Episode #492: Anthony Zhang, Vinovest – From Barrel to Bank: How to Invest in Whiskey
Guest: Anthony Zhang is the co-founder and CEO of Vinovest, the world’s first platform for investing in fine wine.
Date Recorded: 6/21/2023 | Run-Time: 52:48
Summary: In today’s episode, Anthony updates on the business since his first appearance two years ago. He shares Vinovest now has over 100 million dollars invested and 150,000 registered users. Then we dive into their entrance into the whiskey market and talk about the investment profile of whiskey, how it compares to wine, and what else is in store for this rocket ship startup.
For listeners of the show, Anthony shared a special deal for listeners of the show, so go to www.join.vinovest.co/meb and the first 50 people that fund their accounts will receive a $50 bonus.
Sponsor: Future Proof, The World’s Largest Wealth Festival, is coming back to Huntington Beach on September 10-13th! New in 2023 is Breakthru Meetings Program – which will be facilitating more than 10,000 1-on-1 meetings. Financial Advisors and LPs, get your ticket FREE plus a $750 reimbursement by applying for the hosted meetings program by the August 15th deadline.
Comments or suggestions? Interested in sponsoring an episode? Email us Feedback@TheMebFaberShow.com
Links from the Episode:
- 0:39 – Sponsor: Future Proof
- 2:17 – Intro
- 3:22 – Welcome Anthony back to the show; Episode #349: Anthony Zhang, Vinovest
- 6:47 – Covid accelerated digital adoption in the traditional wine industry
- 10:03 – An overview of Vinovest’s services and products
- 14:20 – Vinovest’s marketplace enables active wine trading with high monthly volumes
- 16:56 – Hot trends in the wine industry
- 21:14 – Athletes and celebrities entrance into the wine industry
- 27:19 – Whiskey offering launched due to high demand
- 31:13 – Investing in barrels provides stronger fundamentals with aging and scarcity factors
- 33:31 – American whiskey starts from age zero, Scotch has age and branding
- 35:37 – Vinovest’s focus on long-term sustainability helped navigate startup challenges
- 38:15 – The differences between whiskey from around the world
- 43:02 – Lost Spirits Distillery’s transition to a Las Vegas production highlights diversification
- 44:18 – Vinovest’s offering of new make barrels stands out amid the American Oak shortage; Odd Lots episode
- 46:22 – Wines he has been sampling this past year
- 48:07 – An extraordinary wine that left a lasting impression at the blind tasting
- • 51:18 – Learn more about Anthony; Vinovest; Twitter @anthony_j_zhang; Email: anthony@vinovest.co
Transcript:
Welcome Message:
Welcome to the Meb Faber Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Disclaimer:
Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions, and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Sponsor Message:
Future Proof, the world’s largest wealth festival, is coming back to Huntington Beach on September 10th to 13th. Over 3,000 finance professionals in every relevant company in FinTech, asset management, and wealth management will be there. It’s the one event that every wealth management professional must attend. New in 2023 is Breakthru meetings program, which will be facilitating more than 10,000 one-on-one meetings. Financial advisors and LPs, get your ticket free plus a $750 reimbursement by applying for the Hosted Meetings program by the August 15th deadline. You heard that right, a free ticket plus 750 bucks by applying to the Hosted Meetings program by August 15th. Get out of the hotel meeting rooms and conference halls, and instead get out into the sunshine and onto the beach. No suit or tie required. I was there last year, we’ll be there this year, and cannot wait to go back. Get your ticket at a special discount rate when you register at futureproof.advisorcircle.com/meb, or click on the link in the show notes.
Meb:
What’s up, my friends? We got a really fun episode today. Our returning guest is Anthony Zhang, founder and CEO of Vinovest, which gives investors the ability to invest in wine, and now whiskey. In today’s episode, Anthony updates on the business since his first appearance two years ago, he shares how Vinovest now has over $100 million invested across 150,000 users. Then we dive into the entrance into the whiskey market, talk about the investment profile of whiskey, how it compares to wine, and what else is in store for this rocket ship startup. I like the pitch so much, I just bought an entire cask of American whiskey. We’ll see what we do with it. Do we hold it for sale, appreciation, or just drink it all for Cambria Investors? TBD.
For listeners of the show, Anthony shared a special deal. So go to join.vinovest.co/meb, or click on the link in the show notes, and the first 50 people that fund their accounts get a $50 bonus. Do you know someone who’s a wine or whiskey connoisseur? Be sure to send them this episode and tell them to subscribe to the show. Anthony profiles the two favorite bottles of wine he’s drinking today. Please enjoy this episode with Vinovest’s Anthony Zhang.
Meb:
Anthony, welcome back to the show.
Anthony:
Meb, it’s a pleasure to be back on. Thanks for having me.
Meb:
A lot’s been going on in your world, man. You went and got married, you’ve been running around Europe, you launched new businesses, you moved to Newport. Give us a catch-up. What you been up to, man? Where do we find you today?
Anthony:
Yeah, I think most importantly, married to the love of my life, McKenna. We’ve been together since we were 18, that first week of college at USC, and finally tied the knot. So we just got back from a honeymoon in Italy. Bought a little bit of business along with the pleasure, so got to meet with a lot of our winery suppliers, we’ve got a few employees out there as well, so we got to fly them out and get to see them in person, which is a rare opportunity when you’re here on the West Coast.
