus on buying full, undamaged wooden
cases of excellent quality wines only. Standard bottle formats are the easiest to sell,
so the best choices are cases of 6 x 0.75l or 12 x 0.75l, but 0.375l bottles in cases of 6
or 12 are highly desirable too.
RATINGS, REPORTS AND ANALYSIS
If you decide to buy investment wine on your own, watch wine ratings, vintage re-
ports and wine previous performance figures. These can all help you to estimate the
future behavior of price. Wine ratings and quality of vintage are very important, as
they both greatly influence the entry price of a wine. In the world of wine ratings,
Robert Parker s score can make a huge difference, and Jancis Robinson s opinion has
gained importance in recent years, so watch both.
Vintage quality will influence the all round price level of wines. It is not that a non-
exceptional vintage necessarily means a bad investment option, but that you need
to put all the information into perspective to compare it with other factors (such as
wine ratings and label prestige amongst others). It is very useful to look at the price
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evolution of a past vintage that is, in terms of quality, comparable to the vintage you
are considering for investment.
HOW MUCH TO INVEST?
Each individual knows their own limit of how much they want to and how much they
can afford to invest in wines. A budget of around 5,000EUR will enable you to start
making some investments, but anything less than this will probably not be sufficient.
However, as it is standard practice to minimize your investment risk by creating a di-
verse portfolio, 10-15,000EUR minimum is a good amount for a hobby wine investor.
WHERE TO BUY?
You can, of course, buy wine wherever you want, but you must make sure that you
can trust your source! A lot of wine merchants guides to wine investment often talk
about the need to trust your merchant and you might think that they have only writ-
ten that in order to attract you to their business. Whilst, to a certain extent, this may
be true, they are also correct in what they say. Expensive fine wine is a popular target
for all kinds of scams and that is why it is truly essential only to buy wine from estab-
lished sources. To find a suitable wine-trading partner in your country, please feel
free to visit our Wine Merchants Directory at http://www.ifwic.org/wine-merchants/
fine-wine-merchants.php.
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Transporting and Storing Investment Wine
TRANSPORT
The buyer usually pays all transportation costs and this means that you will bear
these costs from the moment of the wine acquisition. It is essential to use only qual-
ity carriers, who meet or exceed the required standards for transporting wine in all
weather conditions and without affecting wine quality. The extra cost involved in us-
ing reputable wine transporters is most definitely worthwhile to protest your invest-
ment. Do not forget to make sure that your wine is insured during transport!
Personally, my best long-term experience has been with DHL. DHL is not the cheap-
est service available, but they transport carefully, in good climatic conditions and any
problems, such as broken bottles, are quickly resolved. DHL is probably the best gen-
eral carrier to use when transporting investment wines. UK-based investors will also
find the parcel2go.com site very helpful, offering various carrier options at attractive
prices. There are also several carriers that specialize in wine transport. Their major ad-
vantage is that their whole logistic chain is designed to deal with wines and therefore
you can be sure that your wine is being well treated. The principle disadvantage is
that their services are only available in the major wine investment countries, such as
France, UK, USA or Hong Kong.
STORAGE
If you buy wine with the idea of selling it in the future, storing it in a reputable bond-
ed warehouse is a must. Only in this way can you guarantee to a future buyer that
your wine is worth the market price: that it is still in a perfect condition and that even
after leaving the cellars of its producer, it has always been stored in conditions equal
in quality to those of the original warehouse. So, storing your investment wine in a
specialized wine warehouse, which guarantees the right climatic conditions for cor-
rect aging of your wine, is essential. Furthermore, it is important to keep your wine
in bond, to avoid paying taxes and duties. Taxes and duties mean unnecessary ad-
ditional costs on your investment that can be avoided by storing your wine  in bond .
Wine stored  in bond is also much easier to sell as, for example, most merchants
prefer to buy wine in bond exactly for the above-mentioned  savings reason.
Storing your wine in reputable bonded warehouses is also very secure. These ware-
houses often offer additional services: they accept the wine in your name when it
13
arrives and check its quality, ensuring that it is in the condition in which you expect
the wine to be. They can even send you a photo if you wish. If, at a later date, you sell
your wine, they will take care of transport for you.
NEVER forget about insurance! Wine is a fragile item and something untoward could
happen to it at any time. It is not wise to risk losing your investment for the sake of
spending a relatively small amount on insuring it.
Prices for storing your wine at prestigious bonded warehouse are quite reasonable
and absolutely worth the benefits. For example, London City Bond charges around
8GBP per case of 12 bottles per annum, including insurance. Prices for other bonded
warehouses are comparable.
Please feel free to check the list of recommended bonded warehouses at http://
www.ifwic.org/bonded-warehouses/bonded-warehouses.php.
14
Selling Investment Wine
PRICE EVOLUTION  FINDING THE RIGHT MOMENT
The profit you make on your wine investment depends on its future price evolution.
You can never be 100% certain if, and by how much, the value of your wine will in-
crease. However, in the case of Bordeaux wines, there is a certain evolution pattern
which has been observed already, and which can help you to decide whether to sell
or not.
