In recent years, fine wine has garnered a reputation as a leading alternative investment. Although it may sound surprising, returns from other passion investments like fine wine such as cars, art and stamps tend to outstrip more traditional ones.
Statistics from the Coutts index has revealed that fine wine in particular increased in value by 134% between 2005 and 2014. But despite these promising figures, fine wine investment is not a reliable way for anybody to supplement their income: not only is it rife with scams but it can take more than ten years to make any money. Just like with any investment, a combination of research and patience will be paramount for making the best decisions.
Here are three essential facts about fine wine that any potential investor must familiarise themselves with.
Respect bottle condition
Perhaps surprisingly, even a rare and highly valuable vintage isn’t guaranteed to fetch a handsome sum if the bottle condition isn’t up to scratch.
Bottle condition can be negatively affected through a number of factors. If a buyer discovers that a wine bottle has not been stored at a professional standard, they probably won’t want to take a risk on a wine that could have been exposed to suboptimal temperatures.
Bottle condition doesn’t just refer to what’s inside the bottle either.
Serious wine buyers will assess every aspect of a bottle of wine. Bottle level, label condition and capsule condition are significant valuation factors according to fine wine inspection guidelines. So, regardless of a wine’s age, the wine level may prove to be unacceptable if ullage has occurred (the absorption of wine by the cork), a damaged label could lead to rejection and a cork that has pushed through by more than 2mm might prevent a deal.
Provenance is significant
Wine provenance refers to the history, and usually authenticity, behind an individual bottle of wine. It is tremendously important in an industry that has such a bad reputation for fraudulent behaviour. Ultimately, being able to prove the provenance of wine can be the difference between being able to sell at maximum value or not.
The notorious wine fraudster Rudi Kurniawan made a fortune with a fine wine “counterfeiting factory” because his buyers weren’t interested in provenance. Following an FBI raid it was discovered that he had manufactured huge volumes of fake labels for some of the world’s most prestigious wines.
If details can be provided about where a wine has been stored and how it came to be there, it will be far more desirable than a similar wine that has no trace.
Trust wines ‘in bond’
As previously mentioned, professional storage of fine wine is imperative for ensuring the right conditions and preserving the wine’s value.
In order to do this, and prove its provenance, wine should be stored ‘in bond’ for what tends to be a small regular fee. This means that it will be stored in a bonded warehouse in which goods are stored without payment of duty. Bonded warehouses are almost certainly guaranteed to provide the best environment for wine.
One of the advantages of using a bonded warehouse is that the stored wine can be bought and sold multiple times without it ever being moved. This combats the risk of damage to the condition of the bottle. However, it also means that buyers must trust the seller, as they will not have the option to inspect the wine themselves. Bearing this in mind, it will be important to have the bottle inspected by warehouse personnel in order to guarantee that the wine is the genuine article.