The idea of an exchange goes back thousands of years, if not more. The exchanging of goods and services between one person and another is a hallmark of any marketplace. The earliest evidence of wine production dates back 8,000 years and it seems likely that the selling of wine for profit dates back just as far.
If wine has been successfully traded for this long, why do we need a wine exchange now?
The simple response to this would be that if we need an exchange for other goods and services that we trade, why not wine? The financial industry, particularly the stock market, is built on the premise of buying and selling at opportune times. The wine industry is no different. A fine wine exchange brings like-minded customers and traders together, giving a platform for safe, secure sales.
The fine wine market has been historically fragmented with no standard trading rules. The first fine wine exchange, Liv-ex, which launched in 2000, aimed to share information about available products on both a global scale and a merchant-to-merchant basis. Compared to the financial market, the wine industry is tiny; the big money put into global banking was financially viable long before a fine wine exchange would have been. The internet provided the means to reduce the cost of bringing the global market together, making financial investment and exchange cost-effective in the wine industry for the first time.
Today the Liv-ex Exchange has over 400 members in 35 countries spread across six continents. Members, such as fine wine connoisseur Ali Seytanpir, enjoy the many benefits the exchange has to offer. The convenience of having the world’s fine wine traders in one place brings ease and economy to transactions so that members can better serve those whom they represent. Liv-ex matches buyers with sellers by checking prices, noting requirements and spotting opportunities. It is a growing marketplace but Liv-ex is keen to vet new members to increase confidence in trading. The exchange polices disputes and insists on price transparency, avoiding the uncertainty of negotiation amongst members. It offers a fully automated trading platform and has created a standard industry contract to clarify terms.
A fine wine exchange improves trading efficiency, particularly since security and contracts have standardised the process. It makes the comparison of transactions easier and helps buyers to recognise opportunities. For centuries, wine merchants and collectors have understood the value of wine for both pleasure and investment. Fine wine can be an interesting way to diversify an investment portfolio and online exchanges have made the process more transparent. It holds fantastic appeal as an alternative investment, with the fine wine market expected to grow. The fine wine market value is currently estimated to be around $4 billion.
For anyone considering taking their first foray into fine wine investment, there are a few important considerations. As with any investment, it is advisable to only invest money that you have available. This seems obvious but no investment offers any guarantees and potential investors should always have a contingency plan for when an investment doesn’t pay off. This is especially true with wine where spillage or spoilage can occur, and most true wine connoisseurs will enjoy the occasional bottle of their investment with a nice meal.