In the case of Bordeaux wines, the price goes through several phases. The first phase
is when you have purchased the wine En Primeur, following which the price slowly
increases for the next two years. The next significant price increase comes at the mo-
ment when En Primeur wines are bottled and released onto the market. This is the
first  right moment to sell for the investor who doesn t consider wine to be a long-
term investment. After a wine has been bottled, its price increases slowly and any
further significant price increase occurs really only at the moment when the wine
is sufficiently aged and ready to be drunk. This can take around 10 years in the case
of cheaper Bordeaux wines and up to several decades in the case of top Bordeaux
wines.
EVALUATING INVESTMENT WINE
Once you decide to sell your wine, it is important to know its value and therefore how
much you can expect to receive for it. Assuming that your wine is in perfect condition
(meaning that all the bottles have perfect labels, the bottles are still in their original
wooden case (OWC) and you are able to prove quality warehousing) it is relatively
simple to determine the market price of your wine. You can visit wine-searcher.com
and check wine prices corresponding to the geographical area where you plan to
sell. Your reference market price is the minimum wine-searcher.com price for a par-
ticular wine, quantity and format.
To know the value of your wine (what you will receive), you need to subtract 10-15%
from this minimum market price. The reason for this is that, no matter if you decide to
sell you wine via the Internet, via a traditional wine merchant or at auction, 10-15%
will be the minimum commission you will have to pay.
15
WHERE TO SELL
If your wine is in perfect condition and has been well stored, it should be easy to
sell. You can contact your local broker or wine merchant or you can offer your wine
for sale at auction. To find a local trading partner, please visit our wine merchant di-
rectory at http://www.ifwic.org/wine-merchants/fine-wine-merchants.php and our
wine auctions directory at http://www.ifwic.org/wine-auctions/wine-auctions.php.
Alternatively you could sell your wine over the Internet. But again, we must warn you
to beware of Internet scams! If you sell your wine to an unknown buyer, be careful
with the payment methods that you accept. Credit cards and Paypal can be a subject
to a chargeback. The best option is to ask your buyer to pay in advance or use a third
party escrow service such as moneybookers.com.
16
Costs of Investment
Wine is a tangible asset and that is why there are some additional costs associated
with investment, compared to other, more traditional, forms of investment. The most
obvious are broker s or merchant s commission, storage, insurance, transport and
money transfer costs.
BROKER S OR MERCHANT S COMMISSION
Regardless of whether you buy/sell your wines from/to a traditional merchant or
through an established Internet shop, you must always allow to pay 10-15% com-
mission.
TRANSPORT
Transport costs can vary considerably and represent one of the disadvantages of in-
vesting in wine. The costs depend on the distance and the carrier and decrease sub-
stantially the more cases you send at once. A single case of wine sent across Europe
costs around 60Euros with DHL. For wine, it is the industry standard to pay an insur-
ance fee of 1% of the value of the shipment and this is indispensable!
WAREHOUSE
A reputable warehouse will ask for around 12Euros/year per case of 12x0.75l bottles
for storage.
MONEY TRANSFER
This cost cannot be ignored as it can represent as much as 2-3% of the value of the
money transfer, especially in the case of using Internet payment services, such as
Paypal.com or moneybookers.com or in the case of international wire transfers.
17
10 tips for Investing in Wine
EVALUATE RISK
Decide if you want or are able to buy wine alone or if you will need the services of a
broker or a consultant. Their services can help you to identify wines that would be
way too risky to invest in alone and their commission charges can easily be recouped
by potential high returns on your wine. If you want to invest alone, stick with the
traditional labels and  very good to classic vintages.
BUY FROM TRUSTED SOURCE
You will only be able to sell your wine if you are able to prove its history. Buying wine
of trusted origin from a reputable merchant is the first step.
CREATE PORTFOLIO
To minimize investment risk, it is important to create a portfolio. Bordeaux wine
should represent the majority of your wines, around 90-95%.
WATCH RATINGS, REVIEWS AND NUMBERS
These can all help you to forecast the future evolution of wine prices and of your
investment. Do not invest in wines with a Robert Parker rating of less than 95.
WATCH OUT FOR FORMATS AND QUALITY
The easiest to sell wine is that in standard formats (0.375l and 0.75l) in their original
wooden cases of 6 or 12 bottles. Quality matters and only wines with undamaged
labels and cases have a market value.
BUY IN BOND, STORE IN BONDED WINE WAREHOUSE
Avoid unnecessary extra costs such as duty and taxes by buying wine  in bond and
storing in a bonded warehouse. If you buy wine  in bond you will be buying it at the
18
lowest possible price at that moment in time. Wine stored in bond is the most de-
sired by wine merchants, for the above-mentioned financial benefits, and therefore
is the easiest to sell.
INSURE
Wine is fragile, that is why it is essential always to have your wine insured, no matter
whether in storage or during transport.
DOCUMENT
Keep and safely store all documents from merchants, transportation companies and
warehouses relating to your wine investment. You might be asked to provide evi-
dence of the quality and the origin of your wine.
BEWARE OF SCAMS
Make sure that you are actually getting what you think you are buying: buy only from
trusted sources and reputable merchants. Never pay more than 1,000Euros by credit
card or Internet payment sites, such as Paypal or Moneybookers and likewise never
accept more than 1,000Euro through these means. Better to use wire transfer.
LOOK AT 2ND WINES OF BORDEAUX 1855 1ER CRU
Especially from the past 2-3 years, the 2nd wines of the top Bordeaux estates repre-
sent a high yield investment option. Take a look at them.
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