NOMPU SIZIBA: The 44th Nederburg Auction is the industry platform of choice for buying South Africa’s rarest and most sought-after wines. It took place last weekend at the Nederburg Estate. The chief auctioneer at the event was David Elswood of Christie’s in London at the gavel.
The auction apparently managed total sales of R5.2 million. The rand-per-bottle price at auction has increased by a whopping 424% over the past six years – that’s since 2012 – which indicates that wine has become a popular investment asset class.
To tell us more I’m joined on the line by Christelle Colman, who is managing director of Elite Risk Acceptances. Christelle, most people know wine is something to have a good time with, or maybe to drown one’s sorrows, but wine as an asset class? Just educate us about that. What type of wine can become an investment asset?
CHRISTELLE COLMAN: Wine collection around the world is quite a sought-after collection asset, and we’ve seen an increasing trend, not just in South Africa but in other countries around the world, with people getting very good returns on investment when it comes to buying the right kind of wines.
Last weekend we had the Nederburg Auction, and we saw some record-breaking statistics coming out of the auction, so it’s definitely worth considering wine as an investment. But I think importantly, and that’s the thing we want to talk about today, you have to make sure that you insure these assets correctly because things can go wrong.
NOMPU SIZIBA: One of the things, to prompt you a little bit, is that once you do purchase your wine or your wine collection, you have to make sure that you insure it before you even get it. Right?
CHRISTELLE COLMAN: Yes, absolutely. It’s not just about insuring it before you get it, but you should make sure that your entire collection is adequately covered. Insurance is so complex for people, as it is. Car insurance is complex – how do you insure a wine collection?
If you look at the numbers that are being spent on buying wine, you have two different kinds of collectors. You have those who collect for the pleasure of drinking the wine – ageing the wine, drinking it themselves. And then there are those people who actually build a collection to add to the value of their investment portfolio. In either of those two scenarios you need to make sure that you are adequately insured.
It starts at the point of purchase. You might be importing wine from vineyards all over the world into South Africa, or you might be a “swallow”, as we know it. These are people who have property in South Africa, but they are from Europe or from other parts of the world and they are exporting wine to their collections that they have at these other homes. So insurance, while the items are in transit, is very important because you can have breakage and theft during the journey.
Then, when you are at home, you can also pick up some major risks and exposures, such as electricity interruptions – something we deal with in South Africa all the time. We are used to load-shedding, and that could affect the climate-control solutions that we have for the wine collections. You could have a fire, and extensive heat damage. And then of course you can have breakage and theft. Those are major risks.
What is not covered, though, is “mysterious disappearance”. So, if you get into your wine collection late at night [chuckling], you can’t claim for the drinking of the bottles of wine. So you have to be very much aware of the hard insurance risks.
NOMPU SIZIBA: That is, you need to update an inventory for your insurance company, so that if there is that mysterious disappearance, you can at least claim for it?
CHRISTELLE COLMAN: Absolutely. You do get specialist insurance. We can give you exactly the correct cover for your wine collection. That really is the purpose of this conversation, which is if you are an avid collector of wine, if you are investing in wine, make sure that you get specialist insurers who can help you to give you that adequate cover. It starts with a valuation of the wine collection. Apart from being influenced by the increase in the value of the wine as a result of the increase in the price or the rarity of that item, it can also be influenced by the rand/dollar exchange rate, when you consider some people import wines from all parts of the world.
So get a sworn appraiser or a wine specialist to help you with the correct insurance replacement value, because insurance works on replacement of those items. That’s what it will cost to re-purchase those bottles of wine if something does happen to them. It’s a really, really important consideration.
NOMPU SIZIBA: How often should you appraise the value of your wine collection, and is there a special wine valuer who needs to come to your home or your premises to value your wine collection?
CHRISTELLE COLMAN: Just to answer the first part of your question, how often you have to do it really depends on the fluctuations – how you would grow this specific class, and also the impact of the rand/dollar exchange rate. But typically, from the insurance perspective, you would value the collection at the inception of the cover, and then review it every year as you review your insurance portfolio. Yes, you get specialists. If you deal with a specialist insurer they would be able to advise you on specialist valuators and sworn appraisers, who would be able to come out to your premises and assist you in getting this collection valued. We’ve seen some amazing and interesting collections of wine and whisky collections, for instance, that run into millions of rand. People become very, very avid collectors of this specific type of asset class, and it really can become quite a sizeable collection. So if you put that much effort and that much time and money into building this collection, it really is important that you insure it correctly.
NOMPU SIZIBA: And then the last thing I wanted to ask is around security. Presumably, if you are amassing this very expensive wine collection, then as part of the insurance deal you have to make sure that you actually secure the stuff.
CHRISTELLE COLMAN: In South Africa we live in a country of very high crime, and alcohol is definitely something that is very sought after when it comes to home burglaries and invasions. So making sure that your collection is adequately secured is very important – but that goes without saying. It’s the same for a jewellery collection or a fine art collection. Security is very important. What I would advise listeners, as well, is if you do have a high-content-insured exposure, get a security specialist out to your property to advise you on adequate security measures that are commensurate with the exposure, and to the value of your home contents.
NOMPU SIZIBA: Okay. Thanks to Christelle Colman.