Wine Futures, How Something That Doesn't Exist Yet Makes You Richer?
Here at VCM, we can see the future. It’s bright, ruby colored, with medium acidity, and it smells like crushed violet, black currant, and hints of mint. Surprise, surprise, it’s wine. The grapes haven’t been picked yet, nor the wines blended, but we’re already putting it into our investment portfolios.
How are we putting something that doesn’t even exist yet into our portfolios? It’s possible through what are called “wine futures.” The model works as an IOU from a wine estate to a customer who purchases wine before it is on the traditional market. Most of the time, these wine futures are purchased in the spring after the wine finishes undergoing alcoholic fermentation, but before it is blended, aged, and bottled. Depending on how long the wine is aged, it could be years before the customer sees the product they purchased. Wine futures are actually quite common in places like Bordeaux, a region famous for its en primeur event every April, but which was cancelled this year due to Coronavirus.
Because of this new, unexpected Coronavirus reality, many wineries in France are finding themselves with an excess of wine to stock, since their customers (think big restaurant groups, importers, and even private sales to individuals) are keeping a tight hold on their wallets. And the wine market is feeling the blow. On March 24, Jean-Marie Fabre, chairman of French Independent Winegrowers, warned, “In the coming weeks we will not be working on a lean model, we will be working with zero cash flow.”
The antidote to zero cash flow for wineries is to purchase their wines as futures, as a promise of wine to come. For VCM, we see this as a win-win. We get to purchase rare, luxury wines at a discounted rate to further build our wine portfolios, all while helping to keep wineries afloat during these scary times. We’re even looking to purchase wine futures several vintages into the future, not just the 2019 vintage that would normally be purchased in 2020, both in Bordeaux and Burgundy. This is how something that doesn’t even exist yet is being added to your portfolios, making your shares worth more in the future.
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The benefit for our investors is that the market will bounce back; experts may disagree on just how long it will take, but they don’t disagree that we will overcome this. And when we do, our portfolios will have turned a significant profit. We buy these wine futures low, in advance, and sell high, a few years down the line when the economy is roaring. For a long-term vision investment portfolio, this is a crème de la crème situation.
We know these are trying times for many people financially, but we’re keeping an eye on your future. Wine futures make it possible to put money back into the hands of winemakers, and to give you more of a cushion when we make it through to the end of the tunnel.
So, what does your future look like? Get in touch, and we’ll try to help you see it better.