Turn your foodie passion into profit

Published by Helen Knapman on 10 October 2017.
Last updated on 10 October 2017

Truffles

From enjoying a glass of velvety red wine to treating yourself to a meal topped with luxurious truffle shavings in a restaurant; we all like the finer things in life, but have you considered investing in them?

Moneywise weighs up the case for investing in truffles and wine.

Investing in truffles

Investing in truffles involves buying trees inoculated with truffle spores directly from truffle farms. These farms harvest and sell the truffles, and then pass on money from sales to investors.

French Truffle Tree is a family-run business based in Charente, France, which offers investors the opportunity to buy between one and 500 oak or hazel trees aged two years or more. This costs from £99 for a single tree plus a £30 annual maintenance charge.

Sharon Hamilton (pictured below), who runs the business with her husband Kevin and son Ben, says they started the black perigord truffle farm after realising their pensions weren’t going to give them the retirement they’d hoped for.


 

Mrs Hamilton says hazel trees produce truffles for about 30 years and oak trees for about 100 years. It takes around four to 10 years before truffles are produced, she adds, but when they do, the average price per kilo is between £700 and £1,200. Mrs Hamilton explains: “We estimate that when a tree starts producing it will be about £30 worth of truffles, hopefully doubling in yield for the first few years and levelling out at about £440 per tree each year.” You can choose to have the truffles shipped to you to or French Truffle Tree can sell them on your behalf, passing on the proceeds.   

Truffle Farms Europe (TFE) is another farm producing truffles. Launched earlier this year, it’s cultivating 26,500 oak trees near Barcelona in Spain to produce black perigord truffles.

Investors can buy from 25 trees up to 500, which costs from £7,836 to £95,745. You receive the price equivalent of 80% of the truffle crop during the life of the 15-year period you must invest for and 50% of the tree sale price. TFE forecasts average annual returns of between 15% and 21% over the 15-year period.

Before investing look out for truffle type. Mrs Hamilton says perigord truffles are the ones favoured by chefs and these don’t grow in the UK due to the climate.  

Investing in wine

The Liv-ex Fine Wine 100 Index, which represents the price movement of 100 of the most sought-after fine wines, shows that prices rose by 18% between May 2012 and July 2017 – proving that wine can be a good long-term investment.

Fine wine investors typically buy and sell bottles via specialist wine merchants, which they store in “bonded” warehouses. This ensures wine is kept in its optimum condition but also means the wine is excluded from import tax, duty and VAT until it leaves the warehouse.     

Berry Bros. & Rudd claims to be the oldest wine and spirit merchant in Britain, having traded from the same shop in London since 1698. It also has an online wine trading platform called BBX (Berry’s Broking Exchange), which enables investors to buy and sell private stocks of wine. BBX charges £1 a bottle per year for storage in its bonded warehouse, which also covers insurance, while it takes a 10% commission from any sales.  

Simon Staples, sales director for fine wine at Berry Bros. & Rudd says: “As a rule of thumb, only ever invest in the top wines of Bordeaux and a handful of wines from Burgundy.”  

Peter Shakeshaft, founder and chief executive of fine wine investment firm Vin-X Limited and founder and director of trade body the Wine Investment Association, adds: “Key factors to influence value will be the producer, the vintage, critics scores, and rarity.”

For more of a guiding hand, Vin-X works with investors to put together portfolios of wine. It takes a 15% management fee, which includes bonded wine storage and insurance.

If you’re buying and selling yourself, ensure you get a good deal by comparing wine prices using specialist comparison website Wine-Searcher.com.

What to watch out for

Investing in tangible assets is risky for several reasons:

  • Your money is illiquid as to access it you need to sell the asset and you may find with truffles that you’re locked in for years or even indefinitely.  
  • These are unregulated markets, so you can’t take a complaint to the Financial Ombudsman Service if something goes wrong, and if a firm fails you’re unlikely to get your money back.
  • These markets can be cyclical and rise and fall in line with trends and other world events, so you need to be prepared to invest for at least five years.
  • As with all investments, you may not get back what you put in and you can lose your original investment.

Make sure you fully understand the risks and the costs involved before handing over any money. Beware fraudsters and cold callers, as David Richardson, regulatory and commercial affairs director at the Wine and Spirit Trade Association, warns: “Alarm bells should ring if you’re offered guarantees of unrealistic returns.”

Minimise risk by doing your research – check for reviews online and if the company is UK-based, check the firm’s details and recent accounts history on Companies House. 

If you’re new to investing, start with our First 50 Funds for beginner investors and set up a portfolio using a variety of different fund types and asset classes before moving on to investing in tangible assets.  Go to moneywise.co.uk/first-50-funds.

The tax implications

Capital Gains Tax (CGT) is due on profits made when consumers (not traders) sell certain items. You can make £11,300 in profit in the 2017/18 tax year before tax is due – the rate depends on how much tax you pay, the size of the gain, and whether the gain’s from selling property.

However, if you’ve made over the £11,300 threshold, there is an exclusion that may apply called the “chattels exemption”. Under this, tangible assets, including wine and truffles, are exempt from CGT if they’re sold for £6,000 or less.

Income tax is due on money earned over £11,500. Here, the rate depends on how much you earn.  

Investing in foodie funds

An alternative way to invest in food products is to use an ‘Exchange Traded Commodity’ (ETC), a financial product that tracks a specific benchmark or asset and is traded on the stock exchange.

ETF Securities is an investment company that specialises in such products, enabling investors to put their money in ETCs tracking the price of anything from cocoa and coffee to corn, soy, and sugar. However, be warned that performance of individual commodities can be volatile.

Alternatively, you could buy the db x-trackers Stoxx® Europe 600 Food & Beverage UCITS ETF, an exchange traded fund that invests in the largest European companies in the Food & Beverage Sector, with a portfolio including Nestle, Diago, Heineken and Carlsberg.

WIN a truffle tree package

One lucky reader can win a truffle tree package from French Truffle Tree, which includes one truffle tree (your choice of an oak or hazel tree) plus maintenance fees for 10 years. This normally retails for £350. Just email your answer to the following question, putting ‘Truffle tree’ in the subject line, to editorial@moneywise.co.uk by 31 October 2017.   

Where is the French Truffle Tree company located?

A) France B) Germany C) Switzerland

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