CorkSavvy

Was it really only a few months ago that the world looked like it was coming to an end (as we know it)? The stock market was crashing, oil skyrocketed and then dropped like a lead balloon, and the housing market simply disappeared. Lest we forget the swine flu scare and the resurgence of enemies in foreign lands to add to our woes. For those reasons alone, we all deserve a wonderful glass or two of our favorite wine. I don’t know if it is just me, but somehow I feel that each glass of wine tastes a little better than it did only a few months ago. It is unlikely that the wine has changed; it is more likely that my perception and appreciation of the wine has changed in relation to the negative environment. This leads me to believe that in good times wine taste great and in bad times wine taste that much better so maybe wine is a good thing to keep all the time. But is wine a good investment like stocks and bonds? When was the last time you enjoyed holding a stock certificate? The question may sound a little ludicrous, but it should point out that you cannot compare these types of investments. Simply because you enjoy wine does not mean it will be a good investment. As with anything you choose for investment, it requires research, understanding of the marketplace, professional advice, and luck.

Investing in wine is serious business. At wine auctions tens of thousands of dollars are spent on wine. The past year has caused unprecedented turmoil even at auction houses. Investing in wine has to be given the same amount of respect as investing in any commodity. Supply and demand are critical to the value of an investment. A great example of this is the price fluctuations in oil as demand dropped so did the price; similarly as oil demand increased (as we increase our driving in the summertime) so do the prices. 

Wine, like oil, can vary depending on supply and demand. There has been an increase in demand for fine wine in the traditional markets of Europe and North America and the emerging consumer markets of Russia, India and China. The demand for fine wine is not impervious to the starts and stops of the economy; in fact it is very highly impacted by the economic trends. In the short term, both prices and volume of sales have dropped in the wine industry as a whole.

Unlike oil and other commodities where you do not take possession of the product, in wine investing most people have possession of their wine. That is not to say that there are not other avenues of wine investing to pursue such as wine funds or investments in actual vineyards to name a few. Keep in mind that taking possession of the wine entails substantial additional expenses.

The supply side of fine wine is actually quite limited. Since fine wine often comes from the old world regions whose growing areas are highly regulated by governments and limited to specific land areas, there are limits on the amount of grapes that can be grown to produce wine. Champagne and Bordeaux are examples of regions in France that are closely regulated by the government and whose expansion is limited by geographical boundaries. Even though demand may increase worldwide for certain fine wines, the most highly coveted wine producers are not able to increase their production. That has the potential of having more people seeking a limited quantity of wine.

The next question to ponder is whether or not you can really determine what a bottle of wine is worth? Or, what it will be worth in the future? The best indicators of a wine's current and future value are wine ratings and the scarcity of the wine. Ratings can vary dramatically, so it is important to check your sources very carefully.  A highly rated wine that is currently in limited production is a good indicator of a wine that is in high demand. To determine which wines will be scarce in the future is harder to ascertain. One possibility is to research your favorite wineries and check out the past performance of their wine prices and the amount of their production and see if there is much variation.

Obviously the choice of wines is a major concern. Consider choosing wines from the most recognizable regions around the world. Remember not all wines are meant to be collected; many are simply meant for present enjoyment. Collecting wine is not a simple or inexpensive matter. Storage costs alone can be substantial whether you build a home wine cellar or use a storage facility. Be sure to add the cost of insurance to any wine collection you anticipate starting.

For many wine drinkers collecting starts out as a convenience (having a few bottles of wine you enjoy on your wine rack) and then turns into a passion (making sure you have a wide selection and balance of wines in your cellar) and then an obsession (needing to acquire the very best and rarest wines). Where you fall in this spectrum of wine drinkers will very clearly determine the magnitude, the seriousness, and the nature of your investment in wine. Since there is never any guarantee of appreciation of an investment, the beauty of investing in wine is that if you buy what you like and store the wine carefully you will always have the opportunity to enjoy the wine even if it does not increase in value. -- Jill Sloane