By: Todd M. Schoenberger, @TMSchoenberger, @JonesFallsPub
Yeah, the holidays. The wonderful time of the year when we force ourselves to have conversations with family and artificially act like we care. Other than hearing the occasional entertaining tale about a cousin having an affair with his nanny, most stories are a dud.
But, thank God we have booze to get through it!
Alcohol aficionados like to point out the celebratory mood of many as being the reason for a pop in consumption as we close out the year; and that may very well be. But one thing is for certain: Regardless of the reasons, people love to drink during the holidays, and wine seems to be the beverage of choice.
The wine industry has never been stronger as revenues are soaring. Sales of vino in the United States reached an all-time high of $38 billion last year—a 1.3 percent increase from 2014, according to J. Gordon at Wines and Vines. And despite the ancillary economic headwinds, such as fluctuating stock markets, global growth slowdowns, and immediate shifts in appetites and trends, the wine industry will likely post another 1- to 2-percentage point gain in growth in 2016.
The only lost metric for the industry is the ‘on premise’ statistic, which shows sales of wine in restaurants and bars remaining relatively flat. Dollar sales were up 0.1 percent, but volume was down 4.1 percent, according to Guest Metrics. Regardless, this lone piece of data simply proves consumers would rather purchase bottles at the store and drink while relaxing or entertaining at home.
Or, they prefer to order online.
The fastest growing metric for the wine industry is the Direct to Consumer Shipping. According to ShipCompliant, revenues hit $2 billion, which is an increase of 8.1 percent from 2014, with 4.2 million cases shipped. Still, though, this part of the industry is at its infancy stage and only represents 1 to 1.5 percent of total wine sales in the United States. The average bottle price is $38, and wineries can now ship directly to 43 states.
With all of this fantastic data, one has to wonder how to invest and profit in an industry that brings so much joy to others.
Naturally, there are several publicly traded companies to help quench that thirst for wine investing. Stocks like Andrew Peller (ADW.A), Constellation Brands (NYSE: STZ), and Willamette Valley Vineyards (NASDAQ: WVVI) are popular choices, but the big winner is The Wine Investment Fund. The hybrid hedge fund, based in London, has discovered a way to—as it says—invest in some of the finest wines in the world in order to maximize returns.
The Fund has solidly performed. Starting in March of 2004, the fund has posted a gain of 148 percent since inception and has published a 2016 year-to-date return of 15.68 percent, through October. If investors are nervous about actually investing in wines themselves, or simply don’t feel they have the expertise to make a sound buy, The Wine Investment Fund allows investors to simply make a capital distribution in exchange for exposure to some of the best wines in the world.
And, why not. After all, some so-called favorable wine investments are more fun to drink than to wait and see if they increase in value. The WIF figures that certain fine wines, of limited supply, do not increase in value in a linear fashion, but in short bursts over time. As that wine stock is reduced, the value is increased. The firm calls it the Price Step Theory.
Investing in this type of a fund also makes sense when you begin researching prices of expensive wines. Take a look at this list of the world’s most expensive wines, as per CommodityHQ.com:
- Henri Jayer Richebourg Grand Cru: This wine comes from Cote de Nuits in France where the average bottle goes for $15,185. These bottles have even sold for as much as $47,059.74.
- Domaine de la Romanee-Conti Romanee-Conti Grand Cru: Hailing from the same French region, these bottles have an average price of $12,972 with a max of $188,336.
- Henri Jayer Cros Parantoux: Another French creation, the average bottle price for this wine falls at $8,665 with the max price topping out at $23,011.
- Domaine Leflaive Montrachet Grand Cru: And, yet, another wine from France that fetches $5,505 for the average bottle, with its price maxing out at $9,554.
- Egon Muller-Scharzhof Scharzhofberger Riesling Trockenbeerenauslese: If you hadn’t guessed from the name, this wine hails from Germany and averages $6,826 per bottle with a nice max price of $15,105.
So there you have it folks. The holidays are great for many, but even better for wine lovers. And, as Santa likes to say: “Pour more wine and drink your beer, Christmas comes but once a year.”
Disclosure: The author does not own any positions in the stocks mentioned in the article or The Wine Investment Fund, but will most likely partake in the consumption statistics.
Todd Schoenberger 