England’s wine industry is ageing like a high quality Sussex red. Blind tastings have proved that homegrown vintages punch well above their weight in comparison with established brands, and tours of English vineyards are attracting wine aficionados from all around the world.
Yet while the standard of reds and whites are improving rapidly, it’s sparkling wine that’s catching the attention of connoisseurs and courageous investors alike. Production of English sparkling grew by a 3rd to eight.3 million bottles in 2022.
Spying a chance, French Champagne houses are snapping up real estate in Kent, Sussex and Hampshire. Pommery, Taittinger and the Cava behemoth Henkell Freixenet have all bought vineyards within the region, hoping to capitalise on the British wine boom.
Because the industry has expanded, so too have the opportunities to earn cash from English wine as an investment. The market remains to be in its infancy, but with heightened risk comes opportunity.
Here, Telegraph Money explains the right way to boost the percentages of lucrative returns.
The fundamentals of wine investing
The idea of wine investment is simple. You purchase wine, store it and sell it later when its value has risen. The standard and scarcity of high quality wine tends to understand over time, together with its price.
Because wine is a physical, tangible asset, like property or gold, it typically performs well against inflation. The kicker is that that wine can spoil if kept under the flawed conditions.
Just some wines are ok to make the cut. Lower than 1pc of the wine produced world wide is taken into account “investment grade” on account of its quality, brand equity, limited supply, vintage appeal and ageing potential.
Will Hargrove, associate director at high quality wine merchant Corney & Barrow, says investing in wine should never be done with a time horizon of lower than five to 10 years.
He says: “It’s good to find a way to weather the ups and downs of what goes on on the planet.”
“Once you buy and store wine, you’re going through a transition where the wine stops being available on the shelves to being available on the secondary market, hopefully at the next price, although that’s not at all times the case.
“Anyone investing in wine is counting on the patron to be buying the wine and drinking it, because eventually the wine will go off.”
Which English wines to take a position in
Since the investment marketplace for English wines remains to be developing, there are not any secure bets in relation to selecting a vintage.
Mr Hargrove says: “The standard [of English wine] is massively on the up, especially amongst sparkling, but there are some good whites too and the odd red beginning to creep in.
“The issue from the perspective of investing is, no-one knows how these wines are going to age, so it’s a really tricky thing to get right.”
Nonetheless, Matthew Small, senior portfolio manager at wine merchant Cru Wine, says that savvy investors should consider fledgling English vintages, particularly sparkling.
He adds: “The market is up and coming, but the standard is improving and attending to that level that we’d call investment grade.”
Amongst the most effective investment-grade English wines, in keeping with Mr Small, are Nyetimber’s 1086 Prestige Cuvée – at around £150 a bottle for the 2010 vintage – and Gusbourne’s Fifty One Degrees North, whose 2016 vintage retails for £195. “These are the 2 real quality wines in the meanwhile.”
Should you compare 1086’s critic rating against one of the vital famous Champagnes – Dom Perignon – for a similar 2010 vintage, Nyetimber scores 17.5 out of 20, in comparison with Dom Perignon’s 18.5.
The standard is analogous, but Nyetimber is just making around 3,000 bottles a 12 months, in comparison with the five million produced by Dom Perignon, which makes it “super rare”, in keeping with Mr Small.
In theory, this could make it costlier. However the undeniable fact that the Dom Perignon 2010 vintage retails for around 20pc greater than Nytimber’s 1086 shows why small vineyards are at an obstacle: brand recognition.
Mr Small says: “Brand is considered one of the largest determinants of price, as with all luxury goods. With wine the principal three aspects are brand, critic’s rating, and provide.
“Dom Perignon is a globally recognised brand, and has massive distribution channels, massive history in every global market. Nyetimber is attempting to construct that.
“Should you’re going to take a position in English sparkling, you’re mainly making the play that their brand goes to extend over time.
“Then the query is: what’s the life expectancy of those wines? Or what we call the ‘drinking window’. How long have we got for Nytimber to turn out to be a globally recognised brand and for the worth to go up?”
Nytimber’s 1086 is given a drinking window of around 10 years by wine rankings index Jancis Robinson.
The relatively short timescale shows why investing in English sparkling is more of of venture, in keeping with Mr Small.
“For riskier investments you wish an extended drinking window to provide a chance for the brand recognition to extend.”
“I’m not saying it won’t occur, but a 10-year drinking window isn’t an enormous period of time for a brand to turn out to be massive.
“These English sparkling wine houses are ‘up and comers’. They’re a bit riskier – but you may potentially make the largest return.”
Tips on how to fit English wine into your portfolio
Due to the higher risks involved in buying English wine, the smart move is to balance out the investment with safer bets elsewhere.
Mr Small says: “The 2 key questions for an investor are: what’s your time horizon and what’s your risk tolerance?
“Unless you might have massive risk tolerance, English wine has a small percentage to play in that portfolio.
“You’ll probably want under 5pc invested in English sparkling. Invest by all means, but alongside other more established regions.”
Bordeaux makes up around 40pc of the high quality wine investment market, down from its near monopoly before 2012, but still the largest share of a single region. Bordeaux traditionally has been the least volatile segment of the market and in addition essentially the most liquid (pun intended).
“If someone wants low-risk wine, I’d say they need to go along with Bordeaux. In the event that they’re more returns-focused I’d say Champagne and Burgundy, which increased by around 70pc from 2020 to 2021,” Mr Small says.
“You possibly can get these incredible spikes in certain regions. That’s why it’s vital to have exposure to all of the regions, including England, in a way that matches your risk tolerance.
