With wine and spirits investments becoming viable asset classes in recent times, our co-editor Justin Choo explores this pursuit for liquid gold.
Are wines and spirits investments genuinely viable? Yes and no. Much of it depends on your perspective.
These investments fall under the category of alternative investments as they are essentially collectable trading. In other words, to consistently make a score, you often need to be in the know.
The elephant in the room is that most wine and spirits investments are often unregulated by financial institutions. But there are benefits.
For those who can afford it, shrewd purchases ensure that their hobbies go some way in paying for themselves. At worst, if a collection is effectively worthless, it still remains a treasure trove of estery delights. It’s a rosy picture to paint for aspiring collectors and enthusiasts (not that we think it’ll be enough for disapproving partners with judging eyes).
The recent cryptocurrency crisis served to draw attention to the fact that there are no tangible assets behind e-coins. Thus the idea of investing in wines and spirits suddenly sounds more like an attractive alternative. Julian Poh, CEO of Bordeaux Liquid Gold, a wine distribution and brokerage dealing with fine wine, couldn’t say for certain if the crash had driven people towards alternative assets. But he did recount that his clients had started prior to the event.
“When the crypto market was booming, many of our clients purchased more wines. They cashed out and diversified their investment into Bordeaux Liquid Gold,” said Julian.
An inevitable outcome
Even if you are not interested in the idea of monetising your hobby, rising prices are an inevitability that affects everyone; nobody likes throwing good money after bad if they can help it.
Furthermore, as the community of wine and spirits aficionados grows, it’s likely that most enthusiasts will eventually converge on the usual suspects. It’s comforting to know that a lot of people share your excellent taste. But it also means that you are up against the entire world in the chase for a bottle.
Even if profit is the furthest thing from your mind, putting on your investor hat may help you maximise your enjoyment. It will also reduce the damage to your wallet! After all, good buying decisions are tantamount to good investment moves.
“Purchasing wines en primeur is a way to safeguard rising wine prices when they eventually are bottled and people start to purchase them physically,” said Julian. He pointed out that the top wines are still rising in price despite the economic downturn, though currency fluctuations affect the exchange rates when clients want to cash out.
“Overall, it is still safe as you are still holding on to the bottles. You can also open up and drink them eventually and not need to buy them off the shelves from a merchant at a higher retail price,” Julian added.
The problem is access (or lack of)
Sometimes it’s impossible to get hold of certain wines and spirits through your own efforts (or at least not at an exorbitant price), in which case, Bordeaux Liquid Gold, along with investment platforms like Vinovest and Cult Wine Investment are some of the options available. Because wine requires proper storage and transport to ensure good provenance of those bottles, sometimes it is far easier to engage an entity that manages the logistics and administration, rather than taking on the ‘how hard can it be?’ approach. Do note though, that if you’re in it purely for the investment, then you need to remember that these avenues are not regulated, and you’re essentially buying for consumption while hedging on their value.
Whisky Cask Fund, a relatively new platform, is a rare exception, if not the only exception we have here in Singapore. Offered by the Whisky Cask Club and managed by Blair Road Capital, a Licensed Fund Management Company regulated by the Monetary Authority of Singapore (MAS), the fund is the first of its kind in South East Asia, in the sense that it is regulated. It has been authorised by MAS to be distributed to Accredited Investors in Singapore, while the fund manager (Blair Road Capital), Auditors and Fund administrator are also fully licensed in Singapore. The fund umbrella, Variable Capital Company, is a Singapore-regulated entity too.
Alexander Knight, CEO & Co-Founder of Whisky Cask Club explains the difference between his fund and those that came before it: “In this part of the world, we are the only fund that actively manages casks. Competitors call themselves a fund but are not being regulated – they are simply brokers. The Whisky Cask Fund offers a regulated environment to invest into casks that are actively managed.” That said, the Whisky Cask Fund does offer more ‘traditional’ services in cask procurement as well, you have that option if you are less concerned about its value and more flexibility in managing the cask you own.
Strange new world
If the more orthodox approach feels boring to you, then perhaps you might be game for the interesting applications that Non-Fungible Tokens (NFTs) bring to the table. The emergence of NFTs in wine and spirits opens a door to a wild wild west of opportunity, but like the wild west, it’s crucial that you understand what you’re getting into.
NFTs can be used in a myriad of applications. Chateau Angelus and Cult Wines have sold NFTs more traditionally as an experience, which includes the actual product along with other perks such as a digital art piece or a prestigious virtual tasting. Club dVIN offers a wine club membership that you purchase in the form of NFTs and not only does it offer the usual membership perks, but you can also attach the bottles you purchase via their platform to your digital collection.
Meanwhile, others are interested in the asset tokenisation potential that this platform brings. It allows you to split up a physical asset in ways never before thought possible, which can also be partially liquidated as well. This concept will be of most interest to investors, as on paper it means that you need not be able to afford a whole barrel to be able to invest in these assets – and this might well be the most cogent case for NFTs in wine.
If you’re interested in NFTs, Club dVIN and Vinechain will be at Prowine Singapore 2022 on 7th September for a panel discussion about the benefits that the ‘Web 3.0’ approach can bring to the wine community. Animagine will be speaking on the topic of building brand engagement through Web 3.0 and NFTs on 8th September.
Keep a close eye on things
The Japanese whisky boom was arguably the watershed moment that kicked off the speculative craze in whisky and made whisky investment viable. As whisky’s stature as a household name grew, so did the number of people willing to pay higher and higher prices. But it was a one-off. It was no doubt, the whisky equivalent of a startup unicorn. Nothing has since come close to matching this phenomenon.
Nobody expected Japanese whisky to gain such widespread notoriety; it had been knocking on the door for a number of years without getting its proverbial foot in. Rum and bourbon have often been touted as the next big thing but their popularity is limited almost exclusively to the cognoscenti. No doubt, they have become more popular – highly sought-after bottles of Veliers, for example, will invariably command a price premium. What’s missing is mindshare and a zeitgeist-defining moment.
But the true margins are made way before the boom. Even before the viral articles that pushed whisky into the global spotlight, punters have already been buying up Japanese whiskies with the biggest potential margins – the Hanyus, the Karuizawas, the Cask of Yamazakis. When it comes to the money game, remember: when you hear about it, always assume that you’re already one step behind in the game.
Invest in knowledge… and discovery
Regardless of whether you are concerned about the value of your collection, it’s always in your best interests to look out for new discoveries and experiences: discover the next big thing. A quality product will eventually have its day in the sun, and its value will inevitably rise. No producer can cater to demand from the entire world, so supply will always be limited. “There are more and more talented wine markers these days and it is necessary for us to explore other wineries; we never stop exploring,” said Bordeaux Liquid Gold’s Julian.
While the digital medium is convenient, it’s not much help when it comes to obscure labels. A good argument for this is the state of Japanese sake; things have improved in recent years, but it remains a largely undiscovered wild west for the average drinker.
In some ways, the ‘old ways’ are best; for example, trade shows (or sometimes wine festivals for the public) are the next best thing to visiting vineyards and distilleries, as you get to connect with the people behind the products. Events like the ongoing Prowine Singapore 2022 connect producers with local and regional markets through multiple networking opportunities. Potential distributors can learn about new wines and spirits that fly under the radar, while the local media can discover interesting finds that will otherwise stay hidden.
Wine and spirits investments can be a tricky – and financially dangerous – minefield. But invest your time and passion in knowledge, and the rest of it will follow.
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