Here’s how wine can help you make money.
The idea that wine could be an investment was almost a running joke for a long time. In fact, the only reason our ancestors banned alcohol was because it was virtually undrinkable for the first 10 years of its life. . Today, while technology and experience have allowed us to use variables that better control a wine’s flavor profile, there is still a certain inimitable charm in wines aged for decades. available.
But after each vintage bottle is opened, there is little left to enjoy and share. And this increased scarcity, given the dynamics of supply and demand, could drive up prices.
So, hypothetically, if I had bought bottles from the 1982 vintage when they were launched and kept them hidden in a controlled place for all those decades, I would be able to sell them selectively and early retirement today. would have been in a position to plan. . Alternatively, and equally hypothetically, if I had made the same investment in 1983 (or worse, Encore, from 1992), only a few years apart but the weather was significantly poorer. , which adversely affected the quality of the wine produced and resulted in their ability to age would be a working man with a huge debt to pay and plenty of dead wine. There will be bottles!
That’s why we now have wine investment experts. These are usually financiers, working in the financial space with more traditional investment products, who further have a specialized team that deeply understands the world of wine and knows what to pick up. And when to let it go.
Suman Banerjee, CIO at Hidunova
For better insight, I contacted Hedonova, an AIF firm that invests in alternative assets such as Vine, NFTs, crypto, and P2P lending. Suman Banerjee, CIO at Hidunova, sat me down and explained the key aspects of wine investing – how they handle it, how I can come on board and what kind of returns I can expect to see.
So how can wine be considered an investment?
Over the past three decades, wine has gone from somewhat of an investment to a collectors’ item to a mature asset class. There is now an entire global online exchange where wine bottles are traded, called Liv-Ex. Some wines increase in value over time, just like other collectibles. This is because as a wine ages, it can develop more complex flavors and aromas, making it more desirable to collectors and connoisseurs. As a result, older and rarer wines can command higher prices in the market.
Does it give us returns like stock markets and/or mutual funds?
Like any asset class, prices go up and down. Wine markets also move in cycles that are surprisingly predictable. Bull markets last for 36 months while bear markets last for 18 months. In terms of returns, wine has outperformed equity markets by a wide margin. Since 1998, wine markets have returned 21% compared to 16% for equity markets.
How does it compare to watches or fine art as an investment?
Surprisingly, there is a mature investment market in watches as the product is quality but the market is highly volatile and plagued by fakes. There are some similarities with art; They both have similar consumers — the super rich, both are physical products so they thrive in hyper-inflationary environments and both are brand dependent, i.e. art is run by legendary artists while wine The perceived value of is greater when it comes from larger objects. Brand Name Wineries.
What is the minimum tenure to stay in the investment?
Either two years or seven years. These two time horizons serve different types of investments. There are first financiers, like myself, who provide capital to wineries before harvest, take ownership when the wine is in barrel, and then sell to a distributor. Another way is to buy wine after it has been bottled and then hold onto it. The former is operationally intensive while the latter is everyday investor friendly.
How does Hedonova work in the wine investment market?
We are an early stage investor in wine. We finance wineries to buy entire vintages immediately after harvest when the wine is still grapes. Because of this, we can enter at lower prices. We then hold the wine barrels for about two years while the grape juice becomes wine. Before bottling, we sell to a late-stage investor or wine distributor.
How much money can a good wine investment expect to make?
Depending on the region, wine type, and vintage, the wine can return between 16% and 22%. France’s wine, which is red, has historically been the most profitable from 2001 to 2006.
What about taxes etc on profits earned?
Taxation depends on the county in which the investor resides.
What is the worst case scenario?
Like any tradable security on an exchange, the price of wine fluctuates every day. There are two risks specific to wine – bad weather in France and unfavorable tariffs from the US or China. Like it or not, French wines like Bordeaux, Burgundy, and Champagne dominate the global wine market with a 60% market share. But the lack of the Gulf Stream (a warm ocean current) cools wine-growing regions and can lead to crop failure in certain years. In addition to natural concerns, there are other global implications. The US and China are the largest importers of wine, but when the US imposed tariffs on wine imports from Europe in 2021, it jolted the market. In such cases, demand is affected which affects prices and consequently, the value of your investment.
How does one invest in wine? Can they do it themselves?
I can break it down into three steps. One, open an account on a wine exchange like Liv-Ex. Two, buy wine from France, Argentina or Chile. Three, diversify the vintages, offering some great wines from 2016 or earlier. Hold two business cycles for about 90 months. This is one of the few times I can recommend it to people. can do Do it yourself – if the investment fails, you’ll still be left with plenty of decent wine to drown your sorrows with!
