Can’t afford to fill your cellar with Domaine de la Romanée Conti?
Today, alternative investment platform Rally is opening up a wine vertical, letting consumers buy shares of some of the world’s rarest bottles—think buying and trading baller bottles just as you would blue-chip stocks.
Despite this being the app’s first foray into the wine realm, the vintages offered are no beginner’s bottle. Rally is starting off with 2005 Chateau Latour, a 2014 Domaine de la Romanée Conti Assortment, 2016 Chateau Petrus and a 2016 Screaming Eagle. The combined value of the wines are $148,000 with shares starting at as low as $5.
How does this work? Rally purchases cases of cult-loved bottles then slices them into shares, offering up the shares for investment à la standard stock exchange. “It’s similar to how you buy or sell any publicly traded stock, whether it’s Apple
Rally was founded by Petrozzo, along with Max Niederste-Ostholt and Christopher Bruno, in June 2016. The trio worked alongside the SEC to find a regulatory pathway—using provisions of the 2012 Jobs Act—to legally turn luxury items, like cars, watches, and now, fine wines, into SEC-registered securities (think mini-IPOs).
Wine offerings opened at 12:00 PM EST on Friday, September 4.
“As soon as our members saw the wine offerings, the wait list for the Chateau Latour was the longest we’ve ever seen,” Petrozzo says.
Three wine IPOs are hitting the app today. First, A 2005 Chateau Latour: a 12-bottle case of first-growth Bordeaux. It’s a $98,000, 1000-share offering selling at $9.80/share. “There’s also the Domaine de la Romanée Conti 2014,” describes Petrozzo. “12 bottles, worth $54,000, at $54 a share. And the Screaming Eagle 2016, a $39,000 3-bottle cases. 1,000 shares at $39 a share.”
All, are respected vintages from some of the most prestigious houses in the wine world.
(The latter earned a 100 from Robert Parker’s Wine Advocate for the way the wine “leaps from the glass with bright, exuberant blackberries, kirsch and warm blackcurrants scents plus touches of lavender, roses, tilled black loam, wild sage and dark chocolate with wafts of yeast extract, underbrush and crushed rocks.”)
Rally members will be able to view information on the wine’s rarity, scoring, history of the vineyard and historical pricing data right on the app. In 2021, the company hopes to have video surveillance (Covid-19 pending) in place so investors can view their bottles in real-time, right on the platform’s interface.
The platform built its investment base by offering luxury handbags, rare cars and sports memorabilia as assets. Through this unique model of investing, Rally purchases cult-loved and high-value assets, secures them, splits them into shares, then offers said shares as equity investments.
(Rally makes money by charging the original asset owner a listing fee of between 2% and 5% of the asset’s value. Trading is free for users.)
“We started with classic cars, the 50s-era Ferraris and the Lamborghinis,” says Petrozzo. “We moved into categories that fit most closely with those classic cars—things like watches, vintage luxury and wine. The latter, more so than anything.”
But the wine investment field is a tough one to navigate.
A big issue in the fine wine collecting sphere has been the advent of indistinguishable forgeries (the 2016 documentary Sour Grapes brought this issue to the forefront).
Unlike collecting bottles, Rally (as well as other apps that offer controlled wine investments) removes the variables with aging wines. “We work with [notable wine investment group] Cult Wines out of the U.K. to make sure the provenance is what it says it is,” explains Petrozzo.
No bottles are purchased from private collections. Wines are kept in temperature-controlled storage and insured to protect against fraud. “We try and stay away from any of those trappings that lend any credence to what could go wrong,” Petrozzo adds. “We make sure everything is bonded and stamped before it gets to our platform.”
“We also ensure all assets at the last traded price, so in the event, anything material happens, ever investor is made whole. 10% of the asset is owned by us, the company, and we pay the same price as everyone else. Then we can’t sell our shares until our entire asset sells off-platform.“
What’s particularly appealing about the platform is it offers low-risk, lower-priced investments in luxury items, giving the app an opportunity to reach out to investors of all income levels and investing experience.
Take the young Millennial for example: a consumer who is gaining interest in wine and understands the prestige of a DRC bottle, but doesn’t have the funds to start building a cellar. Rally offers a stepping stone into the world of wine investment.
It also protects the nascent wine investor from the tempestuous wine world. The $5-billion dollar resale market is unfriendly to those without deep wine knowledge and monetary resources—there are broker fees and auction house commissions for authenticating wines. With an investment app that holds the hand of a greener consumer but also offers tempting assets for an established investor, wine lovers of all income brackets have a chance to dip their toe into the market without battling the cutthroat resale and investing market.
This Millennial appeal feels like a particularly savvy move considering that the demographic will overtake Gen Xers as the biggest fine wine drinking population by 2026. According to Wine Opinions, 48% of high-frequency wine consumers reported an increase in their weekly consumption (Millennials reported the greatest increase).
But right now, the generation is still looking to cheaper options. As this consumer grows and their income and knowledge increases, the app has the opportunity to retain this nascent consumer.
This latter point is something to consider particularly in the pandemic environment. Without bars to go to, wine drinkers are shopping for their own bottle; researching terroir, grapes, labels, houses and regions. Wine lovers of all levels are educating themselves.
“The fact that our investor base—who invests in Birkin bags and vintage watches—is so well versed in the wine category really speaks to the trend of the education that’s happening right now,” says Petrozzo.