Wine Investing Still Rich Man’s Game

• Sep. 29 2004 00:00

Interest in investing in fine wines has been growing in the West for some years now as more people realize that it is not just the preserve of the well-heeled.

But has the craze hit Russia?

Not yet. While collecting fine wines is becoming more popular, only the wealthiest Russians have started to embrace the idea of using the sophisticated beverage as an investment tool.

People do build their own cellars and invest lots of money in wine, but they do not view it as a future profit. They just have it for pleasure and use it as a chance to boast in front of guests, said Artur Sarkisyan of the Le Sommelier wine school and boutique.

Andrei Zimin, manager of the fine wines department at Moscow’s Gelos auction house, also sees little evidence of people cashing in on wine.

Wine as an investment in Russia is almost unheard of. People might buy an expensive vintage [Crimean] Massandra wine as a special gift for a birthday or anniversary, but not as an investment, he said.

The reasons for the lack of interest in this investment vehicle in Russia are several.

First, Russia lacks proper specialist warehouse storage facilities for wines, and transporting wines from France and elsewhere for investment storage in Russia adds costs and is risky.

Most likely, no one would keep his or her wines for investment in Russia, said Chris Davies, a financial adviser with AVC Advisory in Moscow. Wine storage facilities are well developed in the West, where the future sale of wine can be supported by certified storage conditions, thus pushing up the value. All these places carry insurance for the whole warehouse, and because it is shared over many collectors, the cost of insurance is cheap.

According to Zimin, not one such storage facility exists in Russia and Russian law is underdeveloped when it comes to procuring certification of storage conditions and authenticity.

The number of authorizations and stamps and paper-shuffling that must be completed to sell one bottle of Massandra is beyond belief, Zimin said, displaying page after page of stamped, notarized documents.

Christopher Burr, director of Uvine, an online global exchange for buying and selling wine (Uvine.com), said that because of the complications with importing and storing wines in Russia, they have shipped wine for their Russian clients to the south of France, to private yachts, to New York, Geneva and Helsinki, as well as one consignment to North Cyprus.

We have only three or four clients resident in Russia and a few more who have houses outside the country, Burr said. Pretty much all the wines we have traded are very fine investment-grade wines, which often stay in bonded store in London for future trading or shipping at a later date.

For clients who have wanted their wine in Russia, Burr said the best solution was for the customers to get their own local contacts to arrange shipment and Uvine then delivered to the shipping agent who knew how to clear customs and pay local taxes.

Even if looking closer to home to invest, despite the nostalgia they invoke, famous Soviet-era wines such as Massandra and a wide range of Moldovan wines, for which Russia is still the main market, are much better off in a collector’s cellar than being bought for future profit.

Gelos offers a 100-year-old bottle of Massandra salvaged from a state collection for the bargain sum of $1,500, but this find is little more than a very nice, expensive gift since, even though it is supported with official documentation and decades of dust, the bottle is unlikely to increase in value.

As with all Soviet-era alcohol, the authenticity of a bottle of Massandra is hard to prove.

I had one woman come in with two bottles of vintage Massandra saying her husband had worked for the company. She claimed that the bottles were untouched, but I could tell by looking at the bottle that she had peeled off the label and replaced it with the label from a more valuable one, Zimin recalled.

Moldovan vineyards also do not hold much investment promise, despite producing some high-quality, renowned wines such as Negru de Purcari, the 1990 vintage that Britain’s Queen Elizabeth II regularly orders. Of Moldovan wines, AVC’s Davies said: Most have gone to the wayside due to improper handling and storing.

For the fledgling wine connoisseur, sticking to collecting might remain the better option. Several specialty stores catering to Moscow’s wine-sipping elite have popped up around the city and sell the full gamut of collectors’ wines.

However, Gelos’ Zimin observed, given that the general public’s knowledge about wine has grown exponentially in the past several years, along with the selection of wines available, this is likely to feed into an interest in investment.

There is hope for the future of wine investing in Russia, Zimin said.