Wine Investment in South Africa - Cape Wine Academy

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humidity is a problem for long term storage and they are expensive and will take up considerable space for the serious investor. In Figure 3 above three typical examples are shown; the Fuxin JG110 holds 110 bottles and costs R10,500 ($1,500), the Whirlpool ARC2050 holds 88 bottles and costs R9,286 ($1,326) and the Artevino FV150G holds 150 bottles and costs R19,999 ($2,857). Eurocave UK’s popular range includes several cabinets that hold up to 230 bottles and this size would make more sense for long term investment, though this model costs R39,499 ($5,643) in South Africa. Better value might be the Artevino FV270S, holding 270 bottles for R18,999 ( $2,714 at ‘Wine Essentials’ ). Prices need to be factored in to potential profit returns. Future buyers would expect the wines in their original boxes, though, so these need to be stored and some might expect the original sealed boxes, which might prove difficult. As mentioned above, many homes are being built with cellars but only at the top end of the market. It is possible to have a cellar, often built in a spiral shape, dug beneath the floor of a garage, kitchen or spare room. A selection of styles and the technique used is shown in Figure 4. Figure 4. A selection from the Spiral Cellars UK catalogue of underground cellars. ©SC This is common in Europe where one of the leading suppliers, Spiral Cellars, has installed more than 3,000 in France and the UK since 1981. According to Spiral Cellar’s Lucy Hargreaves, the most popular installation is a 2.25 metre cellar holding 1,360 bottles for £25,500 inc VAT ( R280,500 ). It takes 5 to 9 days to fit. Spiral Cellar’s designs include a 1.35 metre mini version ( 650 bottles ) for £15,400 (R169,422) up to a 3 metre deep cellar holding 1,870 bottles and costing from £30,718 (R336,798). They receive many enquiries daily from all over Europe and are hoping to appoint an agent in South Africa soon ( Hargreaves, 2011 ). Brian Bennett offers a 14 part free ‘design your own cellar course’ via his website homewinecellardesigns.com but it is not specifically for the South African market. A minimum yearly recommended investment of £4500 (R50,000, Premier Vintners UK, 2011 ) would enable purchases of some eight cases of fine SA wine, or about 100 bottles. The investor would need six or so years before profitable trading, meaning a cellar able to hold around 600 bottles. This means a choice of, say, three large wine fridges costing 51
cR50,000 in SA or an underground cellar at cR170,000. Both require some electricity usage. Compared with storing wine at a merchants ( see below ) these are both expensive in the short term, as eight cases might cost R6,720 a year to store and after six years 48 cases some R40,000 a year ( discounts for bulk would apply, though ) enabling storage at a merchants for only 2/3 years for the cost of the wine fridges. Fridges and cellars become very attractive financial propositions for storage of more than 500 bottles for more than two years and allow instant access and personal trading ( with a licence ) – and drinking – but don’t permit the ‘in bond’ or ‘on paper’ trading that a broker provides. The quality and specifications required to meet the demands of the investment market make home storage difficult unless one is prepared to spend many thousands of Rands and this coupled with the necessity for a seller’s licence and having to trade from home, means that this is not a sensible option, though attractive from a tracking and security point of view. Even though wine fridges and underground cellars do an excellent job, wine stored at a merchant’s facility seems more acceptable to the trade; ‘The main problem with investing in wines is storage….buyers may be wary about lone sellers’ storage guarantees’ ( Wasserman, 2010 ). b) Off site storage Wine-searcher.com lists dozens of professional storage services worldwide, including Singapore, Canada and New Zealand, but they list no sole purpose wine storage facilities in South Africa ( Wine-searcher.com, 2011 ). There are many self storage facilities throughout the country, but few cater for the specialist requirements of wine. Garage type spaces are available from companies like SA Self Storage and Storage People for around R700 per month, but these are not temperature controlled and would be unsuitable long term. c) Wine merchant storage Most investors and collectors would consider leaving the wine with the merchant they bought it from, or renting space at a wine merchants. The facilities would be suitable for longer term storage but travel to the store or delivery of the wine, as well as rent should be factored into profit estimates. The average R70 per case per month space rental fee, for a reasonable investment holding of twenty cases over a period of one year would deduct R16,800 from any potential profit return. Also, the business might not welcome frequent visits to check on the wines and if you were trading yourself the logistics and inconvenience caused by removing and replacing cases could cause friction. One of the first to offer on-site storage was the Bergkelder in Stellenbosch. They will store wines bought from their own Distell brands in perfect underground conditions for a fee of R42 per case per year. Owners may visit their wines and tastings are offered of the vintages 52
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 and 28: ‘bargain’ prices. This requires
Page 29 and 30: Ratcliffe, though, believes that,
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: found in numerous bottle shops - an
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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