The art of turning wine into cash

17-Oct-2013

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Increasingly more investors have recently turned their attention to fine wine, which has become a sure way of making money. Turning wine into cash is not something everyone can do, yet if you’re an avid collector this business field could make you rich. Whether you like it or not, fine wine is not just a guilty pleasure anymore; it’s a marketable commodity. According to the latest data, U.S wine sales experienced a 2% increase in 2012, reaching a new record: $34.6 billion.

To give you an idea of how appreciated fine wines are, we should start with an example. The Chateau Lafite Rothschild started to attract more and more investors in the recent period, since the price of its en-primeur 2008 vintage grew with 150% in 2009. These amazing returns obtained in such a short period of time cannot be generated within other markets.

Wine investments – risky but rewarding

The stock presented above is just an example, and we must admit that not all wines can achieve the same level of success. They have to be the finest in the world in order to attract buyers. If you’re planning to invest in fine wines, you can’t expect to make profit immediately. It can take decades until you can recover your investment, so try to avoid living with too many illusions.

People who decide to invest in the wine industry have more things to win if they’re wine enthusiasts or collectors. While the wine business isn’t only about money and the glamour, you should really invest all your passion in it. This piece of advice is given by wine entrepreneurs from all over the world, who know better than anyone that nothing is more exciting than having an impressive collection of fine wine at home.

Basic math

As you probably know, wine cannot be made without grapes, which cannot be grown without land. As a result, entrepreneurs need to spend impressive amounts of money to take care of these assets. Besides, the more famous the terroir (the place) is, the higher the expenses will be. For example, the land found in Napa Valley, California, can make you spend no less than $500,000 for each acre. We’re talking about an isolated case, but note that most famous areas are expensive. You’re not just investing in the land, so remember that.

Wine entrepreneurs need to spend additional amounts of money on winemaking equipment and supplies, from the planted vines to the tanks and barrels used for wine storage. Besides, there are plenty of other costs involved, including the salaries offered to your staff, which can be significant sometimes: some experts can require monthly salaries of more than $2000 per acre. All in all, the expenses that will have to pay can reach even seven figures in a few years, scaring plenty of the investors away. That’s why fine wine investors are advised to keep their calm; don’t get too enthusiastic in the first years because wines need to age before being commercialized.

According to fine wine investors from all over the world, people who want to make a million in this industry must start with a budget of at least 10 million. This additional million is obtained by increasing the price of each bottle that suits the requirements specific to fine wines. The wine in which you invest should kindle the interest of people from all over the world, which means that its quality should be very high.

Useful tips for wine investors

No one can oblige you to purchase a vineyard to achieve success, especially since there are countless entrepreneurs who managed to build wine “brands” by purchasing juice and grapes, or even by outsourcing the bottling process. According to Clayton B. Gantz, a specialist in the wine industry, this is not just an affordable way of getting into the business, it’s also a more efficient one because it eliminates linger implied by other methods.

You can build a brand and start to increase your wine production as soon as you see that the quality of the wine exceeds your expectations. Be ready to wait though as you can’t turn wine into cash in 1 year. For the best results, be ready to spend at least 5 years in this business.

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