Sales and storage key to starting a fine wine collection
Updated: 2010-09-25 08:31
By Ann Williams(HK Edition)
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If you were attracted by the idea of investing in fine wine as a sound investment after reading last week's Alternative Investments column, you may well be asking yourself: what is the minimum sum required to get started?
Nick Pegna, managing director of wine merchant Berry Bros & Rudd in Hong Kong, says that at the very minimum you should expect an outlay of around HK$50,000. "That will buy you two cases of a top-quality wine such as a first-growth Bordeaux, at around 2,000 British pounds sterling per case, in London," he says.
It is not unusual to find wine prices quoted in British pounds sterling as London has retained its historical association as the center of the global wine trade. Not only is it close to the source of the top wines in France, but the collective experience of its vintners goes back centuries.
But before you begin to dream of making a handsome return on your investment, you need to factor in two elements: the costs of storing wine and finding an effective sales channel.
A bottle of fine wine is a delicate commodity that must be looked after carefully. That means holding it in a dedicated wine-storage facility, where temperature and humidity are controlled, free from light and vibration. Many collectors, including wine enthusiast Simon Reid-Kay of Hong Kong, opt for storage in the UK.
Pegna says: "It makes sense, the being closer to the source - i.e., France - keeps costs down, while storage and insurance costs are about 50 percent lower in Britain than they are in Hong Kong, as well as being more available. Being in London also gives you more options in terms of selling."
Wines are stored in bonded warehouses, meaning that owners are not liable for any duties and taxes while the bottles remain there or are exported. You should expect to pay around around 7-10 pounds sterling per case for storage in the UK, according to Decanter wine magazine. This fee will be the same whatever the type of wine, so keep this in mind if you are trying to decide whether to invest in premier cru or lower grades.
However, since the Hong Kong government abolished import duties on wine in 2008, increasing numbers of collectors have been shipping cases to the SAR - especially if the wine is primarily for personal consumption. Berry Bros shipped an impressive 7,500 cases to Hong Kong in the immediate aftermath of the tax eradication.
You should also think about your exit strategy carefully. Don't be seduced by the high prices that wine at auction can go for when valuing your cellar. A good merchant or broker will help you assess the value, plus there are plenty of on-line tools that indicate the latest prices of major wines. When you are preparing to sell, take account of relevant costs, such as a brokers' fee or auction-house consignor fees.
As with any investment, the maxim "caveat emptor" applies. Prices go down as well as up; wines are constantly re-evaluated as they age, affecting their value; and there is no regulation of the wine market, with no equivalent of a Securities & Futures Commission to whom you can turn. If you are "cold called" by someone exhorting you to invest in wine, exhaustively research the relevant company - the Internet has made this easy to do.
One of the biggest dangers is that the wine you buy is not what it seems. Some experts estimate that as much as two-thirds of the Chateau Lafite circulating in China is fake, though this is difficult to gauge accurately, and it is not just an Asian problem; bottles were withdrawn from an auction in New York two years ago after having been revealed as forgeries. William I. Koch, a US-based billionaire wine collector, has had some success recently in instigating law suits against the sellers of fake wine.
But if everything fails, at least you have a top-notch bottle of wine to drink!
(HK Edition 09/25/2010 page2)