Wine Investment in South Africa - Cape Wine Academy

2e) buying through an investment company. Between 22% and 39%.
2f) buying through an auction house in Europe / US / Asia.
Between 18% and 21%, but this excludes storage abroad, transport to and from
auctions etc or shipping to SA.
2g) buying through an on-line auction house. Around 17%.
This comparison of costs does not imply that the cheapest method is best, much will depend
upon potential profit levels; costs of 39% are acceptable if profits achieve 60%, for example.
There are other considerations when making comparisons;
a) Length of investment
Average returns quoted by the industry are 15% per annum. Several investment methods
above have end costs around 15% of the investment, there would appear a good chance of
making little or no profit within the first year or two. The investor is gambling upon a rising
market with their asset achieving exponentially higher growth. A key factor in this is time; the
investor may need to hold the asset several years before any real growth is made,
depending upon how much was paid for the wine and what costs will be incurred. Wine
does not appear to be a commodity with a fast return.
b) Bigger purchases can reduce costs
Economies of scale are available. Larger purchases and larger lots traded can bring reduced
costs where brokers, investment companies, storage facilities, shippers and auction houses
offer reduced rates with higher volumes. Similarly, investment companies will enjoy better
economies of scale than single investors and thus show better returns, going some way to
offsetting their charges.
c) Achieving market price
All methods are dependent upon the seller, broker or investment company achieving the top
market price for their wines which cannot be guaranteed at auction or in a volatile economy.
The over-paying and under-returning prices achieved through auction, often, are important
considerations when comparing costs and returns of all methods of investment.
d) Knowledge of the market
All the methods of investment other than through recommendations of a broker or handing
over control to an investment fund require the investor to have knowledge of wines and the
wine market and a good deal of time to devote to investing. As Phillippe Masset and
Caroline Henderson said;
‘One should only invest in wines if one has a real interest in wines. This is because
such an investment requires having a very good knowledge of this complex market,
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