“It’s very difficult to know when a region’s going to spike, but when it does, so long as you might have some exposure to it you’re going to make the most.”
When considering which wines to take a position in, Mr Small says Wine-Searcher is “an important tool”. The web site offers a comprehensive database of all wines available on the market and is utilized by merchants and investment houses to sell their bottles.
“Wine-Searcher also has critic scores and drinking windows. You possibly can easily flick between wines to see how they rank.
“It’s mainly a Google seek for all wines. It’s got all that information on there.”
Investing in vineyards
Should you don’t want to take a position within the bottles of wine a vineyard produces, you may spend money on the vineyard itself.
Nonetheless, while there are over 700 vineyards in England and Wales, only two – Chapel Down and Gusbourne – have publicly listed shares to purchase and sell.
Chapel Down is Britain’s biggest winemaker, accounting for 30pc of the English sparkling wine market. After spending years on the small online stock market Aquis Exchange, Chapel Down is now listed on the Alternative Investment Market (AIM) because it targets a bigger pool of investors.
Gusbourne can be listed on London’s junior market, and was trading at 74p a share in December 2023. Early investors who bought in 2008 when Gusbourne was first listed have seen their shares double in value.
Buying shares in British vineyards is usually a rollercoaster ride, nonetheless. Chapel Down shares peaked at 110p in September 2018 and were trading at 53p a share in December 2023, valuing the corporate at around £90m.
Yet there’s optimism out there. Chapel Down has secured major sponsorship deals, including with English Cricket and Ascot races in 2024.
Gusbourne said its sales increased by 25pc over the primary six months of 2023. The producer has 230 acres of mature vines in Kent and West Sussex and spent £1.7m in 2023 on acquiring more land for cultivation.
Mr Hargrove points to Nyetimber and Breaky Bottom, considered one of England’s veteran producers, as the highest vineyards to keep watch over, and consider investing in when the chance arises. “What they’re producing is excellent,” he says. “You may say the identical of Chapel Down or Gusbourne.
“Some producers, and Nyetimber can be considered one of them, are doing high-end, very special, limited edition runs.
“It’ll be interesting to see if these varieties of wines turn out to be collector items that folks keep and sell afterward.”
The simplest approach to buy shares is thru a broker, similar to AJ Bell or Hargreaves Lansdown, although remember you will likely be charged a fee to purchase and sell in addition to a holding or “platform” fee.
Storing your wine
Should you are buying bottles of wine as an investment, you might decide to store it yourself. But be warned: maintaining optimal conditions is crucial to make sure the wine stays at the best quality possible, and doesn’t undermine your investment whenever you eventually come to sell.
Mr Small says: “Once you spend money on wine you’re effectively a custodian of the wine. You’re storing it until it’s in its perfect drinking window. Then someone will buy it who doesn’t need to store it but just desires to drink the wine when it’s at its best.”
Nonetheless, in case you are serious about constructing a portfolio, experts agree that storing your vintages “in bond” is the most effective option.
Buying in bond means your wine investment is stored in a specialist warehouse approved by HM Revenue & Customs.
Mr Short says: “Should you’re buying these very expensive wines, a thing we call ‘provenance’ is crucial – that’s the standard of the wine and the way well it’s been kept.
“Once you store in bond you already know it’s been stored in perfect humidity, light and temperature conditions.
“If you might have a really rare bottle of wine but it surely was stored in someone’s cellar you might have no idea the way it’s been kept. Then you definately can struggle to sell that on. Storing in bond means there’s an audit trail. it’s been kept and stored properly.”
Wine will also be insured to its market value when stored in bond, reducing the financial risk if something goes flawed.
The tax good thing about in-bond storage is considered one of the largest draws. Wine buyers are often hit with a double-whammy of alcohol duty after which 20pc VAT on top of the duty and the worth of the bottle.
But when wine is stored in bond you simply should pay tax on it whenever you take it out of storage, and in case you resolve to sell the wine while in bond, you’ll avoid paying duty or VAT altogether.
What’s more, in case you decide to have your wine delivered at a later date, the VAT is payable on the wine’s original sale price slightly than its current market value.
Prices typically range from between £10 to £15-a-year to store a 12-bottle case of wine. There are bonded warehouses dotted across the country. A number of the biggest names include Arc Wine Reserves in Cambridgeshire, Berry Bros & Rudd in Basingstoke, and Nexus Vinothèque in Wiltshire.
Making investments tax-efficient
If a bottle of wine has a life expectancy of under 50 years then HMRC classifies it as a “wasting asset”, which implies it’s exempt from capital gains tax (CGT) when sold.
Capital gains tax is tax owed on the make the most of selling an asset that has appreciated in value.
The precise HMRC definition of a wasting asset is “an asset with a predictable life not exceeding 50 years on the time when it was acquired”.
When assessing how long the wine’s life expectancy is, its shelf life, the wine’s provenance, condition and vintage will all be taken into consideration by the taxman.
While port and a couple of high quality wines are exceptions, the overwhelming majority of wine falls into the wasting asset category, and will likely be exempt.
If the wine is deemed to not be a wasting asset, a seller would still profit from a CGT exemption on profits as much as £6,000.
Nonetheless, this threshold is about to be slashed to £3,000 in April 2024, meaning profits on even modest sales will attract a 20pc CGT liability once the allowance has been used.
Are you a wine investor? We wish to listen to from you, email firstname.lastname@example.org and tell us your story, good or bad.