How to Invest in Wine Futures and Pre-Arrivals: How Futures and Pre-Arrivals Work and How to Buy Safely

When you invest in wine futures, you’re often buying wine while it’s still in the barrel. Photo Credit: Maxpixel CC user Canon EOS

Here’s the difference between wine futures and pre-arrivals:

A wine future is sold before the wine is bottled, and you pay for the wine in advance. The entire process can take as long as four or five years to complete, sometimes longer. You have to wait for the wine to age in the barrel first.

A pre-arrival is wine that’s sold after it’s already been bottled, but before it’s officially released on the market. These wines usually only take a few months, or as long as two years, to arrive. The wait time on pre-arrivals is much shorter than wine futures, on average.

Why You Might Invest in Wine Futures

Although you will often wait years to receive your wine futures, this investment benefits your collection in three ways:

• Price: Collectable wine becomes more valuable as it ages, so buying bottles early usually means paying the lowest prices for those bottles. For instance, futures of 2009 Margaux sold for about $550 per bottle when they were first announced in 2010. Now that the bottles are on the market, that same vintage is worth close to $1,000 per bottle, a $450 increase in value.

• Availability: Vintages that are rare and in high-demand, like 2010 Haut-Brion, usually sell out quickly after they reach the market. Only 7,800 cases of the 2010 were ever made, making it difficult to find more than a bottle or two on the secondary market. When you invest in wine futures from a trustworthy retailer, you can secure the exact number of bottles you need years before they’re sent to wine shops.

• Storage: Because it takes years for your futures to arrive, you have plenty of time to prepare your cellar or storage warehouse for the new wine cases. You can sell off or drink the bottles you already own without stressing over last-minute shipments.

Wine futures are an excellent investment option for collectors who want the best price possible on their wine, and who don’t mind waiting years to see a return on that investment. This is not the ideal option for collectors looking to make a quick profit.

The Risk of Wine Futures

The main risk when you invest in wine futures is that there’s no guarantee on quality. The wine is still in the barrel when you pay for it, and if something goes wrong during the aging or bottling process, you could lose your entire investment.

In addition, the wine might not be worth as much as you expect. In 2011, Leoville Las Cases sold futures of its 2010 vintage for $300 per bottle, and today, that vintage is still only worth between $280 and $300 per bottle. In some cases, collectors paid more for the futures than they would have if they had bought the wine on the secondary market years later.

It’s also very easy to forget about your futures investments unless you use a wine cellar tracking app. If you forgot that you bought a case of Lafite five years ago, you might not have enough space to store your wine when it finally arrives.

Why You Might Invest in Pre-Arrival Wines Instead

Unlike wine futures, pre-arrivals have a stronger quality guarantee, and require less wait time. Here are a few reasons why you might choose a pre-arrival investment:

• Price: As with futures, you often will pay less for pre-arrival wine than you would after release because the bottles are still exceptionally young.

• Storage: You don’t have as much time to prepare for pre-arrival wine storage compared to wine futures. However, you still have anywhere from 6 to 24 months to get your cellar ready. For many collectors, this is more than enough time.

• Availability: Again, ordering your bottles before they are shipped to wine shops means that you will never have to worry about the wine selling out, especially for sought-after vintages.

• Quality: When it comes to quality, pre-arrivals are a safer bet than futures. Since the wine is already in the bottle, critics have usually already written early reviews. Early ratings are typically a good indication of how the vintage will rate over time, so you can use this information to buy the best wine. For instance, Robert Parker gave 2001 Verite La Muse a perfect score when he first tasted it, and after revisiting the wine years later, his score remained very high.

Pre-arrival wines are the best option for collectors who want to see a faster turnaround on their profits, or who want access to tasting notes before making a decision.

The Risk of Pre-Arrival Wine

Although pre-arrivals involve less risk than wine futures, they aren’t foolproof. If the winery is affected by an Act of God, then you could lose your investment. As with futures, a pre-arrival wine might be worth less than you paid for it, especially if the wine isn’t as delicious as critics and winemakers anticipated. Finally, some pre-arrivals are more expensive than futures. If critics give the wine a high score before release, this increases its value on the market, meaning you will pay more for that bottle.