Meb:
Where’d you guys go in Italy? Because I follow you on Twitter and was jealously liking some of the photos. It looked pretty awesome. Where’d you guys go?
Anthony:
So we actually flew into Zurich, because that’s the only direct from LAX, and then we spent a couple days there, went down to Lake Como, beautiful, beautiful region, and then went down to Milan for a couple days, and then we took that high speed train down to Florence, and then spent most of the trip around the Florence and Tuscany area, where a lot of the winery partners we work with are there. A lot of the Chianti producers, a lot of the Brunello producers, and Montalcino, and then went all the way up onto the west coast there in Bolgheri, where a lot of the Super Tuscans are. So it was awesome getting to meet a lot of the owners and CEOs of those wineries. Been on Zoom with them a dozen times, bunch of emails, so good to put a real face and body to the name, and of course get to taste some great wine at the wineries.
Meb:
Yeah. We got a lot of fun memories from Italy. My wife speaks Italian, and kind of her whole family, brothers and sisters all studied in Bologna, and so we’d definitely love to get over there. I’ve never been to Lake Como. It’s on my to-do list.
Anthony:
Yeah. It’s … summer.
Meb:
Yeah. Well, welcome back to Cali. You’re now down south of me instead of north of me, and your business has been booming. So give the listeners a little bit of an update. What do you guys do, for those who didn’t listen to the first pod? We’ll put the link in the show notes, but what do you guys do? And then we can walk forward on what’s been going on in your world.
Anthony:
Sounds great. So I’m one of the co-founders and CEO of Vinovest. We’re a wine and spirits investment platform that allows investors to be able to diversify their portfolios into a real asset class, a real physical asset. So we invest in actual bottles, cases, barrels of the product. We help you choose the right portfolio construction based on your goals around time horizon, goals around portfolio construction, and we hold onto it, custody it with our partners, help you insure the physical asset as well. And then when time comes to exit, we also help with the eventual sale. And I think last time we were on was nearly two years ago now, or maybe over two years ago, so a lot’s changed with the business, and I think perhaps most excitingly, we started as only wine, wine and Champagne, and we just launched our whiskey product. So went from only doing Scotch, and then we just branched into American whiskey as well, and we’re super excited by the reception that we’ve gotten and the partners that we’ve been able to form on our way here.
Meb:
Yeah. So, we’re definitely going to spend some time in whiskey, because you have been the recipient of me harassing you over email and asking lots of questions and being very curious and interested in this whiskey world. I mean look, don’t get me wrong, I like wine and I like beer, but whiskey was definitely a curiosity to me.
But let’s stick with wine for a minute. And listeners, we’ve done a handful of shows on a little more [inaudible 00:07:13] topics, wine, I think we talked about it with Professor Dimson of Triumph of the Optimists fame, some of the white papers that he put out, but also my favorite investing book, Triumph of the Optimists, and he talked about historical returns. Walk us through the last time we chatted. So 2021, definitely a pretty euphoric time in traditional public markets. I don’t know if we have a name for the period we went through recently, whether it was meme stock, COVID, shitcoins, whatever it was, but it definitely was a weird period, but we seem to be on the other side of that, but here we are a couple years later, give us an update. Was wine… Was your world… It kind of zigs and zags, does its own thing, but how was it impacted by a lot of this COVID, post-COVID, post public markets, on and on. Give us an update on the wine world.
Anthony:
Yeah. I think COVID really helped to accelerate a lot of the, I’d say, digital adoption of the wine industry. Wine is a very traditional industry. The way most of these winemakers are making wine and distributing and working through the supply chain is the same way that they’ve done for decades, hundreds of years. They’re doing what their fathers did, and they’re doing what their grandfathers did. So when all on-premise visits to wineries stopped, the global supply chain halted, a lot of wineries, they were forced to go online. And I think same in my household, probably yours too, Meb [inaudible 00:08:42] wine consumption, alcohol consumption in general spiked up during COVID when people were stuck at home. So that led to, I think, a lot more awareness of brands, especially ones that are esteemed to be worthy of holding onto for a long time.
And we definitely saw some of that tailwind that happened from the stimulus checks, the meme stocks, the tech boom. It wasn’t the explosive like 100%, 200% gains in a year that we were seeing, but we were starting to see the wine performance, the indices that we track, go from their historical, I’d say around 10%, 11% annualized return, 2021, we saw 15% returns, 2022 it was around 14%. So we’re able to see definitely an out-performance of the benchmark in those couple years post that boom. And now that things are slowly returning back to normal, global supply chain is getting de-clogged, I think we’ve had another tailwind with this recession that we’re entering into. Alcohol consumption in general goes up during recessions, so that consumption bump that we saw during COVID has been sustained, even into now mid-2023. So we’ve continued to ride a different sort of tailwind right now, but one that we’ve still continued to see in the market.
Meb:
I joked with you last time that I was actually just going to take delivery of all my wine and drink it, as opposed to working with the appreciation. Okay. So I own 42 bottles on your website, mostly I believe Italian, and certainly want to get more involved. But talk to us a little bit about, how does it work again? Tell the listeners, they come to your site, they say, “I’m going to buy some wine.” What’s their choices? How do they go about it? Do they get to pick specific bottles? All that good stuff. Give us the overview.
