Reasons for Buying En Primeur

The en primeur wine industry is full of magic, mystery and suspense, and if that’s not enough it’s also a good investment that doesn’t necessarily require wine expertise. If you are new to the field of buying wine futures, prepare to be pleasantly surprised in more ways than one.

The Basics

En primeur, also called wine futures, is the early purchase of very young wine, hence the name, that hasn’t yet been bottled. It works like this: every spring, when the Primeur campaign opens, thousands of wine professionals visit the Bordeaux region, some come to taste and review, while others come to purchase or invest. More than 150 of the top Bordeaux estates welcome buyers, retailers, journalists and wine experts from all over the world to taste samples of the latest vintages on offer, and prices are set based on the feedback they receive. Wines are released for sale in a number of phases, and prices are adjusted along the way. While Bordeaux is the en primeur capital,the tradition has expanded over the years to include the markets of Burgundy, California, the Rhone Valley, Italy and Port.

Why Buy En Primeur?

If you know wines, you know that they can change significantly in the months between the en premier tastings and the bottling. However, this risk can be controlled by dealing only with established and reputable wine merchants, and the advantages of investing in wine futures are many.

Firstly, there is the price, en primeur wines are usually much lower in cost than they will be once released, making them a good investment. Then there is the opportunity, when you buy en primeur you are given the chance to buy wines that are high in demand and limited in quantity. These wines could easily become impossible to find on the market after they are bottled. Finally, there is the mystique, the excitement of buying something that hasn’t yet become the fullest and best version of itself.

Post-Brexit Fine Wine Investment

Is Fine Wine an Investment Haven After Brexit?

Britain collectively voted to exit from the European Union causing major upheaval in the venture capital world. Investors experiencing the economic turbulence after Brexit are understandably nervous. The upshot of this momentous event has left several severely startled financiers concerned about the rapidly falling pound – and looking around for secure investment options.

Investing in fine wine has just become an
even safer investment haven

Even though global markets are rattled, there are still steady, reliable options available to investors – vintage options, like fine wine investment. One of the main traits of a vintage investment is that it has several defensive characteristics that make it perform well, even in a declining economy. This is why:

Pricing – Since thBrexit Blue European Unione pound has dropped to the lowest it has been in over three decades, fine wine prices have become more competitive. Because of this overseas demand is stimulated. Even though fine Bordeaux investment wines may be priced in Sterling, most of the buyers are transacting from overseas countries like Japan, China and the United States.

Fine wine investment remains on an upward trajectory – Despite the fine wine market suffering a substantial price correction after a period of falling prices between 2011 and 2014, annual returns and price increases remain consistent, unlike many other investment markets and economies.

Fine wine is independent – While many other asset prices are dependent on other pricing, holdings in fine wine has no correlation to the FTSE100. Again, performance is consistent.

Lack of white noise – Lucrative investments can be drowned out by the white noise of a strong economy. During an economic decline, solid investment options become more obvious and fine wine investments are no different.

Physical assets perform better in a weak economy – This is especially true when it comes to the excellent long-term performance track record of fine wine investments.

Sin Industries – Although fine wine cannot truly be considered as sinful, it is regarded as part of the so-called ‘sin industries’ – and during economic downturns these industries do better.

The Flip-Side of the Coin

Of course there is apprehension when it comes to making investments during tumultuous times. According to Mike Laing, Armit Wines managing director, many customers would prefer taking the risk of waiting to see how things settle down post-Brexit before committing funds. Gary Boom of BI is equally wary and was heard voicing concern over volatility when it comes to trade markets.

Is it Really That Risky?

Veteran investors agree that making time-honoured investments is the way to go – and what better than investing in en primeur wines? Acquiring stock at the lowest market price, especially when the economy is dipping, makes perfect sense. According to the Wine and Spirit Trade Association (WASTA) wine trade in the UK has more than doubled in the past 10 years and the country has become an importing and distribution hub for fine wines across the globe. Being the preferred point of entry into the EU’s single market, Britain is the ‘beating heart’ of the global wine trade, making fine wine investments in the UK a very sensible decision. Any investment has associated risks. It is up to the individual investor to decide what level of risk they are prepared to take, and what they are prepared to invest.

Tips for Safe Wine Investment

iStock_000003550102XSmallIf you have extra money and are not sure where to invest, alternative markets can offer satisfying rewards and benefits that are not typically found in the more traditional markets. Alternative investments can run the gamut from coins to vintage cars to artwork to fine wines, but the common thread throughout all of these markets is that you own something tangible. You can enjoy looking at your investments or showing them off while waiting for the right time to sell for profit.

