As 2019 is nearly upon us, so are storage renewal fees. Whether investor or collector, now is a great time to review your wine holdings, before you incur another annual storage charge for each case. At JF Tobias, we endeavour to ensure that all of our clients’ portfolios or collections are in the best shape possible for the year ahead.
Renewal Fees: Storage Costs are Increasing
On January the 1st 2019, the storage fees at London City Bond and EHD will renew for the year ahead. And, at LCB, they are increasing to the following:
Per six-bottle case: £ 6.50 per annum
Per twelve bottle case: £ 13 per annum
(based on your stockholding as of 1st January)
At Octavian, the storage year runs from July 2018 to July 2019. If your wines are held at Octavian, you will not need to worry about renewal until later next year. However, at JF Tobis we would still recommend reviewing your holdings to ensure your portfolio is suitable for purpose. At Octavian, the pricing structure is currently due to stay the same:
1-5 cases: £120
6-30 cases: £23.76 per annum, per case
31-99 cases: £22.48 per annum, per case
100+: £20.77 per annum, per case
*These prices are inc. insurance
Consider Rebalancing your Portfolio
At JF Tobias, it is not unusual for new clients to seek advice over wines they have been sold that are unsuitable for investment. Unfortunately, a lot of wine investment companies have no background in investment, nor finance. This leads to the basic fundamentals of investment being ignored, and clients left with cases of wine that are extremely unlikely to make a profit. This is where re-balancing becomes necessary.
Rebalancing for Profit
Profit is the financial benefit realised when the revenue gained exceeds the expenses, costs and taxes needed to sustain the activity. Or, more simply:
Profit = Revenue – Total Expenses
The costs associated with wine, such as storage, insurance, and administration, are all absolute. These are fixed and do not vary depending on the value of the wine. However, any gains on wine are always relative. A wine, or the market, will go up or down by a percentage of its value. We take a look at the reality of this below.
The dramatic effect costs can have on profit:
[supsystic-tables id=7]
*The figures here are illustrative and are not a prediction of future performance.
When inflation has been considered (2.4% currently, and targeted at 2%), the Batailley is breaking even each year, and the Pontet Canet is making a marginal return. The Lafite, however, performs well.
We can see from the examples above that if profit is the driver, clients holding Batailley and Pontet Canet should well consider rebalancing their portfolios. Refocussing into higher value wines, such as Lafite, is the only way to outperform storage fees and inflation.
If you have 50 cases, at £13 a year each, that is £650 a year in storage charges alone. And this cost is not offset against the value of your investment. Rather, this comes out of your own account, every January.
Portfolio Rebalancing with JF Tobias
Portfolio rebalancing is like an MOT for your car: it allows clients to ensure their portfolios are performing as they should, and minimise risks. If you have invested in a lot of low-value cases, storage fees will be likely wiping out almost all of your gain. With storage fees going up, it makes financial sense to sell the low-value cases, and refocus into those of higher value, or release the funds. At JF Tobias, we can help you achieve this, and ensure your portfolio is fit for purpose.
The first independent port of call in the wine industry, at JF Tobias we will always offer free advice. If you wish to speak to a member of the team now about whether your wines are suitable for investment, rebalancing your portfolio, or releasing funds, contact us now, and we will be delighted to assist.
Drinking Collection: Consider What You are Likely to Drink
If your collection is for drinking purposes, or mostly for this purpose, now is a great time to review your drinking for the year ahead. Of course, this depends completely on individual circumstances, such as space, and cost sensitivity.
If you know you are going to be drinking particular cases in the next few months, then it may well be worth taking these out of bond before you are charged the annual rate. If you would like any further advice, or to talk further with a member of the team, please get in touch, and a member of the team will be delighted to assist.
