The Democratization of Fine Wine Collecting and Investment
How do You Decide? What Are the Most Expensive Wines Sold?
I recently attended a webinar concerning the “Democratization of Fine Wine.” I am a mild collector only for the purpose of aging and consuming wine. I am not an investment collector, so that is my disclaimer on this topic. However, now that there are fractional buying opportunities, many experts feel that fine wine investment should be part of their portfolio. My purpose in educating all of us and writing this newsletter is gathering the information, data, and assistance needed to make choices. Disclaimer: I do not utilize any of these entities currently. Examples of the resources an investor can utilize to make important financial decisions regarding fine wine investment and collecting are detailed here.
History in Fine Wine Collecting/Investing
Previously, access to fine wine was reserved for those in the know or those who could afford to buy an entire case of wine. Wines were largely sold by famous auction houses like Sotheby’s, Christie’s, and Bonhams. With a new generation of collectors and technology digitalization, some revolutionary changes have come to this market with increasing customer expectations.
“Buyer Beware,” is a strong theme in the documentary, Sour Grapes. In this documentary, controversy erupts when an unassuming young man, Rudy Kurniawan, currently doing 10 years in jail, floods the American wine market with fake vintages valued in the millions, bamboozling the wine world elite. William Koch was one of the scammed billionaires who was conned and cheated into paying $2.1 million for 219 fake bottles of wine. A strong provenance (the history of ownership of a valued object) examined by experts for a bottle or case of wine is needed to assure authenticity.
Emerging technologies and authenticity experts are bringing fine wine into the mainstream. Robin Hood-style investment bonds and fractionalization mean wine investments are truly now offered for the masses. As the industry modernizes, both primary and secondary sales of fine wine have notably become more accessible online. Emerging technologies are now paving an avenue of accessibility for consumers, producers, buyers and more, drawing on perspectives from experts across many different industry sectors.
The fine wine market is broadening, too. At one point, Bordeaux produced most of the fine wine, investment-grade market. Now, the primary and secondary markets have broadened to include Burgundy, Tuscany, Champagne, and some US wines.
“Fine Wine Investing is very different than investing in gold, stocks, and coins. This market moves independently of other markets, so it can be a good hedge to other investments. There is a lifestyle, “art” to collecting wine. It is a tangible, beautiful thing. 40% of high-net-worth families now have a wine collection. Fine wine collecting is one of two most popular (along with art) alternative investments in the US. Investors want diverse portfolios”. – David Parker, Benchmark Wine Group.
Digital Players in the Fine Wine Investment Market
Live-ex, London, UK, is a global marketplace for wine trade. It has “the world’s most comprehensive database of fine wine prices,” according to their spokesperson, Robbie Stevens. It is a challenge to know what is collectible and what is investment-grade wine. Live-ex produces the data to help investors make those decisions. Membership in Live-ex allows access to wine-purchasing information ranging from fine and rare investment-grade wine to everyday drinking wine all over the world.
“The democratization of wine will continue, bringing new consumers and a broader market. There were barriers to trade before this time. The consumer found it difficult to know about a wine. Before, it was reserved for people ‘in the know,’ but the internet has allowed transparency and efficiency.” – Robbie Stevens of Liv-ex.
Vint, headquartered in Richmond, VA, offers the investor a fractional ownership of investment-grade wines and spirits that are securitized with the SEC, then stored in the Vint network of cellars. The JOBS Act of 2012 (Jumpstart Our Business Startups) created an exemption under the federal securities laws so that crowdfunding can be used to offer and sell securities to the general public, according to the U.S. Securities and Exchange Commission. Vint sources, securitizes, stores, and sells investment-grade wines and spirits. When the timing is right to maximize returns, they work with merchants, auction houses, and private buyers to sell those assets within each collection and distribute the proceeds on a pro-rata basis.
There are other ways to invest in fine wine. Mutual funds like Anpero Capital, Sommelier Capital, and Wine Investment Fund are also available to accredited investors. Wine futures, or en primeur in French, refer to the practice of buying wine from a producer while it is still in the barrel. Finally, wine industry stocks include Constellation Brands Inc. (STZ), Diageo PLC (DEO), and LVMH (LVMUY), the latter famous for its luxury brands like Champagne’ Veuve Clicquot and Moët.
In a recent Forbes article, “How to Invest in Wine,” the pros and cons of investing in wine are noted. Advantages include portfolio diversification, lower market volatility, and enhanced potential for returns. Disadvantages of investing in fine wine are the shipping and storage costs of wine, premium fees for the purchase, and the high initial investment to get in the market (if fractional or mutual fund buying is not considered.)
What Were Some of the Most Expensive Wines Ever Sold?
· $558,000 – Romanée-Conti (1945) Grand Cru Red Burgundy (Pinot Noir). It was sold in 2018, setting the world record. Domaine de la Romanée Conti consistently produce some of the most expensive wines in the world.
· $500,000 -- Screaming Eagle (1992). This Oakville, Napa Valley (cult) Cabernet Sauvignon was sold at a charity event sale, Auction Napa Valley. It scored 99 points from Robert Parker. The 200 cases were made by winemaker, Heidi Barrett.
· $310,000 -- Château Mouton-Rothschild (1945) Premier Cru Bordeaux. 1945 was one of the best Bordeaux vintages of the century and the bottle itself commemorates the Allied victory in WWII with a ‘V” on the label. It was produced in the Haut Medoc region of Bordeaux.
· $310,000 – Château Cheval Blanc (1947). A Bordeaux right bank Premier Grand Cru Classe (A) wine from the St. Émilion area. It is comprised of 50% Cabernet Franc, 50% Merlot.
· $275,000 Heidsieck (1907). The world’s most expensive Champagne. During the First World War, a ship carrying the wine was sunk by a German submarine. Some bottles survived and were recovered 81 years later.
· $230,000 – Château Lafite-Rothschild (1869). This Premier Cru Bordeaux was sold at a Hong Kong auction. The anonymous bidder bought three bottles at the same price.
· $225,000 – Château Margaux (1787). Bottled in 1787 and once owned by Thomas Jefferson, this wine was brought to a dinner where the waiter accidentally knocked it off the table, causing the bottle to shatter. Insurance covered it.
· $168,000 Penfolds Block 42 (2004) Cabernet Sauvignon. Penfold’s is one of Australia’s oldest wineries, founded in 1844. The Block 42 was closed with a small piece of wood and required an expert to open it properly.
Good Value Wine Recommendations from These Same Famous Regions
2020 Chateau Paloumey, Haut Medoc, Bordeaux, France, $33
Wine Enthusiast, 92 Points
2020 Château Coutet St. Emilion, Bordeaux, France, $39
Wine Enthusiast, 92 Points
2020 Joseph Drouhin Chambolle-Musigny Premier Cru, Burgundy, France, $175
Robert Parker, 93 Points
2020 Penfolds Bin 389 Cabernet-Shiraz, South Australia, $70
Robert Parker, 96 Points
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Thank you, Linda. It's a new world in wine investing.
Great story! So interesting to learn more about wine investing.