Many people will provide you with advice on how to build a wine cellar that is unique and offers great wines from many regions and varieties around the world. In the world of prestigious wines there are so many great wines to pick from and lay down in your cellar. Some expensive, some award winners and some small batch unique wines that are hard to get. While the world of prestigious wines can be very mysterious and even romantic it is likely that you should take a more business like approach when trying to select wines that you would like to sell later for a profit.
Set out below are some of the questions that you should consider when buying wines that you would like to sell in the future.
What is your objective?
You really need to start with the end in mind. If you are buying to sell in the future you will need to do the appropriate research around the types of wines that other people want to buy and drink. You shouldn’t base it around what you like to drink as this could cause you to make emotional purchases that are not likely to increase in value. So it's important to be clear on your objective. Drinking or selling or both!
What do you need to do to achieve your objective?
Planning is at the base of any good investing. If you want to build a cellar for future financial returns then you need to buy well and also make sure the wine is protected well for future consumers. Buying well means that you will need to research the wines most likely to appreciate and then work out how you access them.
How do I take the appropriate actions that give me the best chance of success?
I highly recommend that once you select the products most likely to give you a return you then look at setting a budget for what you want to spend across the products you have selected. Its also important that you spread the investment across a range of brands to reduce your risks. No different to a share portfolio where some shares rise and some fall. In your plan you need to designate an area for the wine in a safe and secure temperature controlled environment. Many good investors do this in an offsite professional wine cellar storage business. Don’t mix your drinking wines up with your investing wines!
How do I know if my cellar is tracking ok ?
Like any business you will need to review your progress at regular intervals. There are a number of websites that can help you monitor how much your wine has appreciated or depreciated. Like the stock market you should be diligent at exiting wine that is not performing and reinvesting in wines that are growing in value.
Picking the right wines can be difficult, but here is an easy checklist for picking wines for your cellar.
- Is the wine a well marketed super premium brand? Prices have increased in the last 5 years
- Is the wine in high demand with limited supply? The wine is hard to get
- Has the wine consistently won respected awards for excellence and quality from relevant shows and writers? A cult following exists
- Has the wine already had a track record of increasing in value in history? Get the actual statistics
- Does the wine have a stable winemaking team and philosophy behind it? How much experience does the team have with this exact wine
- Is the wine from a recognised premium country and wine region? It's not obscure or so unique that no one knows about it
- Does the wine have significant history and stories that support its premium position? Are the stories well written and easy to access
Below is an example of investing in wine and making money
* Initial investment of $17,400 across 15 wines and 90 bottles in 2014
* Value today is $21,654 which is a profit of $4,254 (24% growth)
* 15 wines selected and valuation from wine-searcher.com
The Wines Selected:
- Penfolds Grange Bin 95, Australia
- Penfolds Bin 389 Cabernet-Shiraz, South Australia
- Penfolds Bin 707 Cabernet Sauvignon, South Australia
- Penfolds St. Henri Shiraz, South Australia
- Penfolds Bin 407 Cabernet Sauvignon, South Australia
- Henschke Hill of Grace Shiraz, Eden Valley, Australia
- Penfolds RWT - Bin 798 Shiraz, Barossa Valley, Australia
- Penfolds Bin 28 Kalimna Shiraz, South Australia
- d'Arenberg The Dead Arm Shiraz, McLaren Vale, Australia
- Rockford Basket Press Shiraz, Barossa Valley, Australia
- Leeuwin Estate Art Series Chardonnay, Margaret River, Australia
- Mollydooker Carnival of Love Shiraz, McLaren Vale, Australia
- Henschke Mount Edelstone Shiraz, Eden Valley, Australia
- Jim Barry The Armagh Shiraz, Clare Valley, Australia
- Elderton Command Single Vineyard Shiraz, Barossa Valley, Australia
What if we applied the same rules as the best investor on the planet-Warren Buffet?
- Never follow the day to day fluctuations : Expecting short term gains on your wine is high risk!
- Don’t try and analyse the general economy : You can’t predict what each vintage will do so don’t try and predict the entire wine market fluctuations.
- Buy a business, not its stock : When you buy a wine you should research the winemaker, the pricing strategy that winery has, the marketing approach and the supply strategy. Search for wineries that have great premium brands that are not weighed down by commodity driven consumption.
- Manage a portfolio of Businesses : Know what the strategies are of the wineries. Are they managing supply and demand effectively in line with consumer habits.