Anthony:
Yeah. So we’ve got two products that we offer today. One is a more self-directed, for someone who does want to stock-pick or pick their own wine, as you say. The other is for someone who just wants generalized exposure. So the vast majority of our clients, they start with a more general approach. Even if you know a lot about wine from the consumption standpoint, there are some key differences when you’re looking at it as a long-term hold as an investor.
So we take a look at some preferences, like what type of investor profile are you? What other assets do you own? How long are you looking to hold this? Is it a 10, 20-year, almost infinite type of thing? Is it a five-year hold? What are your mandates? And that allows us and our team at Vinovest to be able to construct a portfolio and recommend you wines that we think fit that mandate. So we can pick from different regions, pick from different vintage years as well, because when we’re looking at exiting the wine, we want the wine to be close to its peak drinking window, when people are deeming it to be really at its maturity. Then the market demand is not only just other investors, it’s mainly pulled by the consumption side, selling to auction houses, retailers, restaurant groups, and collectors.
So we’ll help you pick out those wines, we store it for you, so we keep it out of mind, out temptation as well, so you can’t be drinking those bottles on a Friday night. And we also help you insure those and keep you updated with market insights. What’s happening to your wine? Is there a big critic that rated your wine a different score, so that could lead to a price upgrade, so to say? And what’s happening in the world of that region? If there’s a tariff imposed on Italy, maybe that’s boosting other regions around it. So we keep you updated with general market news as well, as you’re holding this as a pretty long-term asset.
Meb:
Here’s an idea for you. Feel free as an entrepreneur and CEO to ignore. One of the ideas that I was just thinking of as I was looking through my portfolio, and I see it’s being stored in the UK, a lot of the bottles. I was like, I wonder if I’m just going to… Instead of actually liquidating this, I’m just going to order a single bottle of all these from somewhere, wherever I can find them. I don’t know if it’s going to be BevMo!, but certainly wine.com or somewhere else. I was like, you guys need almost a subscription portal, where you say, “You know what? You’re going to invest, but we’re also going to send you,” and you can pay to sign up for this or whatever, “one bottle of whatever you own, just so you can drink this and participate.” Feels a little more almost like, I’m involved in this. I see Robert Parker gave one of mine a ’94. I’m excited about that. Anyway, you ever have any ability to think about that? Because I think you guys do something with that with a whiskey, perhaps, but I don’t want to get ahead of ourselves. Why is that a terrible idea?
Anthony:
A lot of folks, they’re in it for more than just the hard returns. It is an experiential thing. A lot of people may already have a passion or maybe they want to develop a passion or education about what they’re learning. So we have started doing a lot more in-person events. So for example, if you own a bottle of Dom Pérignon, we did an event where the rep came, we identified all the folks in our user base that owned that bottle, we’re like, “Invite-only event, just because you own this bottle. Come check this out.” So we started doing things like that where it’s more so winery-driven, because they want to connect with the end user as well, and that’s an opportunity to taste. But I think having some way to be able to experience a little bit more of the investment, given that is also a consumption and a fun thing to do and fun thing to talk about, it’s definitely on our radar.
Meb:
Yeah. One of the things that I was curious about last time is, I mentioned I’m somewhat of a thrifty/cheap bastard, and I said, “You know what? I would love to scoop up a whole portfolio of wines and just be like the bottom bid.” If people get upside-down, they’re trading too much Nvidia, they shorted a bunch of Tesla, whatever it may be, they say, “Man, I got to get rid of something, I got to sell this wine.” You guys implemented what looks like somewhat of a trading… I don’t even know how you would describe it, not brokerage, but marketplace for wine that I’m currently scrolling through. Tell us a little bit about that. How much activity is there? Is it something that actually there’s a decent amount of movement? How’s it work?
Anthony:
Yeah. So monthly volumes, we’re doing low seven figures on the platform. And I think especially for someone who I think understands a little bit more the actual item that’s being traded… And maybe their patient, they’re like, “I want to build up a nice little collection,” or, “I want to take a bigger position than Vinovest had recommended with my more managed portfolio, say I really believe in this one wine. I want to just collect more of it, and I can do that on my own. I can set bids anytime I want. I can be alerted if someone’s offer gets lowered.”
And that’s something that is still a relatively new product, so in terms of what we want to do, a long ways off from the eventual product vision, but it’s cool to see people using it, and it’s cool to see participants being able to set bids, hang onto it, and give people that early liquidity, because even though most people are expecting to hold this thing for 5, 10 plus years, shit happens. You have a kid, you lose a job, you do need liquidity in a pinch, and a lot of people are willing to give away that discount, just to be able to get out quick and get their cash.
Meb:
I’m scrolling through and I see a couple bottles on here that are 4K plus. Is that the highest on there, or you got some stuff that’s even higher?
Anthony:
Yeah, we’ve got a few bottles, maybe they’re Burgundys or Champagnes, that are pretty pricey up there. Those aren’t going to move much. We’re seeing most of the volume move in the $100 to $500 a bottle range. Those are the ones that not only have good availability in terms of the supply, but they’re kind of chunks that our traders can move more frequently.
Meb:
I see my mom’s favorite, some Châteauneuf on here. She’s very southern and loves Châteauneuf. Tell me a little bit about what are some of the trends in the wine industry right now. What’s hot? What’s not? My wife loves to order Merlot, because she’s convinced… She talked to a sommelier once that said that the Sideways movie did 10 years of damage to the Merlot industry, and it was always a better buy, if you go to a place that has a good Merlot on the menu. Anyway, what’s hot, what’s not? What’s going on in y’all’s world?
