More and more investors are now interested in alternative investments. Alongside dynamic investments such as a stock index, or conservative assets such as bonds and real estate, investment-grade wine can also be added to a portfolio. In this article, we will focus on wine and describe investing in wine through shares and ETFs.
Ways to invest in wine
In this article, we will focus exclusively on investments in shares and ETFs.
For a brief mention and comparison, you can also invest in “physical wine”. This means actually buying individual bottles of selected wines, but this mainly brings higher storage costs for the purchased products, and potentially also greater time demands, as the bottles need to be selected, purchased and then transported to the storage location, and so on.
Main reasons to invest in wine
The first and essentially main reason is the opportunity to grow your money. Quality wine can increase in value over time and may potentially protect you against inflation. Some wines have historically even shown significant appreciation in the tens of percent per year. In selected cases, they have therefore become a better investment than, for example, commodities or some shares from less profitable sectors. During a financial crisis, for example, wine can be compared with bank stocks, which at that time may, unlike wine, be losing money.
An investment in wine can also broaden and diversify a traditional investment portfolio. Diversification can generally reduce the risk of a decline in your investments as a whole. Wine often has a relatively low correlation with other asset classes, such as government bonds, commodities, savings products or cash, and can therefore help balance your portfolio.
Quality wine, like other rare commodities, generally tends to rise in value over time. Given the limited quantity of quality wines on the market and steady demand for them, the price of wine may rise even despite the higher inflation seen in recent years. Paradoxically, some economists argue that luxury goods sell best in times of crisis, contrary to expectations, and luxury wine is no exception.
Selected stocks for investing in wine
Let us look at specific stocks and companies connected with the production and sale of wine. The companies listed below are traded on the New York Stock Exchange in the US. These are often stocks that pay investors a dividend.
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- Diageo plc (ticker DEO) is a company originally from Great Britain engaged in the production and distribution of a wide range of alcoholic drinks, including wine. It owns brands such as Sterling Vineyards and Beaulieu Vineyard. The company is growing steadily and currently offers an annual dividend of approximately 2%.
- Willamette Valley Vineyards, Inc. (ticker WVVI) is a US company focused on the production and sale of wine from the Willamette Valley region in the state of Oregon, where the company is also based. It does not currently pay a dividend to shareholders.
- Crimson Wine Group, Ltd. (ticker CWGL) is based in California in the US. It is a company that owns and operates several wineries in key regions of the states of California, Oregon and Washington.
You can also invest in “wine companies” outside the US capital market.
- Treasury Wine Estates Limited (ticker TWE) is an Australian company traded on the local ASX exchange. It is one of the world’s largest producers and distributors of wine. Its portfolio includes well-known brands such as Penfolds, Wolf Blass and Lindeman’s. It pays relatively high dividends of around 3%.
- Pernod Ricard SA (ticker RI) is a French company operating worldwide. It produces and distributes alcoholic drinks, including wine. It is traded on the Euronext Paris stock exchange. It pays a very attractive dividend of around 2%.
Selected ETFs for investing in wine
If you want to invest with greater diversification, you can buy ETFs. Funds of this type often invest in a specific index. Below is a list of selected ETFs through which you can invest in wine. If a link is provided for a specific ETF, this ETF can be bought through the broker eToro.
- iShares Global Consumer Staples ETF (ticker KXI) invests in shares connected with the production of consumer goods. The ETF tracks the performance of companies included in the S&P Global 1200 Consumer Staples Index. These are mainly sectors such as food, drinks including wine, and tobacco.
- Vanguard Consumer Staples ETF (ticker VDC) focuses on shares from the consumer staples sector in the US. This ETF tracks the performance of the MSCI US Investable Market Index (IMI), which includes producers of alcoholic drinks, including wine, alongside manufacturers of consumer goods.
- AdvisorShares Vice ETF (ticker ACT) invests in companies that produce consumer goods, including alcohol, tobacco and even cannabis, as well as companies in the gaming industry. Broadly speaking, the target investments are connected with entertainment, and it can be said that these shares are less dependent on economic developments.
- Consumer Staples Select Sector SPDR Fund (ticker XLP) is an alternative to the first ETF mentioned. By buying this ETF, you can invest in areas such as food, drinks including wine, and household products.
Conclusion
Selected wine-related stocks have performed fairly well in recent years. Companies involved in the production, sale or distribution of alcohol generally belong among dividend stocks, and holding them may generate a yield of around 2 to 3% per year.
We remind you that you should always carry out your own research before buying or selling shares. Alternatively, consult a professional in advance, such as a qualified financial adviser who specialises in investing or shares.