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Business in Singapore: Investing in wine and cheese

By: Justin Harper

It’s hard to believe that wine and cheese are classified as serious investments, but, as Justin Harper reports, it’s true. In fact, wine has been one of the best investments of the 20th century – and cheese is definitely not just for crackers.         

 

 

Did you know that Bloomberg has a wine and cheese index, which features an eclectic mix of 16 global wine and cheese retailers? Holdings include Spanish wine retailer Baron de Ley, Chilean global wine producer Concha Y Toro, and Japanese cheese dairy Rokko Butter, which trades on the Tokyo Stock Exchange.

And this isn’t an index just for wine and cheese connoisseurs. It has actually gained more than 35 percent year to date, ranking it very high when compared to traditional investments such as property and global equities.

Those keen on this alternative asset class may want to look at some of the below-the-radar stocks that are helping power this index to its stellar returns. These include New York-state-based Constellation Brands, one of the world’s largest wine purveyors. Constellation Brands owns a number of well-regarded wine labels, including Robert Mondavi and Ravenswood. The company has grown through acquisitions in recent years and will likely profit from its purchase of Crown Imports, which imports and distributes best-selling Mexican beer brands in the US, including Negra Modelo, Corona and Pacifico Clara.

 

 

Wine is definitely an investment growing in popularity; prices of rare bottles are surging as more drinkers enter the market, particularly in Asia. But being paired with cheese could make it more palatable for newbie investors.

Both cheese production and consumption has grown steadily in recent years, and interest in small-scale cheese-making is beginning to make a comeback. These days, discerning consumers prefer food sourced and grown locally, with pressure on retailers to grow organic and sustainable produce. It’s all about being trendy and chic in what you eat, as “artisan” becomes the buzzword.

Cheese falls nicely into this category as a natural product which hasn’t been tainted by modern factory-line processes and artificial ingredients. While there are opportunities to invest in cheese-making companies, some may want to take a more hands-on approach and set up their own cheese-making factory.

 

 

Research from some esteemed universities shows that, over the past 100 years, you would have been better off investing in wine than a whole host of other money-making schemes. On top of that, big changes in the industry have made the fine-wine market accessible to the average person, rather than just millionaires and specialists. According to a report released by Morgan Stanley Research, there is a growing possibility that there could be a global shortage of wine, following a nearly 300 million case undersupply of wine in 2012, the largest shortfall in almost 50 years. A contributing factor is a production decrease in the world’s three largest wine producing countries of Spain, Italy and France.

Meanwhile, surging demand from places like China and now the US mean that prices have been rising by 10 to 15 percent a year recently, seeing wine out-perform shares consistently over the last 15 years. Wealthy buyers from around the world are snapping up prestige wines, and their desire for them is so far independent of global economic downturns. The fundaments behind wine investment are relatively simple; fine wine is a tangible asset, it is a luxury product that many aspire to own, consume and know more about.

Investing in wine, or cheese for that matter, doesn’t quite work the same way as shares. After all, you’re buying an actual bottle or case of real wine – not depositing money in a bank or buying a share in a company. That means it needs to be stored somewhere. For investment purposes, most recommend storing it in a bonded warehouse. There are many of these around the globe, and the Singapore Freeport is one such location that will keep the wine safe, secure and in a climate-controlled environment.

 

 

Such alternative assets such as wine, cheese and even art can allow you to avoid paying some taxes normally associated with investing. But tax is a complicated beast and it’s best to seek professional advice before making any major investment. But generally as long as your wine and cheese are held as assets then they don’t attract a tax charge. Drinking or eating it may change your tax position, however, while selling it at a profit may also trigger a liability.

If that seems too complicated, there are services that can do the work for you – advising on wines, making the transaction, suggesting when to sell and sorting out a warehouse to store them in – although this doesn’t come free. Like all purchases, values can fall as well as rise – so no profits are guaranteed when buying wine or cheese. Buying and selling a physical asset like wine or cheese isn’t regulated by traditional financial authorities, which means investors have to be careful when choosing who to buy from.

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