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August 18, 2014

Investing in Bordeaux

Posted by:
Elevay Global

While fine wine has always been a commodity favoured by the wealthy, it has never been such an attractive commodity for eager investors. How eager are investors to get their hands on rare Bordeaux?

People are now so keen on procuring the rarest vintage that they buy the wine before it’s even bottled. Individual châteaux are able to augment their cash flow by selling futures or en primeur, meaning that the wine is sold while it’s still in the barrel for a lower cost than it will sell for once bottled. Most experts agree that it was wine critic Robert Parker Jr.’s endorsement of the 1982 Bordeaux vintage that started this craze which shows no signs of slowing down.

Generally, wine is a good investment because it does appreciate in value. A case of Château Latour sold for about $400 in 1982 but now the same case sells for $33,000. That’s an increase of about 8,000%. Wine is now treated like any other investment by wine funds such as Wine Asset Managers of England. Wine insurance is sold to protect these investments and expert investors are careful to avoid EU sales tax by buying and storing European wines “under bond.”

Many factors can affect the value of the wine but it is generally only in Bordeaux where the process continually attracts high net worth investors. Wine is akin to any other luxury brand in that supply and demand, and reputation, affect its value. Other factors that can impact the price include the hiring of a certain winemaker or the sale of a particular château. In recent years, the Chinese have dominated investment in the Bordeaux region and Wine Spectator estimates that more than 60 châteaux are now Chinese-owned.

Perhaps the irony lies in the fact that vineyards are under great pressure to produce stellar wines, yet the prices of many great vintages have been driven so high by investors that the wine has become too valuable to drink.

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