Wine. The Liquid Asset.

Whether sharing a glass of something special with someone special, complementing a meal or simply relaxing in an evening, wine is a topic that many of us have an interest in (perhaps even more so over the last 12 months!!). But have you ever been curious as to its value as an investment? Is that bottle you were given for Christmas one that should be savoured or secured? Does a higher price really mean better drinking?

You can’t drink a bitcoin!

At the end of 2020, Miles Davis from the wine trading platform, Wine Owners, remarked that the world of wine investment is ‘a calm and beautiful little side water. Traditional assets continue to bounce around causing stress – not so for vino! Unlike after the global financial crisis, the wine market has held its nerve, merchants did not mark down prices and the market has been stable’.

This positivity is reflected in the auction market with Sothebys reporting that ‘buyers embraced an accelerated transition to online sales in 2020’. Its total wine and spirits auction sales hit £67.6million¹ for the year. Similar results were seen across the pond with Acker² auction sales hitting a record $122 million in 2020 which was 32% up on 2019. For those of you with a penchant for Bordeaux its worth noting that wine from that particular region accounted for 23% of those auction sales.

‘There is of course the added benefit that this is an asset you can dip into, savour and enjoy – you can’t even hold, let alone drink, a bitcoin, a share or a derivative’³…although if your wine is truly an investment this benefit could also be a risk of course!

Is your wine liquid gold?

Investing in fine wine is one of the longest standing alternative asset classes with keen and competitive interest from the Asian, European and American markets. Looking back over the last 30 years there is a clear history of very attractive returns. ‘The longest-running index shows that across the last 30 years wine has delivered over 10% compounded annual growth, which compares to 8% for UK Equities (including reinvestment of dividends) and 4-5% for Gold and Oil.’⁴

It’s also worth remembering that wine, like gold, is tax-free (to a point) and could make a good alternative to shares and bonds whilst diversifying one’s portfolio. There is no capital gains tax to pay up to the value of £250,000 but the law is a little murky so be sure to do your own homework.⁵

Is it valuable wine or cheap plonk?

Did you know that the average spend on a bottle of wine in the UK is just over £6⁶. Interestingly have you thought how much the actual wine in that bottle makes up of the cost? If you usually buy a bottle in the supermarket for £7.50 for example, by the time you have accounted for excise duties, VAT, bottling, shipping and the retailer’s margin, a shockingly small £1.43⁷ is spent on the wine! If you splash out a tenner, the value of the actual wine then leaps up to £2.70.

Of course, supermarkets aren’t our only option when it comes to purchasing the nectar with which we so gallantly toast the end of another successful week of working from home. The consumers demand for home delivered wines has increased so much over the last year that Virgin Wines are due to float on the London Stock Exchange in March 2021. ‘With over 169,000 members, we have enjoyed strong, consistent growth resulting in the group delivering more than one million cases of wine to consumers during 2020.’⁸ said Jay Wright, CEO.

With so many cases of wine flooding through our front doors on a regular subscription basis, should we be upping our wine neophyte status to that of a oenophile? With the global wine market valued at £235 billion⁹ in 2020 the entry advice to potential connoisseurs is to start collecting the kind of wines that you already enjoy drinking. When it comes to investment-grade bottles then there are five considerations: rarity, reputation, vintage, critics’ scores, and provenance—its source and storage¹⁰.

Lock, Stock and Barrel

For those fortunate enough to have a vast collection there are commercial cellars that will safely store your wine. One such cellar is situated in a disused limestone quarry in Wiltshire. Octavian currently stores £2 billion worth of wine in their humidity-controlled, vibration-free tunnels and include the relevant insurance.¹¹.

However, for those of us who find that wine is more a pleasure than an investment, storage is more likely to be under the stairs or perhaps in the basement…. somewhere within easy reaching distance of a glass and the corkscrew!

When it comes to Home insurance, this is something that is almost always overlooked. If your ‘cellar’ only amounts to half a case, then this isn’t normally an issue. However, if you happen to have amassed a large number of bottles, particularly if their typical value is more than the UK average of £6, then you do need to consider the overall value and how this affects your policy. Even if you don’t consider yourself a collector, you may still find this is classed as a ‘collection’ for which there could be an inner limit on your policy, under which other items might also be grouped, such as art, antiques and jewellery. If you have a policy that allows you to separate out your wine from your ‘general contents’ you may also find that it helps reduce your premium to do so.

Home insurance normally protects wine in the same way as it does your carpets and furniture – cover for fire, theft, even accidental damage can be included. Unfortunately ‘accidental disappearance’ is off the menu however!

Should you require any advice on this or any other aspect of your Home insurance, please just call or email, we’re here to help.