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Fine wine is undoubtedly an asset; it’s a luxurious product that we aspire to own, consume and know more about.

For many, it’s far more useful than gold, and easier to enjoy than art, and this makes wine investment a pivotal point of interest to wine connoisseurs and investors alike. The most important factor is the supply, which is limited, so the prevalence of any particular aged vintage is constantly diminishing. This is why having a well-aged vintage from good stock in your possession can see you reaping financial rewards.

To ensure you’re making the right long-term investment choice, Wineries of South Australia teams up with Tamara Grischy, head of auctions at Langton Fine Wine Auctions, to explain everything you need to know about investing in wine.

THE STATUS QUOIn the 1990s demand boomed for top-quality wines from renowned regions, such as Bordeaux, as the traditional market for these wines — namely Europe and North America — was joined by a new one, the Far East. This saw unprecedented growth by these new markets, especially China.

Today, an increase in customers’ vinous knowledge has expanded the interest and appetite of buyers, while the tough economic climate has attributed to attractive prices. If you’re looking at making a viable long-term investment, iconic vintages from 2009 and 2010 still hold cachet and will be a high-quality addition to your portfolio. Shrewd buyers, however, are encouraged to seek out quality and value from previously under-priced vintages, such as wines from 2006 and 2008.

It’s also worth noting that wine portfolios are expanding beyond what has been seen as traditionally the best-quality and most expensive wine suppliers in Bordeaux and

shifting towards markets in Burgundy, Spain, Italy and North America.

BEST OF THE BESTArmed with all of this knowledge, it’s important to consider why wine is a better investment than other more traditional forms of financial investment.

In a nutshell, wine is a finite product. You’re putting money into a tangible, improving asset with limited production and global demand. The supply of this already limited asset declines over time, which therefore drives prices up.

“The consumption of wine directly impacts the amount of specific brands and vintages available on the market. This rarity factor is the biggest influencing variable impacting the growth of value in the wine market,” says Grischy.

According to Grischy, however, the wine market is more than just a money-making scheme.

“Wine allows us to travel the world and explore regional differences by simply opening a bottle. In a culture driven by food and wine indulgence, the taste experience is becoming more important, even among those who don’t know much about wine.”

The phenomenal demand for high-quality, mature wines makes it a great way to generate some extra money, while also having fun!

TRICKS OF THE TRADELike any financial endeavour, investing in wine is not guaranteed to give you a profitable return. The key to any beneficial investment is always research, so make sure you learn everything you can about the market, including the history, current economic state and what successful wine investors are doing to see a return for their money. According to Grischy, a

Boasting one of the best-performing asset classes of the last two decades, fine wine investment is by no means a new phenomenon. Selecting a wine synonymous with sophistication and elegance that will perform as a tangible asset, however, can be tricky. Whether you’re a fully-fledged aficionado or a naïve novice, April Davis delves into how funnelling your savings into liquid assets can give your early retirement fund a much needed boost.

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high-quality wine that’s worth investing in will need to meet the following criteria:

“A high-quality wine should capture consumer imagination, have limited production, a good track record, regional provenance and be of an exquisite quality.”

Here, we delve further into some of the essential factors you need to learn about before you invest.

Know Your PriceKnowing your price covers two key areas; knowing how much you can spend and knowing how much a bottle is actually worth.

Wine is a valuable commodity and sales are becoming more impressive, however, making a profit or even breaking even is not always guaranteed. You should only spend what you can afford to lose and never use money you need to live off. As enticing as investing in a premier bottle of red may be, it’s not worth risking your financial wellbeing or your ability to provide for yourself and your family.

You should also make sure your wine merchant isn’t ripping you off. A professional will be able to spot a naïve novice from a mile away and an untrustworthy one won’t hesitate to charge you above market value for the sought-after vintage you have your eye on. This will not only see you spending more in the short-term, it will also affect your profit margin.

Invest In The BestA cheap no-name bottle of white wine, even if you keep it for ten years, probably won’t make you any money, while a good-quality bottle of wine from a reputable winery could potentially line your pockets with some extra cash.

The trick is to invest in wine with a good track record that also has global secondary demand. Many would suggest you should stick to the main chateaux of Bordeaux, which is an excellent tip since historically this region has

fared better than any other. You can, however, also look at the wine investment potential in other countries, such as Italy, America and even Australia. Most importantly, make sure you only buy the best wine available within your price range.

Make A Long-Term CommitmentThe best investment-grade wines are produced in small quantities (usually a maximum of 20,000 cases) and the demand and supply imbalance brought about through consumption drives the prices higher over time. This means that a minimum five-year investment period is more likely to wield results. Purchasing a wine and then selling it a month later is probably going to be a waste of time. Many investors will hold onto their purchases for five-year intervals, with ten-years being a popular and successful investment length.

Find The Right HomeCorrect storage of investment wines is crucial. Regardless of how good your wine is when you purchase it, the quality and value of your wine will be compromised if it isn’t stored correctly.

