When filmmaker Phillip Lim and wine businessman Edward Chew spotted a precarious problem in the wine investment market, they sought to solve it using modern technology. Friends since they studied together as teenagers in Anglo Chinese School, Phillip and Edward then embarked on an exceptional endeavour to improve the security of wine investments using blockchain technology.
“A problem faced by wine futures, is people who are buying these wines don’t see them because the wines aren’t bottled yet,” explains Phillip, who has produced and directed prominent movies like The Teenage Textbook Movie (1998) and Homecoming (2011), and several other programmes for HBO, MTV and AXN. A knowledgeable wine enthusiast, he now serves as an adviser to Vine Group, of which Edward is Founding Director.
“After bottling, these wines will remain in their chateaus for two or three more years, depending on who you buy them from. However, the company selling you these wine futures might not last two or three years.
“If they shutter, then you, the buyer, are left with only an invoice. This is why buyers prefer to only buy from very established wine merchants,” he notes.
Phillip is well-versed in the ins and outs of wine futures, a wine buying programme that has been spearheaded by popular wine producing regions like Bordeaux. In that region, this programme is named En-Primeur (“The First”) and its primary reason for being is to support cash flow.
Revered chateaus in Bordeaux, for example, require three years to produce a bottle of wine. From harvest to bottling, these wine producers have recently been incurring higher costs – labour, barrels and even the price of corks have gone up.
Steep increases in these expenditures threatened the profitability and very existence of these chateaus. Trapped between a rock and a hard place, they fortunately came up with an innovative solution, which was to sell these wines ahead of their completion.
En-Primeur typically refers to the buying of wine while it is still ageing in a barrel. Revenue generated goes to offsetting the chateau’s overheads and the buyers receive their purchase approximately three years later.
An experienced dealer is vital
“After you buy a case or barrel, your wine might appreciate. Wine investors will still need a merchant,” adds Phillip, expounding on another need that Vine Group is addressing.
“You can keep your wine and slowly drink it, but if you want to liquidate your wine investments, you will need a merchant to assist. I bought some wine futures and saw a lot of potential.”
“Vine Group is one of a few companies that have direct access to preferentially allocated wine futures releases by chateaus and négociants (traders),” he shares. Vine Group was founded in 1989 built on Edward’s love for “sharing wines of exceptional pedigree”.
Today, Vine Group is an internationally trusted wine partner that imports, distributes and retails wine, from ancient to new latitude wines, across 10 major wine producing countries. Vine Group’s experience and expertise also comprises the conducting of wine expositions, winemakers’ and proprietors’ dinners, tours and chateau visits, sommelier services, wine appreciation and scholarships, wine futures and investment, portfolio management, and rare wine and cellar creation and management.
Dealing through a tenured wine merchant, Phillip opines, is the best way to ascertain when opportune times for buying and selling might arise, especially given the unprecedented circumstances that we are currently living in.
NFTs can safeguard your wine assets
Although global interest in wine investment is on the uptick, safety of investment in this commodity still had lots of room for improvement. “Vine Group is using NFTs (non-fungible tokens) to address this security need. All relevant data is block-chained,” remarks Phillip.
“We put the certificate of origin, bottling details, customs number and all pertinent data into a wine case or barrel’s NFT. In an extreme scenario, even if Vine Group ceases to exist, you can still trade your wine on an NFT platform like vineart.org.”
If a wine buyer or producer were to shutter, an NFT would ensure that investors do not find themselves in the “left with only an invoice” outcome.
“All of your wine’s data will be in your NFT, proof that you own those wines. When I pitched this to Dunstan, he immediately understood the idea and saw its potential.” Phillip is referring to Dunstan Teo, President of Sanctum, who has been building blockchain technologies and companies for the past 12 years, and has mentored the crypto space and groomed several crypto disciples.
To say the least, Dunstan is a prominent figure in the NFT sphere. He consults for a variety of projects and enterprises, builds sovereign-level technology, creates new economic models, and is the president of a multi-office advisory, an author and an advisor to exchanges.
“Even though it took a while because of all the technical jargon, Dunstan and Edward saw how NFTs and blockchain technology can change the way wine investments are managed. Ownership of wines are now digitised as Non-Fungible Tokens recorded on the ERC 721 as a smart contract, and if the owner chooses to exit, the token can be listed for sale on an NFT marketplace,” Phillip divulges.
“Dunstan was so confident that this was the way to go that he made one of the largest orders of the 2019 En-Primeur from Bordeaux. However, some investors and fund managers are still skeptical, because no one has done this before.”
The Founder of Vine Group, Edward was a first-mover in En-Primeurs. He mostly secures the best En-Primeur vintages, and those that are reasonably priced.
For example, Vine Group skipped 1997 and 1999, but bought the vintage 1998, which yielded good returns. Clients of Vine Group have also reaped multifold returns from investing in fine wines of vintage 2000, 2003, 2005, 2008 and, most recently, vintage 2018.
Among these batches, the best return was realized in 2009, when the Lehman Brothers Collapse led to one bottle of Lafite Rothschild 2008, which was released at 135 Euros, and selling for 1600 Euros. Phillip and Edward are now working on a new batch of wine NFTs, the 2020 En-Primeur, with Dunstan.
Interested parties can find out more at www.vinegroup.com.sg