As an investor, you are always seeking to maximize the returns of your portfolio, with good diversification and acceptable risk. If you are an entrepreneur, the lure of a new business can be both exciting and profitable. If you are a wine connoisseur who enjoys visiting wineries and tasting on site, you have probably dreamed of owning a winery someday. It doesn’t need to be just a dream. It is quite possible for those with money to invest and an entrepreneurial spirit to invest in the wine business. Imagine pouring your own vintage at an elegant dinner with friends, hosted on a balmy evening in your vineyard.
Sales of wine continue to raise, with US sales hitting an all time high in 2012, at $34.6 billion. The demand is definitely there, though there is competition to match. There are now wineries in all 50 states, including some that do not seem like obvious wine countries.
Winemaking – an excellent type of investment for rookie entrepreneurs
Buying or creating a winery can be an expensive proposition, however. If you want to purchase land for your vineyards, the more prestigious the region, the more expensive the land will be. The top of the line would be California’s Napa Valley, where prime vineyard land could go for up to $500,000 per acre. Even a small vineyard (five acres or so) could require a substantial investment.
Looking beyond Napa Valley, you could see prices in Sonoma Valley, California at about $150,000 per acre, or $80,000 along the California central coast. Some industry experts are looking at Oregon and Washington as possibilities, both of which produce some fine wines. If you move further east, you might end up paying as little as $10,000 per acre in places like New York, Texas, or Virginia.
Of course, there is a reason that vineyard land costs more in some locations. Certain regions have optimal growing conditions, and tend to produce the best grapes and the finest wines. They also have a prestige factor that influences the price. You could sell a bottle of your Napa Valley wine for $100 much more easily than a bottle of Arizona wine.
Investing in wine can secure your future
Another way to get into winemaking is to skip the land, and just make your wine from other people’s grapes, or even grape juice. This approach requires a far less initial investment. You can purchase grapes via a “custom crush” program from a company that owns vineyards, and then turn it into wine yourself. This can be run as quite a small operation, and you can even outsource the bottling. It gives entrepreneurs and wine makers a way to start small, and then grow from there.
Another advantage of this approach is that you can be making wine your first year in business, instead of planting vines and waiting a few years for them to mature. Of course, investors can also invest in wine the easy way – buying someone else’s wine and holding it as it ages and the prices rise. While prices for some of the top Bordeaux wines have been dropping recently from their earlier lofty levels, many Burgundies, Barolos, and cult California wines like Screaming Eagle have increased in value. There are good values and investment returns to be found.
Get to know the business before starting an investment
Wine is a liquid asset that’s gaining a lot of credibility. Increasingly more people are choosing to invest in wine rather than spend their money on art, gold, or jewelry. In order to get a return, entrepreneurs should be patient. Start small. Buy 1-2 cases of good wine and store it properly. Know your supplier and only store the wine in licensed bonded warehouses to eliminate VAT costs and minimize insurance costs.
Entrepreneurs who want to invest in their future should start paying more attention to fine wine. The business is booming because of such an increasing demand; however that doesn’t mean you are allowed to be reckless. If you’re seriously thinking of spending money to buy wine, you have to speak with a connoisseur first. Ask for advice because investing in wine can be just as risky as investing in some other type of commodity.