How to Invest in Wine Futures

Here’s what to expect when you invest in wine futures:

Your first step is to find a trustworthy retailer or negociant. Always pick a retailer who has a fair refund policy for futures orders. No matter how dedicated your retailer is to getting you the finest bottles, futures sales can still fail. The winery might decide to sell fewer bottles than they expected, or the wine could spoil before reaching the bottle. When this happens, make sure that your retailer looks for replacement bottles, or gives you a full refund on your order.

You should also only buy from retailers who have direct contact with the winery or distributor. They can negotiate the best price, and you can verify that they actually placed a futures order with the winery. Never take your retailer’s word for it; ask for proof of the sale.

How to Invest in Pre-Arrivals

Here’s what to expect if you go with a pre-arrival sale instead:

You’ll notice that this process is shorter than the futures process. You don’t have to wait as long for the wine to age, and your retailer usually has a better sense of when your wine will arrive. If you buy pre-arrival wine, ask your retailer for an estimated date of arrival shortly after you place your order. Your retailer might not be able to provide you with an exact date, but they should be able to give you a rough estimate (such as May 2018, or spring of next year).

How Long Does It Take to Get Your Wine?

Investing in wine futures and pre-arrivals can be stressful because it takes months or years for your bottles to arrive. Here are the differences in wait time between the two types of investments:

Because futures take longer to arrive, your retailer won’t know exactly when you can expect your wine. You should check in with your retailer at least once a year to ensure that your order is still in the system, but don’t expect an arrival estimate until the wine is about one year away from release.

When you invest in pre-arrivals, you can contact your retailer more frequently (about every six months). Because these wines are closer to their official release date, you can request a more accurate arrival estimate from your retailer.

Ask yourself the following questions while you wait for your wine to arrive:

• Do you have room for your wine in your cellar? Put a reminder date in your calendar at least six months before your estimated arrival date. If you store your wine professionally, you can also have your wine shipped directly to your storage provider when it’s finally released.

• How much did you pay for your bottles? You’ll need to keep this information in a spreadsheet or wine app. This allows you to stay on budget and keep track of your bottle’s value over time.

Avoid Fraud When You Invest in Wine Futures and Pre-Arrivals

Last year, a wine futures retailer allegedly took advantage of dozens of collectors. The retailer sold millions of dollars in futures, however, customers claim that they never received their bottles. This isn’t an uncommon problem in the world of wine futures, but you can try to prevent it. Buying from trustworthy sources who have refund policies is your best defense against wine fraud.

First, check whether your retailer has recent customer reviews. Did these customers receive their wine on time? Did the company communicate with them when there was an unexpected delay? Your fellow collectors can help you choose the most reliable retailers.

It’s also important to know when a futures or pre-arrival price is too good to be true. Generally, the winery will sell a bottle for a set futures price, and the retailer or negociant will add shipping and other handling fees on top of that price (usually totaling anywhere from $100 to $200 more). Be wary of retailers who are selling futures for $100 less than the average price, or who only charge the price that the winery offers. This means that the retailer might not be taking a cut from the sale, which is suspicious. It’s better to pay $100 more for a wine that you know will arrive than a cheaper bottle that never will.

Fraudulent retailers also take advantage of collectors who forget about their investments. Their hope is that you won’t remember that you paid them $1,000 five years ago for two bottles of Ausone. Keeping your orders in a wine tracking app will help you avoid this problem.

The Best Option for You

If you’re new to pre-ordering wine, experiment with a low-risk pre-arrival sale first. The shorter wait time will make it easier to keep track of your order. Research which regions had the best harvest to increase your chances of a quality investment, but always stick with the producers and wines that you love. Even if you pay more for your pre-orders than the wine is worth on the market later, you can at least enjoy drinking your favorite wines years later.

Whether you are starting your high-end wine collection or adding to an established portfolio, Vinfolio is your partner in buying, selling, and professional storage. Contact us today to get access to the world’s best wine.