Raise your glass but not your hopes
Financial Times 5.10.07 by Ellen Kelleher
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The number of boisterous City workers clinking glasses of Pinot Grigio or Sancerre outside the pub after a day in the office is proof that London is a city teeming with oenophiles.
Indeed, some of these enthusiasts have become so interested in wine that they are now taking shares in French vineyards and studying wine-making as a hobby or second career.
"More of my students are second-careerists these days," reports Chris Foss, head of wine studies at Plumpton College in East Sussex.
But investing in vineyards is not for the cowardly. It is quite difficult to make money once start-up and operational costs are taken into account, say retired and current winemakers.
"People underestimate the amount of time you need to put into growing the grapes, making the wine and selling the wine. All three of these tasks are equally important," says Foss.
Planted vineyards in France vary in price depending on the region. It costs €10,000 (£6,920) per hectare to purchase a plot of vines in Languedoc, the slightly cheaper region in the south of the country, but in the Rhône valley the price would climb to €25,000-€30,000 per hectare.
Near the well-known
village of Chateauneuf-du-Pape, prices range from €350,000 to €400,000 per hectare. And in the Champagne region, prices can run as high as €1m per hectare, according to Adam Dakin of Vignobles Investissement - one of a small number of French property groups specialising in vineyard estates.
One hectare produces 6,000 to 9,000 bottles of wine. But to run a business that is commercially viable, you would need about 40 hectares in the Rhône valley or about 15 in Champagne, analysts say. To farm a hectare of grapes would cost about €6,000. It would then cost an additional €1 euro per bottle to pay for marketing and
bottling.
Returns are limited. If the marketing of the wine is successful, at most, one could see a 5 per cent return, according to Vignobles Investissement. "About 95 per cent of the success of a vineyard depends on sales and marketing," reports Dakin.
Capital appreciation of property offers more attractive profits. The prices of housing and commercial buildings are increasing on average at a rate of 10 per cent per year in French winemaking regions.
Or for those who maintain an interest in winemaking, but do not want to risk farming on their own, additional schemes are available.
Wine Estate Capital Management (www.wineestatecapital.com) offers the chance to buy shares in vineyards in France and South Africa. The scheme is not accepting investors at the moment, but more projects are likely to be launched soon. Vineyard estates are owned by an investment company, which has a maximum of 20 shareholders each with a minimum investment of €100,000.
An annual return of 6 per cent is guaranteed. Shares can be sold at any time, but are offered first to remaining shareholders. Shareholders can spend weekends at the chateau and organise social events there. They also receive 10 cases of wine a year.
Some other creative schemes may be attractive to hobbyists. Wine Share (www.wineshare.co.uk) permits investors to "rent" a row of vines at Domaine du Grand Mayne, a vineyard in southern France, each year for £75. Its 4,000 or so members are entitled to buy cases of the wine produced there - which carry personalised labels - at reduced rates, which range from £5 to £14 per bottle. Owner Andrew Gordon opens up the vineyard for grape-picking, tasting and a feast over the last two weekends in September.
A similar vine-rental scheme is offered by 3 D wines (www.3dwines.com).
However, for anyone embarking on a wine-making career, it pays to learn the craft. Plumpton College offers a five-day "intensive" vinegrowing course and a five-day winemaking course for £345. Two-year programmes in wine production cost about £3,000 per year.
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