Anthony:
What’s hot is Italy and Rhône, actually. So these are regions that are not as… I’d say they don’t have the same brand value as Champagne or Burgundy or Bordeaux, but Burgundy and Champagne have been the stars of the past five years. They’ve been returning on average over 20% a year for the last five years straight, and prices were getting pretty stratospheric. You’re seeing those 5K bottles, for one bottle of wine. Part of what was driving that price increase was the scarcity. Climate change plays a huge role in the wine industry, and these are regions like Champagne and Burgundy that have been particularly impacted on the supply side. So they’re producing less and less, collectors are going nuts over it. But now that we’ve seen a little bit of cool-down in the general macro market, we’ve all seen a cool-down in those two factors, in which they’re still kind of sky high, but their appreciation rate has tempered down a little bit, and people are going more toward relative values.
So, Italian wines. Love Italian wines, they’re usually pretty reasonable from a price point range, even the more expensive ones. So that’s been the leading region this year in the wine market. I think it’s at about 8% up, year to date. And then Rhône as well. Rhône is a region which not too many people know about, but it has as long of a history as Champagne, Burgundy, and certainly longer than Napa. So that one’s up around 6% year to date as well, on the index that we’re tracking. So they’re both really steady buys, really strong, fundamental blue-chip regions that were kind of overlooked, just because they’re less flashy and don’t have the marketing power of an LVMH behind it trying to pump up a lot of the brand value.
Meb:
Tell me a little bit about y’all’s global client base. Is it like 95% American, or is it something where… Is it even allowed to be a global investor? And part of that question too is, I’m kind of curious about the global demand on the wine marketplace in general, China impact in Asia, Europe, how the macro world with some rising inflation, various interest rates, just blah, blah, blah, but want to get to how the global marketplace is.
Anthony:
Yeah. So I’ll talk about our client base first, and then just the global marketplace. So from a client side, I’d say about 75%, 80% are still based in the U.S. That’s where we are, that’s where we’re focusing our efforts. And then organically, about the remaining like 20% is based in Asia, so countries like Greater China and Hong Kong, we’ve got Japan, Singapore. Those are all our major regions outside the United States. And then just a little bit sprinkled everywhere else.
From an availability standpoint, you’re just purchasing alcohol, so you long as your country allows you to purchase alcohol, and as long as you are of drinking age, you are good to go on Vinovest. So that kind of excludes a lot of the Middle Eastern countries, Muslim countries as well, from the alcohol standpoint. From a global consumption standpoint, U.S. is still the biggest market, but China is projected to overtake the U.S. in terms of consumption volume by sales in the next two years. So probably by the end of 2025, China will be that new number one. And especially as COVID policies are now being loosened, things are opening up again now, especially in Hong Kong, which was always traditionally seen to be more of a window into Asia, it’s zero tax, really, really great for import/export. So we’re seeing a lot more activity come out of Asia, especially on the buying side. So a lot of the folks that we sell to when we eventually sell our wines, more of those Asian buyers who were previously doors closed, are now open for business.
Meb:
Just reminded me that I saw an investment opportunity years ago for Yao Ming’s winery. Are there any celebrities… I mean, I see tons, I feel like every day I see a different celebrity that has a label, or is getting into the wine game. I was actually up in Healdsburg a couple weekends ago, and I absolutely love that part of the world. It’s also good beer country too.
Anthony:
Yeah. It’s beautiful up there.
Meb:
It’s so pretty. Are there any in particular celebrity labels that you think are drinkable or delicious, that are wonderful? Has anyone gotten it right in that world of actor, athlete, celebrities that you can think of?
Anthony:
That’s actually one of my favorite topics, because I pretty much had them all, from Snoop Dogg’s $10 red blend to Yao Ming’s wines, which are like 200-something bucks a bottle. So a lot of these wine makers or these athletes/celebrities, you got to differentiate between them just slapping their face on a brand and them not being involved at all with the viticultural side of it, with someone like Yao Ming or someone like CJ McCollum who… They bought the land, they cultivated the vines, they’re very involved with the wine-making process, and it’s fully vertically integrated with what they like to drink and who they are.
So for the ones where it’s more the latter case, there’s some great wines out there. Dwyane Wade makes his own wine at Wade Cellars. Really, really great rosé. I’ve loved it, and especially now that we’re in the summer, something that I’ll be buying by the caseload. Carmelo Anthony just started his own winery in France, in Châteauneuf-du-Pape as well, so your mom will probably like that one when it gets released. And then you’ve got athletes like Yao Ming or CJ McCollum that are just huge, huge wine lovers, and they’ve got their own winery, it’s fully a business for them. It’s not just a marketing thing.
Meb:
More importantly, Melo was Denver Nugget, I got my game five NBA finals hat. I joked on Twitter for a while, because it was really problematic getting there, because I had kindergarten graduation the next morning, and my flight proceeded to get delayed by seven hours, but I made it with about two minutes to spare, still wearing all of my Nuggets gear. Probably smelled a fright, but I was there. It was good. I’m going to buy some D Wade wine then and then give it a taste test.
