Explainer

How to Buy Wine as an Investment

A guide to buying wine for both fun and profit

Betsy Andrews By October 18, 2021
Illustration by Jess Cruickshank.

Among the lessons sommeliers relearned during Covid-19 was that wine is money. At restaurants throughout the United States, sommeliers threw cellar doors open and sold off trophy bottles to help keep their restaurants afloat. Sales of iconic wines popped up online as well, as some collectors shored up cash and others snagged relative bargains to hold for the future.

In this climate, would-be wine speculators might have wondered how they could get into, and profit from, trading wine. But reselling bottles out of a private collection isn’t as easy it might seem. With storage, transaction, and shipping costs, plus wine’s potential for depreciation, experts warn oenophiles away from buying bottles with the intent to make money from them. 

As Tim Kopec, a sommelier and wine consultant with a wide portfolio of private clients, puts it, “People might just go buy Bitcoin or Apple stock. Those don’t cost money to store. If your true motivation is only to make money, maybe wine is not where you want to be doing it.”

Still, a market for collectible wine does exist, and it’s not unheard of to turn a sought-after case of Barolo, or a few choice bottles of Burgundy, into a pile of cash. You just need to do it properly. 

“The majority of people buy what they like, then buy more with the idea that if they don’t drink it, it will probably go up in value, and they will sell it,” says Jamie Ritchie, worldwide head of Sotheby’s Wine. “But that’s not the best approach to investing. If you’re investing, you need to put your palate and everything else aside and ask, ‘What will give me the greatest return over a period of time?’”

Buy on release

Wine is like other luxury items. A pre-owned wine has the same potential for problems as a pre-owned sports car. “But everyone wants immaculate condition,” says Ritchie. And they’re looking for perfect provenance. “They want to know that you were the first buyer and only owner of it, and now you’re selling it.”

You can’t just look under the hood with wine, so one way to ensure that it is pristine is to buy it upon release. That’s more complicated than it sounds, though, especially if you’re collecting from abroad. “In an ideal world, you would go over to France or Italy, pull up to the winery, and say, ‘I would like to buy a case of your current release.’ Then you walk out with the wine almost guaranteed to be perfect,” says Kopec. “But with the import, distribution, and tax laws of our multiple-tiered system, and the fact that all states are treated like different countries when it comes to alcoholic beverages, that’s not the way it works.”

Importing cases on your own entails duty and federal excise taxes, and might raise red flags with customs or state agents. Chances are, therefore, you’ll be buying new releases from a merchant. Make sure you get them “from a very well-established retailer who’s been in business a long time, has a great track record, and delivers on what they say,” advises Kopec. 

Check the wines when you receive them. “Apart from rare Burgundy, which you can only get a few bottles at a time, you need full cases, in pristine condition, in the original packaging. The levels and labels need to be perfect. There can be no compromising,” says Ritchie. “If you’re buying from an auction house, there’s a description in the catalogue that says the wine is pristine, and you need to verify that.”

Finally, keep your receipts, says Kopec, “to show that you bought the wine as close as you could from the time of release, from a reputable source.”

Expect to spend money

Which new releases should you buy? Do your homework. “The best way for beginning collectors to get involved with creating a collection is to read the publications, blogs, newsletters, and critics that they like for research,” says Ritchie. Armed with that research, seek out the trusted wine merchants and auction houses. Get to know the staff, and find someone among them who you mesh with and trust. “They can give you the information and advice that gives you the confidence to start a collection.”

Then, if you have money to burn, go for the blockbusters — Domaine de la Romanée-Conti, Château Lafitte-Rothschild — and check the vintage reports. If the region for the wine you’re considering is experiencing a great vintage, or if a particular producer has created a special release, now’s the time to spend. 

“Generally, the best producers and best vintages perform the best,” says Ritchie. “People start making errors when they stray too far off the beaten track, not staying on what has been proven successful.”

But you’ll be shelling out dollars to earn them back later. “A $50 bottle doesn’t move up in value very much,” Ritchie continues. “The highest end of the market is where there is the strongest demand and the greatest return.”

Just don’t expect to score deals in the stratosphere, says Kopec. One red flag would be seeing a notable wine listed for a below-market price on a lesser-known wine site. “Does the wine exist? Yes, but it could be fraudulent, not stored well, etc. There’s a much greater chance of something going wrong.” 

In addition to the price of the wine, you need to factor in fees. “Auction houses charge a premium, shipping costs, and sales tax. Once you have the wine, there’s storage and insurance. And when it comes time to sell it, there may be seller’s fees,” says Ritchie. “So from your full purchase price, plus carrying costs, is that going to leave enough room for appreciation, that gives you a solid return?” 

“Wine is an investment that requires further investment,” says Kopec. Be prepared to do the numbers.

“Wine is an investment that requires further investment. Be prepared to do the numbers.”

Think ahead

When you’re planning on selling wine some years hence, the current market isn’t as important as the future one. Watch the trends. Tastes in wine change, and what was desirable yesterday, might not be so sexy tomorrow. 

