Investing in Wine

Introduction

The concept of making money from wine – wine as an asset class – is a relatively recent phenomenon and one which has been fuelled by the dramatic increase in demand and the emergence of new markets; particularly China and the Far East generally.

Previously the act of making money from wine was almost accidental or driven by buyers selling cases to fund future purchase with the concept of “building a cellar for free” due to the increase in value of one case meeting the cost of buying two cases. This was most vividly seen by purchasing En Primeur when generally this is the cheapest a wine will ever be.

There are unique factors that provide investment potential in certain wines and from certain regions of the world.

Why Invest in Wine

Unique aspects

• There are several aspects that create an opportunity for wine to deliver an investment return. When each vintage is harvested and the wines in barrel or vat, the producing Chateaux must declare the total production. This enables us to know how much wine is being bottled for consumers. Wine therefore has a finite quantity for each vintage. Due to consumption in sought after vintages the demand for a wine will drive up its price and hence value of stock held.
• The Bordeaux market in particular is very structured, based primarily on the 1855 classification. This has ensured that with no movement in the chateaux between levels then the pricing structure is fairly constant.
• Unlike the majority of other investments, wine is a physical and therefore a tangible asset and one that will sit in a warehouse recorded to your name as your asset.
• "in bond” – wine held for investment in the UK has the benefit of being able to be held in a bonded warehouse (all GVWM wines for both clients and our own stocks sit in a bonded warehouse) and this means that wines so held do not enter the tax chain of the UK. This removes them from both duty and VAT. Wines can be bought and sold “in bond”.

Wasting Asset

• Wine is classed as a “wasting asset” and as such there is no liability to tax on the gains from increases in value of wine – Wasting assets (TCGA 1992 s.45) and Chattels (TCGA 1992 s.262)
• Wine clearly does not produce an income therefore there is no liability to tax from gains made on holding wines as an asset.

Making an investment in wine

• Key issues are the length of time you are investing for. GVWM advisors will explain that wine is not a short term investment. You should be looking to hold your wines for a minimum of five (5) years. Many people will use investment into wine as a supplement of their pension funding and hold long term – by far the best approach. A benefit of wine is that it is traded worldwide on a daily basis and with the internet wines can be sold any time 24:7 – the only issue is “are you willing to accept the price offered”?
• Only invest what you can afford to. There are no quick fixes with wine investment.
• As stated, ensure your merchant / advisor is solid and has good reputation.
• Clarify where the wines are to be stored.

Risk issues

• The merchant or organisation advising you. You must ensure that the firm that you consult for advice is reputable and has a good reputation. One place to check online is through a site established by Jim Budd, a long-time campaigner for greater regulation of this area.
• Regulation – this activity is not regulated and the fine wine industry is not regulated. GVWM wines are not in the business of financial or tax advice. You are advised to consult your tax advisors for any further specific advice
• Provenance of the wines is crucial. You should be buying wines that are only OWC – original wooden cases. This preserves the value whereas the same wine not in OWC would be worth considerably less
• Always buy wines “in bond” – see above
• Storage is crucial. Wines must be stored in temperature and humidity controlled environments. We at GVWM wines store our wines with EHD who have ideal conditions for storage in both their Locke King Vaults and main warehouse. Currently GVWM wines has over 15,500 cases of client wines stored with us. Storage is at a rate of £12.50 per 9 litres stored with us and this includes insurance at full replacement value

GVWM is a leading wine merchant in the UK and Hong Kong and has been involved in En Primeur business since 1998. This ensures we are well qualified to provide advice on investing in wine through our experienced team who have a total of 104 years in the wine trade combined; operating throughout the world.  With the advent of greater focus on investing in wine, we have refined and improved our services for investment clients and provide clear and focused advice on investing.

We do not charge a fee for advice or managing your wine portfolio. The only costs to you are the purchase cost of the wines and the charge for storage – see above.

Your next step

Contact one of the advisory team today.