Author: CJ Follini

Happy Sunday fellow NOYACKERS!

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Now, let's uncork today's topic: wine investing. I've been collecting since '88, watching my weekend passion evolve into something more intriguing – an alternative asset that combines pleasure with potential profit. While a glass of red remains my favorite way to end the week, I've learned to see beyond the bottle to the investment opportunity.

Here's a quick lesson I learned the hard way: Fresh out of college in '88, I poured my savings into six cases of fine wine on a relative's tip. By sheer luck, they were from the legendary 1982 vintage – one of the century's finest. The catch? I stored them at my parents' house.

One evening, I arrived late to meet our new wealth advisor, only to find everyone casually sipping what turned out to be a 1982 Château Margaux from my collection. Sure, that advisor became my best man, but breaking up that case instantly slashed its value by 50%. Talk about an expensive dinner party; to this day our guests think we are the best hosts he’s ever met;

The moral? Do your homework and diversify. As we dive into wine investing today, we'll explore everything from market performance to expert insights, helping you avoid my rookie mistakes. And don't worry – unlike my mother, we won't mistake investment-grade wine for Tuesday night juice.

No need to stress about repeating the blunder I once made! Many of us are here to help, and the knowledge of wine investing is extensive. Today, let's take a moment to explore the basics together. Cheers to learning!

Along the way, we’ll see:

• The surprisingly strong investment performance of wine,

• Three unique ways to invest in wine,

• And common pitfalls of amateur wine investors.

We’ll also be speaking with Callum Woodcock, founder & CEO of WineFi and an expert in this field. Stick around to read our interview, or watch the video here.

Let’s roll!

Wine Investing: An Overview

The basic premise of wine investing is straightforward: buy a nice bottle of wine, wait a little while, then sell it.

Since older wines are generally more expensive, you’ll probably be reselling at a premium – which can make this process a profitable endeavor.

What’s more, the number of global millionaires is growing – which should increase overall demand for luxury items like fine wine.

Sounds simple, right? 

In reality, the situation is a little more complicated. Determining which bottles to buy and when to sell them is a nuanced art, and there are a bunch of factors besides age that can influence the ultimate sale price:

• Condition. Careful temperature and humidity control are required to store wine bottles properly and maintain their condition over the years. 

• Provenance. Like fine art, it matters who owned a bottle of wine previously. I mentioned Thomas Jefferson’s appreciation for wine – some of his bottles have sold for hundreds of thousands of dollars.

• Scarcity. Some wines are produced in limited quantities, which can make them especially valuable on the secondary market.  

Only 350 cases of the 2012 Domaine de la Romanee-Conti were made, resulting in prices of over $90K per bottle. 

Overlook any one of these factors, and wine investing can be sour grapes.

But get them all right, and the practice can be highly lucrative. 

Despite a recent pullback, fine wine prices (as measured by the Liv-ex Fine Wine 100 index) have returned 8.7% annualized over the past five years. 

And if you’ll excuse the finance lingo, investing in wine comes with an ‘embedded option.’

If prices don’t perform well, you always have the option of uncorking the bottle and drinking it yourself!

Which Wines are “Investment Grade”?

I’ve been speaking in broad strokes here, discussing “fine wine” as an investable asset class.

But let’s get more specific here – which types of wines constitute investment-grade bottles?

France still leads the way

Historically, wines from the Bordeaux region of France dominated the investment-grade market. While things are a bit more diversified these days, Bordeaux wines are still a market leader.

Bordeaux produces around 900 million bottles of wine annually, but only a tiny fraction of this amount comes from one of the First Growth chateaus – considered to be the best of the best.

Vineyards at a chateau in Bordeaux, France. 

In addition to Bordeaux, fine wines from the Burgundy region of France are also generally considered high-quality. And, of course, we can’t forget about Rhône wine or Champagne. 

Italy is a close second

Not to be outdone, fine wines from Italy are also highly competitive with French vintages. 

In recent years, Barolo wines from Piedmont and Super Tuscans have been grabbing investment-grade market share.

California is holding its own

While the investment-grade wine market is largely dominated by European vineyards, Napa wines from California are becoming more widely appreciated.

In fact, our friends at WineFi say that Napa wines are the only “New World” wines allowed in their funds! 

Expert Interview: Callum Woodcock

To help us better understand the wine investing ecosystem, we sat down with Callum Woodcock, founder and CEO of WineFi. 

Callum has a background in the traditional asset management space, having worked for Fidelity and JPMorgan Chase. 

He was inspired to launch WineFi after noticing the asset classes’ impressive historical performance – and the dearth of serious investor options in the space.

You can watch our full interview with Callum on the NOYACK YouTube channel, or read a condensed version of our interview below!

Psst… Curious to learn more about WineFi? You can book a call with their team.

What aspects of wine investing might be particularly appealing to Millennial and Gen Z HENRYs?

I think that Millennials and Gen Z differ from older generations in a few fundamental ways when it comes to how they invest. 

Back in the day, because the only way to access wine as an investment was through a wine merchant, it was very easy to conflate investing and collecting. I think younger investors are much more intentional about drawing the line between the two and focusing on the financial performance of the assets. 

So, we’ve invested a lot of time pulling together educational resources comparing wine’s performance with reference points like the S&P 500, and younger investors have really been responding to that.

What type of holding period would you recommend for a wine investment?

Wine is a medium to long term hold, I think. 

There are some platforms that pitch the idea that you can buy wine and sell it in a couple years for tremendous returns. To the extent that you’re in a bull market, that might be true. 

But typically, the dynamics of wine investing mean that you need to hold the wine over a period of time – because scarcity increases as other wines from that vintage are consumed or damaged or improperly stored. We typically suggest holding periods of three to seven years and that’s the length that our investment syndicates run.

What are the main risks of wine investing?

I think the first thing is liquidity. Ironically, wine is a relatively illiquid asset class, which means that it can take a while to sell down your wine portfolio when you’re ready to exit.

Part of this is because wine doesn’t pay yields like many other assets. That can make them harder to value and thus sell quickly. 

The second thing is forgeries. People are often surprised to learn that around 30% of wine sold on the open market is counterfeit.

We’re able to minimize this risk by only purchasing from bonded warehouses or directly from producers, meaning there’s an unbroken chain of ownership we can validate. But in the market overall, it’s definitely a risk.

NOYACK: Curated for You

Chubb: Things to consider before investing in wine

Morgan Stanley: How to Invest in Wine

Liv-Ex: Introduction to fine wine investment

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