Anthony:
Yeah. Wade Cellars. Get the rosé, it’s really delicious.
Meb:
It’s funny, because we’ve talked on the show before about, maybe 20 plus years ago, where celebrities, athletes, tended to be contra-signals on getting involved in the entrepreneurship world, but to me it’s really transformed to where so many have been exceptionally successful in the past 10 to 20 years. I mean, recently we see Ryan Reynolds and George Clooney and on and on and on, the Williams sisters that have just done… So it’s been fun to watch. You know what’s interesting, listeners, we’ve also done some farming podcasts, as far as alt asset classes, and I saw actually a few come across my desk on some AcreTrader vineyards. I didn’t invest in them, so I don’t know how interesting they were, but they were in California and I was very tempted. So then you could just have the entire ecosystem of the wine world, where you’re collecting the bottles as well as farming the land, without all the hard work. It may be a future partnership for you guys one day.
Anthony:
Yeah, absolutely. There’s a few, I think they’re in the central coast of California, that… Pretty solid yields, and they’re giving you maybe 8% to 10% a year, and you’re able to also say you’re a part-time vineyard owner, which is pretty cool.
Meb:
I’ve been trying to convince my brother-in-law, he’s up that way, and he’s got a little bit of land, to plant some vines, but thus far he’s not interested. Says it’s a lot of work. When’s you guys’ next event going to be, man? I’ll come join you guys, we’ll co-host it. Are you guys going to do any more producer meetups this summer? Summertime’s a good time to do it.
Anthony:
Yeah, I think we will be doing some, because especially during the summer, right before harvest, that’s where a lot of the winery folks are a little bit more available. During the fall, they’re just all out focusing on the harvest, bottling, all that.
Meb:
Well, subscribe to Anthony’s Twitter feed and he’ll announce it. Do you guys do much… I mean, I would assume you do, but I don’t know. In the social world, as far as marketing. Where do most of your clients come from? Is it word of mouth? Are you heavy into TikTok content? Where do people find you guys?
Anthony:
So, still a lot of it is on traditional performance marketing channels, your Facebook [inaudible 00:25:47] of the world, but we’re really leaning heavy on content, especially stuff from our own blogs. Because people are searching about wine, whiskey, alternative assets, alcohol stocks, all the time, and we’ve kind of built ourselves into a pretty big authority in that space. So if you’re searching, what are the best vintages of Dom Pérignon, odds are you’re probably browsing on our blog. And that’s a great in to be like, “Oh right, this is not only drinking Dom Pérignon, you can invest in it.” And there’s this great website called Vinovest that makes it all very simple for you to do.
Meb:
One of the fun insights, and you guys probably know this better than I do, but I remember over a decade ago we were chatting with some friends that are big skiers, that did a lot of writing, but in kind of back-country Japan and other worldwide locations. But particularly the more esoteric you get… I mean, obviously if you’re writing about Dom, there’s going to be a million articles about it, but if you’re writing about maybe a specific vintage or a weird or different producer, you may end up being at the top three on Google. Some of your little local places in Tuscany or in Italy, you end up being a much higher opportunity. Anyway, people are always searching out the weird ones, too.
Anthony:
Yeah. Exactly. And with the wine world, every single… It’s not just Dom Pérignon, every single vintage year. 2008, 2009, 2010. Every single one of those is a long tail keyword opportunity for us. So we try to win on all of those small ones, because they all add up, and it’s a lot easier to rank than just the main keyword.
Meb:
All right. Well, listeners, when you see me as the low bid on all these Vinovest trading marketplace, don’t laugh, because I’m definitely going to put my algo on there if I could.
Let’s talk a little bit about whiskey. So I saw this news, I got pretty excited about it, because to me this is an area that I haven’t seen as much going on, and I got all hot and bothered about it. Emailed you, said, “Anthony, I got to get on your cap table. I love what’s going on. Please, what do you got for me?” So tell me about this whiskey offering. What do you guys got going on? How’s it work? Is it the same thing as wine, just with a different liquid, or how’d you guys think about it, and how’d you arrive at whiskey?
Anthony:
Yeah. So I’ll start at how we thought about it and arrived [inaudible 00:28:02] I can then talk a little bit more about how the product offering works. But it really started all as an experiment. We heard from a lot of our existing investors, “You guys ever think about doing whiskey?” We’re like, “No, we’re Vinovest. Maybe in the future. We want to focus on wine.” What we did do though was we threw up a landing page with a wait list, and that wait list we started at the beginning of last year, it went from about zero to 4,000 people in the first six months. And then when we looked at it at the end of the year, it went from 4,000 to nearly 15,000. And we hadn’t really paid attention to it, but we were like, “Oh my god, there’s 15,000 people who signed up for whiskey. It really would be irresponsible not to give the people what they want.”
So what we did then was we’re like, “All right, let’s figure out how we can be able to launch a product that has the same features, makes it just as easy for an investor to invest in whiskey as in wine.” And the key difference in wine and whiskey is that the wine, it ages and develops in the bottle. On the whiskey side though, it’s really all in the barrel. Once a whiskey is bottled, the proof stays the same, it doesn’t turn from an 18-year to a 20-year in the bottle, all that maturation and therefore all that price appreciation happens in the barrel. So then we thought to ourselves, all right, how in the world are we going to figure out how to invest in giant barrels? We’ve got to move further up the supply chain.
