Investment Expert Shares How To Build a Wine Cellar on a Budget

The time is now. There's no literally no better time to start building your wine cellar. While it might seem like a daunting task, the simple truth is you just need to purchase more than you drink. Tips from an expert will always serve you well, and when it comes to growing a wine collection that becomes a cellar, we knew it would be valuable to hear from Brian Ward, Principal of Cask100 —a wine and whisky fund & club model, bringing access to the most elite bottles on planet earth.

Winston Art Group —a global collectibles advisory firm—launched Cask100, a $20M wine and whiskey fund. Brian Ward is the company's long-time Director Wine & Spirits and was given the opportunity to spearhead the fund. This fund is joint-venture with Artory , a blockchain-based secure registry for collectibles, and acts as an extension of a similar fund launched by WAG & Artory for art investment. Unlike some of the other wine investment services out there, Cask 100 is only for accredited investors—minimum investment is $10K. So what if you are not in a position to invest at that minimum level?

Here's a Q&A with Brian Ward that is sure to help you start building the wine cellar of your dreams:

For consumers looking to start a wine cellar on a budget, where is a good place to start?

Whether a consumer is new to wine or a longtime connoisseur, the best place to start is with budget. Determine the amount of money you feel comfortable using to start the collection. That helps direct you on the number of bottles and types of bottles you may want to purchase. For example, someone with $1,000 to start may want to focus on bottles to drink now and a few to hold; someone with $25,000 has the ability to focus more on pricier investment-caliber bottles, where cases may go for 5 figures.

After that, it depends on a consumer’s level of knowledge about wine. If a consumer is new to wine, then I recommend education, both in what they like as well as what regions have to offer. The best way to do this is to go to your local wine shop and talk to the staff, who will direct you to styles of wine from various regions that fit your palate. A case may look like: 3 pinot noir from Oregon, Santa Barbara and Burgundy; 4 cabernet Sauvignon based from Napa, Bordeaux, South America and Australia; and a mix of 5 different varietals of red like Chianti and nebbiolo from Italy, Syrah/Shiraz from Rhone and Australia and perhaps a merlot from the right bank of Bordeaux. This can be very economical, but also deepens the understanding of what wines you enjoy.

Many people get stuck and have their go to wine only, so never experience the amazing wines out there. Before I got into wine myself, I was stuck on zinfandel from Sonoma Valley. I loved the fruit and spice, but never strayed away until I entered the wine world. I was blown away.

Then, collectors can now really dig into the world of collecting armed with knowledge about their own palate and what the wine market has to offer.

Is there such a thing as too small an amount of money to start a collection?

Wine is meant to be enjoyed, so I never say there is too small an amount. However, the collector should determine their goals accordingly. If they are looking to spend $1,000 on a nice collection of wines for drinking perhaps one bottle a week, then $30-75 per bottle wines would last for 6 months.

However, if the collector is more interested in an investment collection, the budget would need to be higher. I might suggest a case of Lafite Rothschild 2004, which is an off-vintage year, but strong and good potential to increase. A case of 12 sells for $7,200. If we start with a Sassicaia 2017, which as a lower entry point, there is still an investment of $2,500 for a case. By comparison, the top Burgundies, such as Domaine Romanee Conti and Leroy, sell for between $2500 and $10,000 per bottle .

It is very important for the collector to state their goal for a collection and understand if their budget will fit their goal. They can then work with a wine consultant, like I do with clients at Winston Art Group, to help source specific bottles with the access we have in the primary and secondary markets. Or, they can build it on their own if they have a thrill for the hunt and the time spend on sourcing.

How do you recommend breaking down the distribution between wines that are drinkable now, versus wines that need age?

Great question. It depends on the collector’s goals: Do they drink often and need bottles on hand for entertaining? Or do they see this as an investment opportunity, where they may drink later or sell it.

To use an example:

• The client drinks 2-3 bottles per week, and entertain twice per month
• The client mainly enjoys bigger reds, but does like more powerful whites and would like to try other reds
• They would like to invest both to age wine, but also as a true investment to potentially sell down the road, but mainly for enjoyment
• They don’t mind drinking $30-$75 bottles, but also enjoy a more special bottle on occasion
• They have a budget of $15K initially, but would like to build on the collection

For this client, I would suggest a three-tier approach.

Tier one: Wines you drink yourself with family and friends. These would be wines in the $50 to $125 range, and would recommend this to be 40-50% of the volume of the collection, but 20% of the value. The core of the collection is for drinking and entertaining.

The second tier: wines that are meant to be aged before drinking and do have investment value, but also should be enjoyed and tasted as they age. This may represent 20-30% of the bottles at a higher price point per bottle and 30% of the overall value. I recommend buying 2 cases of these wines, which could be 3 or 6 packs, not necessarily 12 packs. This way the collector can see how the wine ages over time and if the second case does increase in value it may pay for both.

