Fine Wines Department

Investment wines are often wines bought En Primeur, which means the wine is bought while still in the barrel at the Chateau. Only 1% of all wines produced in the world are considered investment wines, they are all generally from Bordeaux in France. This makes for a highly competitive market. Asia is currently at the forefront of the investment wine market. This is largely due to the fact that the Hong Kong government has abolished all import taxes on fine wines. This has resulted in Hong Kong being the fine wine trading capital of the world. Now is the best time to enter into this alternative method of investment as the Chinese market is predicted to expand four-fold in the next 5-10 years.

Platinum Wines continuously analyses the fine wine market and has several experienced wine brokers. Our brokers will guide you in setting up a portfolio if you are new to the market, or help you maintain and expand your current portfolio. All Platinum Wines investment portfolios are continuously monitored and you will be given constant market updates as well as assistance when it comes time to trade your wines.

What is Wine Investment?

The underlying principles of wine investment fundamentally come down to the basic laws of supply and demand. The very top Bordeaux wines, in which we specialise, are produced in very small quantities, so there is a painfully limited (and ultimately diminishing) supply. Demand nearly always outstrips supply through the ‘traditional’ markets of Europe and North America, but the extraordinary investment performance of recent years is largely attributed to the influx of wealth from China.

In such a finely balanced supply vs demand dynamic, the increase of new wealthy buyers in the quantities coming out of China has changed the market beyond recognition. You can also add into the fold that Fine Wines, by definition, improve with age. As they reach maturity and approach optimum drinking, they become more desirable and therefore more valuable. As the wines begin to be consumed they become even rarer, which in turn adds yet more upward pressure on prices.

As an asset class, fine wine is a finite resource – the top Chateaux cannot readily increase supply. It is a recognised symbol of status and class, occupying a unique position of cultural significance.

Fine wine investment has seen some astonishing returns, with a market average net return of 15-17% per year over the last 20 years. Indeed, it is no secret that wine has significantly outperformed many traditional investment indices – including the FTSE 100 and even the price of gold – for as long as three decades.

WHAT IS EN PRIMEUR?

En Primeur, or "wine futures", refers to the method of purchasing wines while a vintage is still maturing in the barrel. This allows investors to purchase high-end wines up to two years before they are bottled. The advantage of this tends to be that the wine is often cheaper to buy En Primeur than it will be when it is bottled and released onto the open market.

The wines most commonly offered En Primeur are from Bordeaux, Burgundy, the Rhône Valley and Port, although other regions are adopting the practice. En Primeur wines are released for sale every year in the summer, when the previous year’s vintage will be available for purchase. Each En Primeur wine buyer is issued with a certificate of ownership directly from the relevant Château.

Back to top

Why Invest?

The Hong Kong government has abolished all import duties
Investment wines are a physical asset that are certified and can be insured
Only small quantities are produced with the focus on quality
Excellent return rates , 15-17% net average per year over the last 20 years
Constantly outstrips return rates of gold, property and stocks
Relatively stable market, especially when compared to equities
Medium to long term investment (4-5 years)
China is now leading the way in wine investment with a seemingly insatiable demand in Asia
The Asian wine market is expanding 4 times faster than the rest of the world

Market and Future of Wine Investment

Kanupriya Kapoor, FT.com, 1 June 2011

The Liv-ex Fine Wine 100 Index has recorded a steady rise of almost 40 per cent in the prices of fine wines over the past three years. Demand for wine was relatively resistant to the global financial crisis and prices recovered quickly.

Boston Consulting Group, Hong Kong, 22 January 2010

China is poised to become the world’s largest luxury goods market in the next five to seven years.”

South China Morning Post, 20 June 2011

The wine industry has exploded in a few short years to be worth HK$5.5 billion dollars.”

Reuters Life, 19 July 2011

Wine collectors, particularly from Hong Kong, bought more than $200 million worth of fine wines at auction in the first half of 2011, nearly doubling the amount for the same period last year.

As the above quotes and graph show, the market for both fine wines and the general consumption of wine is growing in Asia at record levels. As the number of millionaires and billionaires continues to grow in China, so will the demand for high-end investment wines which are already in short supply.

Declared the "fine wine industry's leading benchmark" by Reuters, the Liv-ex Fine Wine 100 Index represents the price movement of 100 of the most sought-after fine wines for which there is a strong secondary market. The index is calculated monthly. Liv-ex is the world’s leading on-line marketplace for fine wine. It is estimated that the Liv-ex membership accounts for 80% of global fine wine turnover. The above graph shows the steady increase in returns in the fine wine market over the last 5 years.

Storage and Exit strategies

Storage

Can I store my wines with you? How much does this cost?

Platinum Wines will handle the transport to HK and we can help you open an account at Crown Wine Cellars in your name for proper storage. The cost is approximately HK$300 per case per year.

Where are the wines stored and are they fully insured whilst in storage?

The facility at Crown Wine Cellars is generally considered to offer the best storage conditions for fine wine in HK. All wines stored with Crown Wine Cellars are insured to their full, current market value.

What are the ideal conditions for storing wine?

If you intend to store wines for any length of time, proper storage conditions are imperative. The most important factor to consider when storing a wine is a constant temperature, ideally between 10 - 15 degrees Celsius. Bottles should be stored on their sides to keep the cork in contact with the wine, preventing it from drying out. A dark space is best, as is an absence of any vibrations.

If buying En Primeur, when do I start paying storage?

You only start paying storage once the wines are bottled and arrive in Hong Kong and are placed in your storage account. The length of time this take varies from campaign to campaign – for Bordeaux it is usually two years after the initial release of the wines. For other regions, it is from several months to a year after their initial En Primeur release. The varying length of time relates to how long the wines spend in barrel before being bottled and delivered to Hong Kong.

Can I store my wines elsewhere in the world?

Yes, you can store your wines at a place of your choosing. However, we suggest you keep your wines in Hong Kong as it is the trading hub of the world for fine wines and it will make storage and reselling of your wines much easier. The other most common choice is to store your wines in London and there are two we recommend, which are London City Bond and Octavian.

Exit Strategies

You are totally in control of your investment wines at all times, including when it comes time to sell. Platinum Wines continuously monitors your portfolio and will help you throughout every step of the selling process.

Where can I sell my investment wines?

Wine merchants such as Platinum Wines
Online tading platforms such as Liv-ex
Auction houses such as Christie’s, Sotherby’s, etc
Wholesalers such as Watson’s Wine Cellars

Back to top