So we started working with actual whiskey suppliers and the actual brands, and what we realized was there was a really interesting opportunity, almost like a working capital play, where even a big brand like Diageo, they’re going to make an 18-year Macallan, they can’t really have a barrel on their balance sheet for 18 years that’s not generating revenue and only creating costs. So then what we realized that a lot of these brands do is they’re selling them to investors, giving a range of returns, or sometimes even a fixed return and fixed buyback date, and allowing others to be able to own it. And you can sell it back to the brand, they’ll bottle it. You can actually work with an independent bottler and actually bottle it under a private label, or you can sell it at auction. So there’s a number of different exit options.
But we thought this was super unique. It’s even harder to store an entire barrel of whiskey than it is a case of wine. So we thought this was even more special when it comes to our mission of really breaking down barriers and creating access. So, that’s what our whiskey product does. You’re going to invest in an entire barrel, all of its yours, and you can choose what to do with it. Bottle it, sell it at auction, sell it back to the brand, and you get your option now between Scotch, so a lot of the major brands, Macallan, Bowmore, Ardmore, and then on the American side, a lot more conventional brands like High West, WhistlePig, and things like that.
Meb:
I actually went to the High West distillery this past winter. It was actually wonderful.
Anthony:
The one in… I think it’s in Park City, right?
Meb:
Yeah. Outside, they have the traditional bar downtown, but they have the actual distillery maybe, I don’t know, 20, 30 minutes away, and beautiful location. What was the decision… Because theoretically you could have gone the route of, we’re going to buy bottles of Hibiki, or this fancy scotch, and it’d be like a bottle-based conceptual, versus this barrel based. Is it something that you’re considering both, or there was a decision to go full cask as opposed to the bottle concept that you went with, more similar to the wine world?
Anthony:
Yeah. So it was really more of a fundamental analysis where, when we looked at wine, there are two main factors from a fundamental side that drive price appreciation nationwide. Number one is ageability. So, a one-year-old wine of 2021 vintage is going to taste different than when we’re in 2030 and its nine years old. And secondly, it’s that supply and demand. If you decide to ship your wine home and drink a case of it, that means that there’s six bottles less in the world, and then price will go up. So we see the same factors in the barrel side. When we’re aging the barrel, we have that appreciation, it is going to taste different. And then you have that scarcity as well, the angel’s share decreasing the actual volume of alcohol in the barrel, where we feel really good from a fundamental analysis side.
From the bottle side, you only have that scarcity play. Maybe there’s only 300 bottles produced, and then it’s really just based on who else is drinking it. That bottle’s going to stay the same, and you’re really kind of at the mercy of the market. So we thought that, by starting with barrels first, not to say that we won’t ever do bottles, there’s just a stronger fundamental play for investing in those barrels.
Meb:
I kind of like the idea of buying a cask and bottling it, and doing it for Cambria giveaways. So when you say cask, I’m terrible at public math, but how many bottles is in a cask? Do you have any idea?
Anthony:
Yeah, so for a traditional hogshead, which is the barrel size that most of our barrels in, it’s about 300, 350 bottles. So depending on the age, a little bit less if the barrel gets older and the evaporation, but that’s kind of the general range that you can look at.
Meb:
There’s a pretty big spread between the American and ultra-rare Scotch casks. Can you talk a little bit about the options here, as far as the American whiskey versus the Scotch offerings, and how you can go about reserving one?
Anthony:
Yeah. So on the American side, that’s our more entry level product. We’re buying new make, so this is just brand new barrel, brand new alcohol, and you’re starting from age zero. So that’s why the price point’s a lot lower, and in general, American whiskey’s just cheaper on the retail market than Scotch. On the Scotch side, you’re typically buying something that already has at least five to eight years of age on it. So you’ve got all that appreciation built in, and it is usually branded, so you know that it’s a Macallan cask, or you know that it’s an Ardmore cask. Whereas with our American cask, it’s pretty much neutral until a brand decides to scoop it up and add their special recipe to it.
Meb:
Do you have any current favorites in this world? We had a Kentucky friend that gifted us a bottle of… Rabbit Hole? Rabbit something, that was wonderful, nice surprise from some local Kentucky crew. Anything that you’ve come across that have been particularly interesting?
Anthony:
I think on the American side, I’m certainly a big fan of whatever Sazerac produces. They’re a big conglomerate, they have a number of brands, and in the industry it’s particularly prized to get your hands on a Sazerac barrel. And on the scotch side, I’d say probably Ardmore is my favorite. So we’ve got a few barrels there that are maybe 12-year, 18-year, and I also personally have about a 12-year Highland Park cask, and that’s our Vinovest IPO barrel. So it’s something that we bought right when the company started, I think it was about eight years old, and now it’s 12 years. So when we go IPO, we’re going to be bottling that and giving all of our employees and investors a bottle of it.
Meb:
The startup ecosystem for many has been a struggle the past year or two, I guess. Funding has dried up. You’re starting to see some companies fail. We were chatting about a company in your world that just kind of overnight just announced, “We’re gone.” Which you see on occasion, which is always kind of surprising. You see companies that are like, “We’re doing awesome, everything’s going wonderful,” and then literally it’s just like, “Just kidding, we’re done.” But that’s part of this startup world, the challenges and everything with it. As you guys build this, what are some of the challenges in the last couple years? Did you get caught up in the Silicon Valley Bank mess? Is funding a challenge? What’s been your experience of this world that you’re involved in, last year or two?
