Callum Woodcock, CEO and founder of wine investment platform, WineFi, debunks the myths around investing in fine wine – and reveals what budding investors need to look out for when searching for asset bottles…
In recent years, there has been growing interest in fine wine as an investment. Looking at the data, it is easy to understand why.
Over the last 20 years, the Liv-ex 100 fine wine index has consistently outperformed the FTSE 100, rivalling even the S&P 500 in terms of performance. On a regional level, this is even more pronounced – with Burgundy outperforming even the NASDAQ over the past five years by a full 30%.
It is uncorrelated to traditional asset classes – likes stocks and bonds – and behaves a lot like gold, as a stable asset to hold during times of economic uncertainty. Perhaps most interestingly for UK investors, it is also exempt from Capital Gains Tax (CGT) in most circumstances.
But not all wine makes for a good investment. In fact, WineFi estimates that only 1% of wine globally can be considered truly “investment-grade”.
“It’s hard to tell how much investment-grade wine is out there,” says Callum.
“The wine market is very opaque as so much is in private hands, but we estimate that there to be an investable universe of about £4.5 billion.”
There are a variety of factors that make a wine investable – brand, vintage quality, critic scores – but all of them contribute to the same objective: the likelihood that someone will buy the wine for a higher price at a later date.
There are a limited number of “blue chip” producers across a handful of top wine regions and only a finite number of bottles can be produced by each winery every year – the quality of which varies from vintage to vintage.
As the wines improve with age and bottles are consumed or damaged, they become increasingly scarce. At the same time, as global wealth increases, so too does demand for high-end wine.
“The fine wine market is driven by supply and demand,” explains Callum.
“This combination of ever-increasing scarcity and growing demand helps to drive prices higher”.
Callum and his team imagined WineFi – a next-generation investment platform for fine wine – as a way of solving the problems that prevent more investors from discovering wine as an asset class.
“Education is so important,” says Callum.
“If you Google ‘how to invest in wine’, the only resources that appear are thinly veiled adverts for wine investment businesses. For this asset class to enter the mainstream, there needs to be far more content out there to allow investors to make informed decisions”.
WineFi is backed by an investment committee of industry experts, including two “Masters of Wine” – the wine industry equivalent of a PHD – and has seen interest skyrocket since the launch of their private beta in October 2023.
“We are really humbled by the response from the market,” says Callum.
“We have seen a huge volume of inbound interest from investors, who were only vaguely aware of wine as an investable asset and who want to gain exposure. We take a very gentle, consultative approach, which I think helps.”
The WineFi team takes a narrow view of the market, looking at around 300 producers across France, Italy and California.
“We take a value investing approach across a relatively small investment universe. There are excellent Spanish, German, South African and Australian wines, but none of them meet our criteria”.
To retain its value, fine wine must be stored “in bond” in a UK-government approved warehouse, where conditions are tightly controlled.
“Light, heat, humidity and vibrations can all impact the quality of the wine. If you plan to sell the wine, then a future buyer needs to know that it has been stored in perfect condition – not in your cellar at home”.
Encouragingly, for the wine trade, the average age of a WineFi’s investor is just 34, versus the average age of a wine investor more generally, which is 58.
“The wine trade knows that they need to attract a younger demographic to the market and wine investment is a novel way of appealing to that audience”
The WineFi team and platform has attracted the attention of leading venture capitalists, eager to encourage access into an untapped asset class. They are backed by SFC and Founders Capital, as well as prominent angels like incoming Inchcape chairman Jerry Buhlmann.
