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Investing in wine

Sep 27 2017 16:44

Cape Town - Wine is now the most popular luxury investment globally, according to Knight Frank’s latest Luxury Investment Index (KFLII).

Wine has now overtaken collectable cars in the past 12 months, according to the index.

The report concludes that the reason for this growth in wine investment is due to the exclusivity associated with some wines, because limited volumes are produced, creating a rarity of owning them.
 
The concept of wine being an investment has become more prevalent on a local level as well. At the recent 2017 Nederburg Auction in Cape Town, six bottles of the 1977 Zonnebloem Shiraz were sold for R13 000.00.
 
According to Michael van Deventer, Vinoteque and e-commerce manager at Distell, while investing in wine may seem far more exciting than the investment into other, more traditional asset classes, selecting a good investment wine is very much like picking a stock on the JSE.

“A lot of research and thought goes into selecting the right wine to invest in and, just as you would consult a financial adviser about the stock market, it is crucial to seek professional advice on what makes a wine investment-worthy,” explains Van Deventer.

Desirability

Generally speaking, desirability is what makes a particular wine a worthy investment, says van Deventer.

“While iconic wines tend to be produced in smaller volumes, this is not the only factor to consider. When selecting an investment wine, it is important to look out for the best vintages, awards that the wine has won and possibly most importantly, ageability,” he adds.
 
Therefore, in order for a wine to reach a status whereby it can become an investment, it needs to reach maturity and rarity first, says van Deventer.

“Ageability is the backbone to a rare investment wine and, unfortunately, very few South African wineries have back-dating vintages in the Vinoteque, an online wine sales platform, or an archive of sorts."
 
According to Elize Coetzee, cellar master at Zonnebloem wines, another factor here is that a vast volume of high-end South African wines are of the white variety. However, global consensus is still that only reds can be considered true investments.

"This is unfortunate, because we have some amazing white wines in the Cape and while many of them do possess ageing capacity, the investment ‘mind-set’ is simply not there,” Coetzee adds.

Risk

Like with any investment, Coetzee warns that wine collectors do run the risk of their wine losing value, rather than gaining value, over time.

“Wine is a commodity and, like any other commodity, will suffer with shifts in the economy. Other factors that could cause an investment wine to become less valuable over time include a shift in ownership of the winery, a change of winemaker, or poor storage conditions,” says Coetzee.
 
She concludes that while wine has proven more than capable to earn investors healthy returns in the past, it is an investment that should only be considered by those who are passionate about wine.

“Wine investment, much like the collection of fine art, is often considered as more of a hobby than a method to earn financial return. A love of wine, however, is not enough to ensure a good investment and it is also always advisable to get a professional assessment of the wine in question from someone who is able to offer a historical understanding of the producer and vintage,” she cautions.

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