Fine Wine as a Safe (and Fun) Investment

For safe portfolio diversification, investment in fine wines has increased in popularity as a hedge against wild fluctuations in the stock market or other financial markets. When properly handled and stored, wines from established estates will improve with age and become dearer as supply runs low. But be careful here because for investment purposes, not all wines are the same.

Investment Grade Wine

There is a great variety of New World wines available to enjoy around the table, but estates from Bordeaux produce the tried and true vintages that do not flux with changes in the stock market. The majority of investment wines come from Bordeaux, with producers from Champagne, Burgundy and the Rhone Valley making up most of the remaining supply.

Global Warming Improves Vintages

The steady increase in worldwide temperatures has been good for the grapes. The warmer weather has positively affected wines coming from Burgundy and Bordeaux over the past decade and it seems that the trend will continue. There have been fewer storms to damage vineyards and overall climate changes have helped produce vintages that can be purchased with little doubt that they will increase in value. The only question is how much?

The best advice for a beginning investment? Study the market, narrow down your preferences and consult with a reputable wine merchant to find a suitable entry point.

Solid Investments in an Evolving Wine Market

in the late 1990s, ultra-fine wine produced in Australia was predicted to be worthy of investment, but today that is not the case. There iStock_000011499766XSmallare a number of reasons for this, not the least of which is the general movements in the wine market during the past decade. Recent changes take into account increasing internet sales, a renaissance in the Bordeaux market, Hong Kong’s zero tax rate, Chinese speculative buying and the new international wine funds. Australia’s once popular cult wine market has eased up as well.
Australia’s Place in the Market

Contrary to predictions, the Australian wines were unable to capture and hold on to a corner of the fine wine investment market. One particular Australian First Growth that was singled out for success, Penfolds Grange, failed to keep up with investments in Bordeaux. A combination of downward price pressure, inability to compete and increasing costs all helped to nail that coffin shut. Many of Australia’s wine brokers are now out of business and unfortunate buyers of the recommended wines took a big hit at resale.

Choosing the Correct Wine for Investment

We know that it can take decades to build up a strong reputation in the market, with track record being the strongest market indicator. Other aspects that can make or break a wine investment are regional character and price evolution. The Australian wines that investors were encouraged to buy in the late 1990s and into early 2000 were in fact second or third wines from emerging producers. While they were not bad wines, they did not meet the expectations of investment wines. Other factors working against the Australian market have been the spiraling exchange rate, evolution of fashion trends and the cost of doing business.

Wine Auctions as an Indicator

Watching the auctions has been the most effective way to gauge wine trends. If a fine wine generates a lot of excitement in an auction, it is usually followed by market success. But even with emerging wines, first growths from reputable wine estates will always hold the highest probability for success.

Matching Your Wine Investment to Your Portfolio Needs

iStock_000013320303XSmallInvesting in fine wine can be one of the most fun and exciting investments you will ever make, but it will also teach you patience. That’s because one of the first prerequisites in successful investment is the ability to wait. Unlike other types of alternative investments, wine does not offer a quick buck or a fast turnaround. According to your portfolio needs, choose a wine that will come of age during a year you will be ready to sell. For instance, En premier wines produced in Bordeaux have a minimum turnaround time of five years, making them a perfect choice for a short-term portfolio.

Once you have selected the best wine for your purposes, your next prerequisite should be proper storage in a licensed facility that can be documented at sale time. Temperature control, which is professionally regulated, is vital when it comes time to sell for the top dollar.

Wine For Sale in Dijon

Speaking of French wine, many cities in that country keep their own wine cellars stocked with local vintage. They break into their own stock when wooing official guests, hosting prestigious receptions or bestowing memorable gifts. We can only imagine that each bottle was stored in that city’s climate-controlled conditions. Thousands of those bottles in Dijon were recently auctioned off to make room for more and to rotate the stock. During storage for an undisclosed number of years, some of the wines had outrageously increased in value. The total receipts of the day came to some $200,000, but one of those bottles, a 1999 Vosne-Romanée Cros Parantoux, brought in $6,500. Proceeds went to the “social action” committee.

Officials in Dijon may have taken the idea from Paris, where 4,680 bottles of French wine were auctioned in 2006. Half of the proceeds, which totaled more than $1 million, were donated to a special anti-alcoholism fund.