The third tier of wines: the truly investment grade wines with an average of $1,500+ per bottle. These are the wines that make up the collection of the Cask100 fund that I manage and those that I feel have the most potential to increase in value and would recommend be kept in professional storage. These are the wines that tick all of the things that make a wine valuable., such as Domaine Romanee Conti Echezeaux. This is a very rare wine with less than 1,400 cases produced annually and remains a name in Burgundy as the top collectible wine. It has seen a 67% increase in the past 5 years even in the face of a soft market, indicating a good time to buy. These wines would comprise 20% of the collection and 60% of the overall value.

When a wine drinker/collector begins thinking about wine as an investment, what are some key considerations?

When we are considering wines or spirits for our own collection at the Cask100 fund, we look 5 specific components that indicate value of the bottles we purchase.

1. Producer. Only 1% of wines are truly collectible. With roughly 100,000 true winemakers in world, only between 500 to 1,000 are investment grade. Of those, a small number are considered the blue-chip brands like the first growth Bordeaux, Petrus, Domaine Romanee Conti, Leroy, Dom Perignon, Krug Champagne, Bruno Giacosa, Sassicaia, among others.
2. Rarity has a big affect on the price of a wine, not necessarily its investment value, but does help drive the idea of appreciation. Wine is a consumable product and even the most valuable wines are consumed, so the concept of supply and demand is just as important. When all else considered is somewhat equal, rarity makes the big difference. Screaming eagle is a Napa cult wine that sells for $3,000 plus per bottle with low production of 400 to 750 cases per year compared to another cult type wine, Opus One, that sells for $400 and big part because they produce 25,000 cases per year. This is true across most regions of the world with Domaine Romanee Conti producing 450 cases per year starting at $3,000 per bottle compared to Lafite that produces 20,000 cases per year and sells for $500 plus per bottle.
3. Vintage – wines are organic and respond to the soil, climate and production process differently each year. Known as terroir, the weather, soil, sun exposure all play a huge part in creating the perfect balance between sugar, acidity and the tannins and in the right conditions can create the foundation for a great wine. With that in mind, vintages make a big difference between a good wine and a great wine. It is important to understand strong vintages for each region. Collectors can make the mistake of collecting a wine by name only and forgetting about the vintage. It may mean the difference between your Lafite selling for $1,500+ (for 1982) versus $550 or less (for 1984).
4. Drinking Range is subjective and can be quite a wide range, but critics give these ranges to guide consumers to when and how long a wine will be in its peak drinking window, when all of the flavors have integrated and the wine will be at its best. This is the time to consider selling, before the wine is past its prime. It’s important to note when buying to ensure you didn’t pass the window.
5. Critic scores are often panned by wine experts and collectors for being very subjective, but they are important for the value of the wine, whether we agree or not. The Lafite 2019 is considered a great wine and looking at 10 critics scores, they all ranged from 97-100, telling the consumer this is a safe bet that it will be a great wine.

Additionally, there are factors outside of the specific bottles:

1. The collector also needs to consider carrying costs for any collection. These would include insurance for replacement value, storage either at home with a climate-controlled cellar or our recommendation at a professional storage facility. This has an upstart cost, to outfit a storage space, and hundreds or thousands of dollars a year in other costs.
2. Provenance. When purchasing for investment, try to buy in the original cases, from very reputable sources and keep track of documents. It will become important when selling as auction houses prefer to have strong provenance in unbroken cases. If possible store in a professional facility again to ensure provenance and proper storage from time of acquisition. There is a trend in the wine industry to start using blockchain technology to ensure authentication documents are not tampered with or fraudulent. We use that with our own collection at Cask100.
3. Consider a theme, such as verticals of vintage years, groups of similar wines like the 5 first growths from Bordeaux or even horizontals which may be the great vintages from the top producers. This will create more demand and value for the entire collection.

Aside from the classic areas of the wine world, where are you looking to as emerging wine regions for collectors to keep on their radar?

Currently the world of wine collecting revolves around France, specifically Bordeaux, Burgundy, Champagne and the Rhone Valley region—it’s 75% of collecting and trading! This is followed by Italy with the Tuscan and Piedmont regions that produce Barolo, Barbaresco and Super Tuscan wines. This makes up 12% or so of collecting with the US wines coming in around 6%. The rest of the world makes up the remaining 7%—this would be the emerging regions that have history, but also potential in the market. Plus, they are great wines to drink.

• Germany makes great Rieslings with long aging and investment potential
• Australian wines like Penfolds and Henschke
• South America produces powerful Cabernet Sauvignon.
• Israel is making great wines with cabernet sauvignon, merlot, syrah and chardonnay.
• Greece has been making wines for a long time, but are now producing really interesting wines from Santorini that are barrel aged sweet wines
• The country Georgia may be the birth place of wine and has seen a renaissance recently in winemaking utilizing native grape varieties such as Kisi and Mtsvane
• England has seen a boom in sparkling wine production that quality compares to Champagne with a similar climate for growing. Nyetimber 1086 Rose sells for $200 per bottle.
• Canada is known for its Icewine and its Inniskillin Riesling Icewine has long aging potential and potential for appreciation

Wine making has continued to grow worldwide and countries like India, Japan and China are beginning to make great wines with native varietals. It’s an exciting time to look at emerging regions!

Visit cask100.com to learn more about the fund and begin your investment strategy today.