Anthony:
Yeah. So I think we’re really fortunate, I think, in the asset class that we operate in. We’re still a FinTech, but when we’re looking at our peers, most of them were in traditional stocks or crypto, massive swings in prices led to massive swings in their balance sheet, in the trading fees that they can collect, in the AUM fees that they can collect. And we were definitely jealous of them in 2020, 2021 when they were just posting crazy user number growth, crazy demand, and we’re like, “All right, we’re still chugging along. Our investors are happy with 15%.” And now that they’ve had a down year last year, where everything’s just cratered under them, we’ve also just been really lucky to be chugging along [inaudible 00:37:12] we delivered investors a low double-digit return again.
So I think just given the nature of the asset class, given the mentality of our investors who are all just very long-term, this is a small piece of their portfolio, no-one’s got a significant portion of their investment portfolio in wine, and it’s something that they kind of just set and forget and expect to be pretty happy a few years down the line. I think we’ve also kind of taken that mentality to just be slow and steady, not really get caught up in the hype or the new things, and just focus on building for the long term. And I think that’s really helped us out in terms of not giving into the whims of the market. Now we’re at this break-even cash level where we can just survive indefinitely without additional venture capital funding. So we’ve also been able to future-proof ourselves for any future downturn in the market, not have to rely on VC funding, and just be able to grow really sustainably and organically, because we made this promise to our investors four years ago that it’s a 10-year investment, so we need to be around in 10 years.
Meb:
I love scrolling through your website, as I contemplate buying a cask right now, but there was a really interesting stat, to totally take a hard left turn here. But listeners, see if you can guess the top five whiskey-consuming countries, and just think about them in your head. Number one is a total shocker to me. The answer you guys have is India.
Anthony:
Yeah.
Meb:
What’s going on in India? I mean, I know there’s just a shit-ton of people there, but I didn’t know that such big whiskey drinkers.
Anthony:
Yeah. I think the true answer is, there’s a shit-ton of people there.
Meb:
It’s three times the size, listeners, of the U.S. whiskey-consuming total. So we got 462 million liters in the U.S., 1.5 billion liters in India. This reminds me of… I heard a statistic the other day, and they were talking about fantasy sports and how it’s taken off, and all the websites and offerings that are making money off this. And they said, “Did you know that actually the biggest fantasy sport is cricket?” And I was like, “What are you talking about, cricket?” And they’re like, “Yeah, in India it’s actually a massive industry, is fantasy sports about cricket.” And I said, “No kidding.” So just like sheer numbers, it’s amazing the scale of what happens.
Anthony:
I’ve actually had Indian whiskey as well before, so it makes sense that they’re the number one country by volume, not by sales dollars, because I think it’s just in… It might not even be in new barrels, they might just be putting wood chips in stainless steel tanks, aging it for three months, and calling it [inaudible 00:39:55].
Meb:
The weirdest place I ever had whiskey was in Bhutan, did a trip with my mom, and had some local whiskey, and went to a joint that had karaoke. And it was a little different there, because instead of getting yourself up to sing, which I was very happy not to do, you actually would pay the waiter or the waitress to go sing a song for you, which was a little different style, but it was fun. Enjoyed it. I can’t remember the name of it, but it was not too bad. I’ve never had an Indian whiskey.
Anthony:
It’s pretty good. I mean, it’s definitely whiskey to drink, not whiskey to think about and ponder.
Meb:
As I think about, contemplate, buying a cask, anything else I should be thinking about? Or, you’re talking to people who are in this world, anything we skipped over on the whiskey side that you think is particularly insightful or interesting or something they should consider?
Anthony:
I think the other consideration on buying a cask is thinking about where it fits into your time horizon strategy. The benefit of American whiskey is that it is pretty short-term in comparison. You can be able to get a return in two to four years, whereas Scotch, it’s at least five years. It’s the age of those products that you see in market, 18-year, 21-year, 25-year, that’s when the prices really start to skyrocket. Whereas the American whiskey market, people are still drinking it young. So that’d be the biggest factor in my mind, if I were in your shoes right now.
Meb:
One of the topics that I certainly read a lot about over the past 10 years, not so much in the last five, was there was a number of companies, scientists, startups, trying to condense that aging process from 10, 20, 50 years down to like three months. Has there been much success there? I know there’s groups that have claimed they discovered the secret to accelerating that aging process, but it doesn’t seem like it’s really translated into brands and sales. Is that right? Or give us an overview of…
Anthony:
Yeah, I’ve heard those headlines too, or seen them, maybe four or five years ago. And to be honest, I haven’t heard much buzz about it since. Or I haven’t heard… I think maybe from the taste standpoint, even if it is identical, there’s still the brand value, there’s still the respect of craftsmanship, of time, of that artisanal value that people buy, along with the brand. And I think another part of it is the scarcity. People want the one of 300 bottles that’s a special collection or collaboration with some artist, versus this mass-produced, we can taste like an 18-year-old scotch, but we’re actually made in the lab for six months, type of thing. So I think there’s going to be many reasons why it’ll never be the same, but I think it’s cool to the casual drinker who may not be able to afford, on a weekly basis, that same taste profile.
Meb:
This is funny. There used to be a distillery in L.A. that kind of claimed to do this called Lost Spirits.
