Fine wine valuation is an art form disguised as a spreadsheet.
The fundamental question:
If I wanted to sell this case of wine, how much would someone be willing to pay for it?
The fundamental answer:
It depends
Selling fine wine can be much like selling a car. If you need to sell it today – there’s always someone who will take it off your hands. They may not, however, be willing to pay you full value – think webuyanycar.com.
If you have an exit strategy, a buyer lined up, or a reliable sales channel, then it’s more likely that you’ll be able to sell it at market value.
So what is market value?
Problems arise (and have arisen) from wine investment companies being opaque about valuation. You hold a wine for 5 years, and the whole time, you are told it is worth £X.
You then go to sell it, and suddenly it’s worth £(X – a lot).
You feel (understandably) misinformed.
If you have a wine portfolio, the below (or a variation of it) is what you should expect from your portfolio manager.
The lowest available offer (to sell) on the market for the exact case and bottle that you own.
However, some problems may arise here.
- No offer exists for the specific wine on the market.
- The only offer available is for a different format (e.g., a magnum instead of a bottle).
- The offer in question pertains to a different quantity (e.g., a single bottle versus a case of three).
- The offer data is outdated, potentially months or years old.
- The average trade of a wine may be below the average list price.
This is where valuing fine wine becomes an art.
The Liv-ex has recently published a ratio to calculate premiums for non-standard bottle sizes.
What are we doing at WineFi?
- Research into the difference between trade prices and list prices.
- Research into the premium between bottles and different case sizes.
- Research into the premium between non-standard bottle sizes.
- Ensuring we have data from as broad a set of marketplaces as possible.
- Applying logic to prices that are outdated, or not the exact same format.
- Researching ‘price smoothing’ to understand the trajectory of wines that are not frequently traded.
This is a circular problem. It’s easiest to value and sell wines that are frequently traded. However, this part of the fine wine market is not necessarily always the highest returning.
Therefore, we must find ways of quantifying what is not explicitly quantified.
