February 29, 2024

Liquid Assets: Vinovest Seeks Thirsty Investors

Smoky, nutty, fruity – no matter what hints consumers claim to pick up in a bottle of wine or at a whiskey tasting event, investors in Los Angeles are picking up returns.

As alcoholic brands trend towards premiumization, local institutional investors continue to decant money into fine wines and spirit brands hoping such risk won’t disturb sedimented savings.

Vinovest, a platform founded to uncork the bottlenecked access to fine wine investing, launched a $30 million Capital Whiskey Fund vehicle at the end of last month to invest in barrels and casks of whiskey and scotch.

The Culver City-based tech company, which claims to have more than 150,000 investors, constructs portfolios across wineries and distilleries so limited partners can buy into the maturation process of wines and spirits, betting on their appreciation.

It’s a bet whetting investor appetite amid stubborn inflation and market uncertainty. Fine wines and spirits continue to see outsized returns compared to other luxury goods and commodities. The latest Knight Frank Luxury Investment Index, a price tracker for high-end investments, showed wine and rare whiskey bottle prices grew 149% and 322%, respectively, over a 10-year basis as of March.

While users can buy the bottles themselves on the app, investors can also hand Vinovest a lump sum as low as $1,000 for the platform to then curate a portfolio of fine wines. It handles the authentication, storage and trade commissions – distilling the asset’s complex network and upkeep so more investors can stomach the appreciation waiting period.

Just as Los Angeles’ organic food craze appeals to a customer base wanting to know what they’re putting in their bodies, Vinovest attempts to translate spirits’ oxidizing science and regional significance to liquid returns.

Vinovest CEO Anthony Zhang and Duke. (Photo by Thomas Wasper)

“I think consumers want to have a story to be able to share if they are going to be spending this kind of money and sharing it with friends or family,” said Anthony Zhang, chief executive of Vinovest. “This movement of people wanting to learn more online past what is convenient at their local store, that is really driving the growth of this business.”

Working directly with wineries and building out a globalized data network, the Culver City startup can claim ownership of coveted cases such as, say, the 2008 vintage of Dom Perignon, which scored 98 on Wine Spectator’s widely accepted 100-point scale.

According to Vinovest’s site, the vintage Perignon racked up an 80% appreciation over the two years the company owned the champagne. 

Whiskey has key differences

Whiskey, however, doesn’t exactly follow wine’s standards for valuations. 

Zhang regards his company’s barrel and casks acquisitions as stakes in future commodities rather than a collector’s market. According to the executive, valuation is much more static in the bourbon, whiskey and scotch space – meaning the industry sets an initial price for a barrel that fluctuates according to projected demand. 

This requires patience on behalf of the investors and trust the barrels fermenting the grain varieties hold the right alcohol levels. 

“The biggest risk by far is storage,” Zhang said. “A lot of these barrels, if not taken care of properly, can pretty much turn to zero value.”

Vinovest invests in third-party authenticators and insurance to minimize the chance of a whiskey being watered down before investors can savor it neat.

Vinovest’s whiskey fund vehicle, which accepts investments with a minimum buy-in of $50,000, will tap into hundreds of barrels the company hopes will eventually prove valuable in a swinging whiskey market.

According to a report released last year by Global Market Insights, a market research firm, the American whiskey market is expected to grow at a rate of 6.3% over the next 10 years. 

Consumers are looking for new whiskey variants past the familiar Jim Beam and Fireball Cinnamon Whisky shooters. They want to swirl orange peels around the rims of glasses and strike up conversations at bars over their libations, and are open to “craft” labels and experimentation.

Others in the field

Zhang’s isn’t the only Los Angeles investment vehicle betting on Americans’ desire to show off their sophisticated palates regarding spirits. Platinum Equity, a Century City-based private equity firm, last month broke the “sin” asset barrier in taking an equity stake in Amsterdam-based premium rum blending specialist E&A Sheer for an undisclosed sum.

While Platinum isn’t necessarily buying into the process of fermentation itself, its roadmap for both organic and inorganic growth positions the business-to-business supplier of premium rum in bulk as a lucrative asset set to be more valuable as restaurants seek more supply.

“With our financial and operational resources, we see a lot of runway for E&A Sheer’s continued growth and intend to support it via international expansion and M&A,” said Fernando Goni, managing director at Platinum Equity.

The team that acquired E&A Sheer also took over the Italian-based wine producer and exporter Fantini Group in 2020. 

“We believe the rum category has promising prospects driven in part by the increasing popularity of new craft brands and the trend toward premiumization,” said Louis Samson, Platinum Equity’s co-president. “We are excited to help the company capitalize on these opportunities by investing in the company’s continued success.”

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