HOW TO IN­VEST IN SOUTH AFRICAN WINE

CityPress - - Business - In­vestors have un­til July 19 to con­tact The Wine Cel­lar on 021 448 4105 or info@wine­cel­lar.co.za if they want to par­take in this wine fu­tures cam­paign

Wine fu­tures, some­times called en primeur, en­able any­one to buy the most highly sought-af­ter Bordeaux wines one to two years be­fore they are bot­tled and re­leased on to the mar­ket. The term en primeur means “newly pro­duced and made avail­able”.

In Europe it’s a fully fledged mar­ket and, dur­ing spring, thou­sands of wine pro­fes­sion­als flock to Bordeaux for the open­ing of the fu­tures cam­paign. It’s a big event with over 150 of the top es­tates wel­com­ing dif­fer­ent wine pro­fes­sion­als from all over the world to sam­ple the most re­cent vin­tage, and buy at the (pos­si­bly) low­est price.

The South African mar­ket is not quite as so­phis­ti­cated. In Jo­han­nes­burg, a sim­i­lar event was held last month, al­beit on a much smaller scale, where 23 wine mak­ers from Stel­len­bosch showed off their Caber­net Sau­vi­gnons, in­clud­ing Kanonkop, Water­ford and Kleine Zalze, to name but a few. Wine fu­tures may be here to stay, but things haven’t al­ways been this easy.

A CHE­QUERED HIS­TORY

Sev­eral years ago, wine es­tate Kanonkop attempted to of­fer in­vestors the op­por­tu­nity to buy wine fu­tures. As part of the deal, it kept the wines in a tem­per­a­ture­con­trolled en­vi­ron­ment at the es­tate un­til such time as the in­vestor wanted to sell.

The con­cept flopped, but not be­cause of a lack of in­ter­est. “Our big­gest prob­lem was having to ware­house the wines af­ter the re­lease date, and the ad­min­is­tra­tion of the sys­tem,” ad­mit­ted Jo­hann Krige, co-owner of Kanonkop. It was dif­fi­cult to get hold of the in­vestors as some of them had moved on, ei­ther lo­cally or abroad. They hadn’t con­tacted the es­tate to change their con­tact details and in some cases may even have passed away.

How­ever, with a fine wine mer­chant – The Wine Cel­lar – now on board, there is hope that a se­condary mar­ket will be cre­ated, one where it will act as a bro­ker be­tween the wine es­tates, pro­fes­sional wine buy­ers and oth­ers.

There are ad­van­tages all around as wine mak­ers get to sell their wine be­fore they even re­lease them, have them stored with The Wine Cel­lar, while the in­vestor gets to buy wine at dis­counted prices and po­ten­tially profit too.

HOW TO BUY WINE FU­TURES

Roland Peens, di­rec­tor of The Wine Cel­lar Fine Wine Mer­chants, ex­plains that the com­pany will in­tro­duce an on­line plat­form this year where in­vestors will be able to see their or­der on­line and trade. He hopes in the fu­ture to cre­ate an in­dex that will be man­aged and run by a bank.

For now, you can buy and sell wines by con­tact­ing The Wine Cel­lar di­rectly. If you buy the right wine at the right time you could get a dis­count of 10% or more. “An anal­y­sis of the 23 wines at the tast­ing shows that, on av­er­age, each Caber­net in­creases by 9.5% each year, well above in­fla­tion. The De­laire and Water­ford have been far higher re­cently and we be­lieve these wines are be­ing ‘repo­si­tioned’ in the mar­ket ow­ing to se­vere de­mand,” says Peens.

While some wines may go up in price as soon as they are re­leased, Peens ad­vises in­vestors to be cau­tious and hold on to them for a few years be­cause wine fu­tures are not a short-term in­vest­ment. While you could strike it lucky with the right case early on, it’s likely your wines will get more ex­pen­sive over time as the mar­ket con­sumes the wine and fewer bot­tles of that vin­tage be­come avail­able. Of course, wine, like any other in­vest­ment, can go up as well as down.

Bro­ker­age and stor­age fees ap­ply, which would again make it ne­c­es­sary for the in­vestor to re­tain the wine for a few years to en­sure they make enough of a re­turn. The Wine Cel­lar cur­rently charges a 20% bro­ker­age fee.

How­ever, Peens con­cedes that the com­mis­sion struc­ture is too high and that he will re­duce this dra­mat­i­cally when the trad­ing plat­form launches.

Find­ing a buyer can also be dif­fi­cult. Wine fu­tures are not cur­rently a reg­u­lated in­dus­try, so the Fi­nan­cial Ser­vices Board can’t step in if things go sour and you want your money back be­cause you can’t sell the wine.

There are risks in­volved, so you have to en­sure that you are will­ing to part with your money or hang on to the bot­tles if the mar­ket isn’t favourable at the time you wish to sell. While The Wine Cel­lar boasts a large data­base of po­ten­tial buy­ers, Peens ad­mits it can’t make any prom­ises. “We don’t guar­an­tee that we will sell the wine. That is where peo­ple have be­come un­stuck in the past.”

How­ever, the in­dus­try ap­pears to be pos­i­tive about the value of South Africa’s wine and that a bro­ker has en­tered the in­dus­try. “Not so sure that it will be an im­me­di­ate success, but if there is a wine bro­ker that could make it work, then it’s The Wine Cel­lar.

“Top-end South African wines are un­der­priced if these are com­pared like for like to the world’s best wines. I am con­vinced that South Africans will re­alise this sooner than later and that buy­ing for­ward could un­lock im­mense value,” says Krige.

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