Wine Investment in South Africa - Cape Wine Academy

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have no seller’s fee ) which neither Christie’s, Bonham’s or Sotheby’s make readily available, but can be assumed to be between 2% - 15% ( Sotheby’s will admit to 2% - 10% ). Thus, a case of Cheval Blanc 2004 purchased in August 2010 at auction in the UK might be; Hammer price R31,394 R2,616 per bottle Buyer’s premium 15% R4,709 VAT on charges 20% R941 Total paid R37,044 Thus, 1 case bought at auction in UK R3,087 per bottle / R37,044 per case Some 18% more than the initial hammer price The investor then has to store and broker in Europe with similar fees to the examples above, or ship to SA and pay shipping costs and duties. Buying the same wine in New York would be; Hammer price R31,394 ie R2,616 per bottle Buyer’s premium 20% R6,278 State Sales Tax 8% R502 Total paid R38,174 Thus, 1 case bought at auction in New York R3,181 per bottle / R38,174 per case Some 21% more than the initial hammer price Storage, brokerage and shipping costs are applicable. It is possible to evaluate why wine auctions around the world, but especially in Hong Kong, have managed to make such huge profits for the auction houses. Consider selling a case of wine through Sotheby’s Hong Kong which realises HK$11,100 (R10,000) hammer price. The seller will lose [converted] R1,000 of that as a ‘seller’s premium’. The buyer will then pay 25% ‘buyer’s premium’ of R2,500, meaning that the auction house has made R3,500 from a R10,000 sale. Very few wine auctions take place in South Africa and those that do are on a much smaller scale. Boland Auctions in Paarl, for example, have held wine auctions for charities and schools where prices are skewed because people are buying to raise funds. On this basis they are successful and wine lots are usually all sold. Norma 21
Ratcliffe, though, believes that, ‘there is no way forward for SA wines at auctions’ ( Ratcliffe, 2011 Appendix G ). 2g) Buying and trading On-line. The rise of e-trading has made on-line auctions readily available to investors around the world. Based in the USA, ‘WineBid.com’ has more than 62,000 registered bidders and offers storage and shipping facilities ( though not to South Africa ). One might assume that the costs of using this service are much lower than traditional auction houses, but ‘WineBid.com’, for example, has a 14% buyer’s premium, 1% insurance premium, similar seller’s premium and adds US Sales Tax to purchases. Then there are storage charges at R72 per case, per month and shipping charges to add and of course charges on arrival in SA if the wine is not traded via the same online auction. Hence, the same case of Cheval Blanc 2004 bought for the same price via ‘WineBid.com’ might cost; Hammer price R31,394 R2,616 per bottle Buyer’s premium 14% R4,395 Insurance 1% R313 State Sales Tax 8% R602 Total paid R36,704 R3,058 per bottle Thus, 1 case bought ‘on-line’ in USA R3,058per bottle / R36,705 per case Some 17% more than the initial hammer price The investor would then pay for storage, adding R864 a year per case, and seller’s fees of 5% - 15% if resold on-line, or shipping / duties costs to SA. ‘Cybercellar.com’ are an SA on-line company that has gone a long way to simplifying costs for the potential investor and has some of the lowest charges in the market. Investors buy the wine from ‘Cybercellar’s’ on-line portfolio, who have added their normal retail mark up in advertised prices. Wines can be stored with them at no extra charge and traded through them at a 10% seller’s premium. This could seriously challenge competitors in the market place, but ‘Cybercellar’ only deals with South African wines which, still, make ‘great returns’ for their clients ( Phillips, 2011 ). Regular dealing, or dealing in larger lots, can bring discounts; ‘AuctionVine.com’ offer a sliding scale of buyer’s fees beginning at a relatively low 12% ( with an additional handling fee of R29 per case ). It can be seen that the investor pays heavily for his ‘virtual attendance’ at auction, but it does mean being able to purchase 22
Page 1 and 2: Wine Investment in South Africa Dav
Page 3 and 4: Acknowledgements The following all
Page 5 and 6: Contents Acknowledgements………
Page 7 and 8: List of Tables Table 1 Key investme
Page 9 and 10: 1.2 Scope of Assignment Wine invest
Page 11 and 12: The barriers that seem to exist whi
Page 13 and 14: meet future market demand. The 1855
Page 15 and 16: after seller’s premium ) giving t
Page 17 and 18: Hence the growth of dozens of inves
Page 19 and 20: Table 5 above shows an even more im
Page 21 and 22: Thus 1 case brokered personally or
Page 23 and 24: would avoid the need for the invest
Page 25 and 26: For the top châteaux, returns have
Page 27: ‘bargain’ prices. This requires
Page 31 and 32: 2e) buying through an investment co
Page 33 and 34: worldwide and hugely increased the
Page 35 and 36: 6.1.2 Securing a release price High
Page 37 and 38: Other vintages should be considered
Page 39 and 40: Indices Level MOM YTD 1yr 5yr Liv-e
Page 41 and 42: may be legally more deserving than
Page 43 and 44: Even with the best intentions, wine
Page 45 and 46: Ullages (Level of Wine) For Bordeau
Page 47 and 48: Section 2 Chapter 7 7.1 South Afric
Page 49 and 50: people distrust wines of age and do
Page 51 and 52: 8.2.3 Domestic recognition of SA fi
Page 53 and 54: ‘It would be depressing indeed to
Page 55 and 56: some top producers do not enter the
Page 57 and 58: found in numerous bottle shops - an
Page 59 and 60: cR50,000 in SA or an underground ce
Page 61 and 62: The need for investment from abroad
Page 63 and 64: Krige is selling previous vintages
Page 65 and 66: ‘South Africa may not have as muc
Page 67 and 68: found an even more serious lack of
Page 69 and 70: important to establish to the world
Page 71 and 72: cases the CWG wines achieved higher
Page 73 and 74: ecession. Table 16 below shows wine
Page 75 and 76: seeing négociants make huge profit
Page 77 and 78: wine market. De Toren’s will be m
Page 79 and 80:
For this reason, savvy investors mi
Page 81 and 82:
Section 4 Summary and conclusions T
Page 83 and 84:
References 90pluswines. (2011) http
Page 85 and 86:
Goode,J. (2009) http://www.wineanor
Page 87 and 88:
Norman, R. MW (2011) Chenin Challen
Page 89 and 90:
Van Rensburg, A. (2011) The Big 5 S
Page 91 and 92:
Appendices Appendix A Interview wit
Page 93 and 94:
CT has still got 2/3rds of the fore
Page 95 and 96:
We were one of the first to offer e
Page 97 and 98:
There is no way forward for SA wine
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