A classic example is Napa Cabernet. In the 1990s, when wine critic Robert Parker was at the height of his influence, the wines he loved, including Napa Cabernet, were wildly popular. “But now, they don’t have that same level of support that he was giving them,” notes Ritchie. “We’re moving toward more nuanced, more elegant, and complex wines, rather than purely bold ones. So while Screaming Eagle and Harlan have held up well, the rest of the market has not. Release prices have continued to increase, but the secondary market prices have been flat.” That makes big Napa Cabernets less desirable for resale these days. 

Ritchie encourages long-range vision. “Most people put too short a horizon on wine sales. Probably you want a 10-year horizon. Be strategic about it. Who are the up-and-coming producers making the collectibles of tomorrow?” he asks. “Can you find the best young producer building a following and know that their prices will go up? Yes, you can.” 

Ritchie rattles off a slew of Burgundian names: Charles Lachaux for Domaine Arnoux-Lachaux, Maxime Cheurlin at Domaine Georges-Noëllat, Amélie Berthaut at Domaine Berthaut-Gerbet, Arnaud Mortet at Denis Mortet. Particularly in Burgundy, and increasingly, in the Northern Rhône and Piedmont, where a new generation of producers is emerging, there are opportunities to get in on future-collectible discoveries. 

Store wines properly

In England, storage can be straightforward. “You buy it in bond and store it in bond,” says Kopec. The cases are shipped directly to an authorized bonded warehouse, where they’re kept in proper conditions. As long as they stay in that warehouse, there is no duty or sales tax to be paid. They can be resold directly from the warehouse, avoiding the taxes altogether. If the cost of storage is less than the taxes you would have paid, and also less than the profit you’ve made, buying in bond is a win.

But that option doesn’t exist in the States. If you bring home a case of collectibles, “a cellar with split-level cooling unit that’s well insulated, vibration-free, cool, and dark is essential,” says Kopec. “But then comes realism, and most people don’t have a lot of space in their home.” 

That’s where professional storage comes in. Several companies operate in and around American cities. “You can go check out the facility and make sure the wine is stored correctly, both with humidity and temperature control,” says Ritchie. “It needs to be a full-on professional storage facility, with a back-up generator, in case there is a power outage.” 

Look for a facility that’s located well away from the vibrational effects of train tracks, highways, and construction sites. In an era of climate change, it’s also best to store wines on higher ground. New Yorkers learned the hard way when, in 2012, Hurricane Sandy submerged the bottom floors of the Manhattan facility WineCare Storage, smashing bottles, destroying cases and labels, and sending humidity soaring. When the surge hit the computer system, it also wiped out WineCare’s database.

Though the company filed for bankruptcy and later was liquidated, the incident revealed the importance of insurance. Facilities, like the UK’s Octavian, will provide a certificate that authenticates proper storage, “but that’s like me saying I’m a jolly good person. Is a self-awarded hamburger still award-winning?” argues Ritchie. “Make sure your wine is covered in the storage location under any insurance policy you’re using.”

To manage your investment, you need to know what you have in storage, especially as you build a collection. Professional facilities provide 24/7 online access to your inventory list, and you can download when you want. It’s a good idea to do so, given accidents such as WineCare’s or today’s malware attacks. If you’re keeping your wines in a home cellar, programs like VinoCell help you record where, when, and for how much you purchased your wines. 

Accurate recordkeeping is key to resales. “Everything starts with a list of the wines,” says Ritchie. “You send that to an auction house or merchant, and they price the wines, negotiate the sale, and complete the transactions.”

Work with an expert

How do you know they’re pricing your wines correctly, or that you got a good deal in the first place when you bought them? “There’s plenty of data out there on what wines are trading for, so unless it’s super rare, you can gauge a wine’s market price,” says Ritchie. 

For those who don’t feel confident doing the trading themselves, there are experts. “I like to use this example: If you had $100,000 to buy wine, and you walked into ten different stores, all of them will encourage you to spend with them. Where do you go to get the best value? That’s why you’re hiring a competent consultant,” says Kopec. “It costs a bit more, but you’re avoiding mistakes and the pressure that the industry can put on you as a buyer.”

A consultant will offer soup-to-nuts service, and for busy collectors, that’s a boon. “If you’re a muckety-muck, it’s nice to say, ‘I like this wine. Let’s get 24 bottles.’ That’s where they want to stop thinking about it, and that’s where the logistics come in”—the transaction, transportation, storage, inventory, monthly fees, etc. “People like me work on that side,” says Kopec.

It’s all about relationships

“Often the way I see the flow of business is I’m already working with someone, or maybe they know my reputation,” says Kopec. “That gives them some degree of confidence. We’re having a meal or sharing a bottle, and they say, ‘This is so good. Where do I get this?’ It’s a dance, a symbiotic conversation.”

In other words, successful wine trading depends upon building relationships in which you can have confidence. Whether you do it yourself or have someone else handle it, there are basically two options for resale, says Ritchie. “First, there’s selling the wine to someone for a fixed price, where there’s a negotiation and payment immediately, and then there’s an auction. That’s the consignment route. You consign the wine to a sale, and then there’s a period of time when they have to receive, inspect, and publish the wine, hold the auction, and collect the funds.” 

You’ll wait for your money the latter way, but you might garner a higher profit. Either way, says Ritchie, the most important thing is to “make sure you sell with someone you trust, so you can be assured that you’re going to get the kind of service you want and get paid in a timely fashion, at the price you want to achieve.”