As alternative assets go, the decision to invest in wine was an easy one for me. I was introduced to it as a student while working in a local gourmet shop by a customer who bought specific bottles more for his interest in the labels than for the wine. I thought of that guy — and his collection of Chateau Mouton Rothschild bottles — as I started to research this Vinovest review.
For the better part of the past year, I have been following the development of private investing in wine. It’s definitely changed since my student days. What hasn’t changed, though, is the level of knowledge and vineyard access that most investors lack. Vinovest is trying to eliminate that obstacle with its platform.
Why wine? The value of wine for investment has been beating equities in recent months.
The Liv-ex index, which has become the de facto gauge of global fine wine prices, has outperformed the S&P 500 over the past 40 years. Vinovest co-founder Anthony Zhang told Forbes earlier this year. “[Wine] has only had five down years during that time, with 12% annual returns,” he said.
Tech Democratizes Wine
As with so many other things once the domain of the rich and famous, technology is democratizing nearly every aspect of the wine business. At the same time, certain characteristics — particularly those that are essential to the appreciation of a wine’s value — remain unchanged. For example, for this alternative asset to increase in value, the bottle needs to be stored properly for a number of years.
Vinovest seems to have solved those issues with its customer-facing tech that makes investing in a physical asset — think of physical gold or other precious metals — easier than ever before. The platform allows investors to pick their wine or let the Vinovest algorithm make a recommendation. As with traditional assets, investors are categorized by their risk tolerance. Big data — such as historical pricing, vintage rankings and vineyard reputation — comes into play to match wines with risk with investment horizons, producing investment recommendations.
Because an investor is purchasing that physical asset, the bottle of wine, Vinovest is also acting as the intermediary to make the purchase. It will store the wine for investors, as well as help sell it when the time comes to liquidate.
Looking to invest in wine but want in earlier in the pipeline? Here are a few options.
Invest in the Wine Making
Another vehicle for investing directly in the wine-making process is WineFunding, which its founders tout as the first equity crowdfunding platform in the sector.
There are three options for investing here. One, an equity option, channels investors into what is effectively a stake in a winery. This stake also comes with access to discounted wine purchases from that operation. A second option is the wine bond, which like corporate debt, funds a company’s need. The principal is eventually returned, but in the interim, the interest is paid in wine.
The third investment option acts much like a wine future, where an investor provides money for a specific project — vineyard acquisition, winery construction, equipment purchases. Your investment is returned over several years with wine. Currently, all of the funded projects are in France, though the platform is open to investors in other countries.
On the other end of the investment food chain, WineFunding also serves as a platform for wine growers or entrepreneurs to crowdfund their project.
Making a Connection
As with so many commodity and agricultural businesses, ensuring cash flow and establishing a connection with consumers of your product is a challenge for wineries, particularly smaller, boutique operations. One platform that is seeking to change that is Vinsent, which seeks to build loyalty between the winery and the customer, while providing a tool to forecast and plan vintages and sales of wines.
The Vinsent platform enables wineries to put up wine futures — vintages due to come to market in the next six to 18 months — and set a per-bottle case price. The platform and mobile apps have a search and filter system to help buyers make the right decision.
I was part of the beta testing of the platform and app a few years back and have been a fan ever since. However, as an alternative investment on the continuum that includes Vinovest and WineFunding, this is all about access to limited-production, special-edition fine wines, leaning toward wine lovers who are investors.
Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups. He was previously emerging markets editor for Bloomberg News in Tel Aviv. He is a contributor to the Powered by Battery blog. As of this writing, Robert does not own any of the aforementioned securities.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
1) Greater chance of failure
2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
Read more: Private Investing Risks