Fine wine will age best if it’s stored in a temperature- and humidity-controlled environment. Ensuring it’s in sealed, unmixed wooden cases, potentially in a paid warehouse, will keep it safe. There are ‘in bond’ locations across the globe where for a small fee your wine will be professionally stored in optimum conditions to ensure it retains its value for the life of your investment.

Find The Right InsuranceMuch like you wouldn’t purchase a house or a car without insuring them, you also shouldn’t purchase a bottle of wine that you intend to keep as an asset without insuring it. Ideally your wine should be insured for its potential value; at the very least make sure it’s insured for the purchase price.

Know When To SellKeep track of the market and trends, to know how much your wine has grown in value and if it’s expected to keep growing. You need to hold onto your investment for a period of time, but not too long. This can feel like a bit of a balancing act, but if you keep yourself up-to-date and well-informed, and seek advice from professionals, you’ll be more likely to find the perfect balance.

TRUST THE EXPERTSDespite the fads and fashions of the wine industry, certain wines have historically fared better than others in terms of investment. First released in 1991, the Langton’s Classification of Australian Wine has become the benchmark for investing in Australian wines. It ranks the country’s best-performing wines based on market demand and secondary market performance over time.

“Langton’s Classification of Australian Wine ranks wine based on its reputation and track record at auction. The classification is compiled every four years from auction sales results, including volume of bidding and price movements,” says Grischy.

Another indicator of how well a wine might perform in Australia is Penfolds Grange.

“Penfolds Grange leads the market in Australia and is distinctive in the international wine market. The brand has established some unique and very attractive qualities that are rarely seen in the international market, especially since there’s always a high demand for complete sets of Penfolds’ wine and for Grange magnums, which trade for high prices,” says Grischy.

Another benchmark is The Liv-ex Fine Wine 100 Index, which is a great resource available to budding or established wine investors. The index is the fine wine industry’s leading global benchmark, which represents the

price movement of 100 of the most sought-after fine wines. It’s highly recommended you refer to its index prior to finalising any buying decisions.

LIQUID ASSETSStarting the research process from scratch can be daunting, which is why we have compiled a selection of high-quality vintages that are real commodities!

BordeauxWines from Bordeaux have a long-established history and a good reputation for consistent quality and cellaring potential.

On Bordeaux’s ‘left bank’, chateaux Latour, Lafite-Rothschild, Margeau, Mouton-Rothschild and Haut-Brion are all reliable investments. On the ‘right bank’ plush merlot-based wines from Le Pin, Petrus and Lafleur are some of the most popular investment wines.

BurgundyRed and white wines from Burgundy are only made in small quantities and are

usually snapped up by local enthusiasts very quickly. When they re-appear on the market their scarcity drives the prices to astronomical heights.

The Grand Cru wines from de la Romanee-Conti, Henri Jayer and Comte Georges de Vogue are also among some of the best.

Rhone ValleyThe Rhone Valley doesn’t produce as many wines capable of commanding high prices, but there are still a handful of attractive prospects. Most notable are those from Jean-Louis Chave, particularly the Cuvee Cathelin and Vin de Paille. Any of the top-end Chateauneuf-du-Pape wines from Chateau Rayas, including the standard Reserve, the Pignan Reserve and the white Reserve Blanc, are all worthwhile investments.

AmericaThe United States is a new force in the wine investment industry and is making its mark with its potential to produce expensive, top-quality wines.

California dominates the American market with collector’s items produced in small quantities that drive a strong return. Napa Valley cabernet sauvignons, such as Screaming Eagle, Schrader Cellars’ Beckstoffer To Kalon and T6 RBS, are among the best.

Outside of Nappa, Sonoma County’s Vérité winery produces three wines, La Joie, La Muse and Le Desir. The value of these wines has grown consistently over time and can lead to good investment returns.

AustraliaAustralia is home to a handful of wines that are being recognised globally for their investment potential. Penfolds, in particular, produces several wines that have been consistently increasing in value over the past decade. Among these are Bin 95 Grange, RWT, Bin 389 and Bin 407.

“1998 Penfolds Bin 389, in particular, has increased 300 per cent over the last ten years. The original purchase price was $18 and the current price is $120,” Grischy explains.

As you can see, there really is a lot to consider before you start purchasing fine wine. To ensure you’re investing in the best, Grischy runs through her best investment tips.

• Buy what you enjoy

• Know your budget

• Understand the market

• Buy direct from the winery and look out for deals

• Only buy the best vintages

• Pay attention to cellaring conditions (storage, provenance, fakes)

Her final piece of advice is to subscribe to mailing lists and to invest in wines with a strong performance history.

“Get on the mailing lists of Australian wineries such as Wendouree, Majella, Moss Wood, and Rockford Basket Press. You should also target staples, such as Penfolds Bin 28 and 128.”

With proper research, funds, and patience, your favourite bottle of red can do more than make your head spin. Wine investment is a burgeoning interest to people across the globe, and with the Australian wine industry booming, it’s no wonder more and more investors are raising their glasses to money well spent.

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