Anthony:
Yeah. They do really cool tours, by the way.
Meb:
Yeah. Well, the joke I was going to say was that I went on the tour, and it was amazing, and it was more like a Disneyland of rum or whiskey, whatever it was, than anything. And I did the math and I was like, “Wait a minute, you guys make like two or $3 million from this tour.” I was like, “The rum is sort of irrelevant to this whole business.” And I just looked it up as we’re talking, and it’s now Lost Spirits Distillery & Modern Cirque Show in Las Vegas, and it’s an entire…
Anthony:
Whole production.
Meb:
Yeah. I mean, they have like 40 resident performers, one of the largest production show casts in Las Vegas, which seemingly has nothing to do with rum or whiskey, but I guess that’s kind of the point, so whatever.
Anthony:
Yeah. I remember going there for a friend’s birthday party, and you’re just in there, it’s a really cool experience. And it’s a lot of drinking. It’s very different than wine-tasting, if you’re just taking shots of different types of rum and spirits, you come out the other end and you’re like, “Whoa.”
Meb:
Yeah. Interesting. Well, when you guys do the Vinovest tour, let us know. Sign me up.
What else is going on? What have we skipped over today that’s particularly interesting? I know that there’s a barrel shortage. I was listening to Odd Lots with that Bloomberg crew, and they did a whole episode on why there’s no barrels. Is that something that affects you guys at all, or it’s more a curiosity, or what’s going on there?
Anthony:
Yeah, so that’s… Because of the American oak shortage, it’s really hard to find new make barrels. And that’s also why we’re, I believe, the only company in the United States that offers new make barrels available to the public. It’s usually just swooped up, long-term contracts, by one of these big five conglomerates that just use it for their own production. So it is hard to find those new make barrels. It’s definitely going to be harder and harder to find them. So that’s why we’re pretty proud to be able to have that as an offering for the general public.
Meb:
Very cool. We’ll add a link in the show notes to that Odd Lots episode. It’s fun to listen to. Is that mainly a COVID thing, or is that just more of a supply/demand? Are these guys…
Anthony:
I haven’t listened that particular episode, but from what we know from our industry partners, it’s really the oak shortage, American oak. To make those barrels, they got to grow for a couple decades, and the increase in demand for those types of barrels has greatly outpaced the speed that these trees can even grow. So I’m sure there’s now a company that’s trying to speed up oak tree production or growth, and that whoever figures that out is going to make a ton of money.
Meb:
Yeah. What have we skipped over today that you think is particularly interesting? We can talk about whiskey, wine. Is there something you’re like, “Oh man, we got to cover this, we haven’t touched on it.” Is there anything on your brain?
Anthony:
No, I think we covered pretty much everything. A little bit of whiskey, a little bit of wine, a little bit of fun in between that. But I think, really always just get to enjoy chopping it up with you, Meb, so thanks again for having me on.
Meb:
All right. Give us some picks, man. In the last 12 months, what have you been drinking that we can add to my order list that’s been a delight, a surprise, wonderful. I follow you on Twitter, so I always write down… You’re in my saved folder a lot, because I see you drinking some good stuff, and I say, “All right, I’m going to add that to the list.” But for the listeners, what’s some good things that you’ve sampled over the past year?
Anthony:
So I’ve definitely been in a pretty fortunate position, especially coming off of that honeymoon in Italy, where I had a ton of great Italian wine. So I’d say in terms of a red wine, the Sassicaia 2020, so it’s a Super Tuscan, which means it’s mainly a Cabernet blend with some other Bordeaux grapes. Still very, very young, so this is definitely one to keep in your wine fridge for a few years, and you open it up at a special occasion, you’ll be very, very happy. If you’re not that into red wine, you’re looking for white wine, I would go in the direction of white Burgundy, going to a sub-region called Chablis. So there’s a producer called Vincent Dauvissat, and he farms this little village called La Forest, and it’s a really incredible crisp white wine.
Meb:
And the name of the brand is La Forest?
Anthony:
Kind of like the sub-name. So it’s a Vincent Dauvissat Chablis, Premier Cru, and La Forest is that specific one that they make, because he makes a few different bottles of white wine. And that one’s not your grandma’s super buttery Chardonnay that I think a lot of people have started getting turned off by. This is very, very vibrant, perfect with food, perfect on its own, and it’s one of the best white wines for the price range that I’ve ever had.
Meb:
What’s been the most memorable one you had in the past year? Is there one that sticks out as being particularly memorable?
Anthony:
It’s got to be the one that we had during our team retreat in December. So after three years of COVID, for the first time we had a full company team retreat, and we asked everybody to bring a bottle to blind taste. So we put a little sleeve over everything, and we’ve got folks who have passed the master sommelier exam, we’ve got people who just like to drink something. So it was a good range of palates, and we had a bottle of 1992 Domaine de la Romanée-Conti wine, which retails for nearly $30,000, that I put into the blind tasting sleeve, just to see the reaction on people’s faces when we finally did the reveal. Priceless.
Meb:
Did it get some good reviews? Because we did this with my family, and let me be clear, listeners, my family is perfectly happy probably drinking [inaudible 00:49:10]. So we had the Costco, and then we had some fancy bottles, and some less fancy bottles, and we joked afterwards because the Costco was always rated as a seven or eight. It was never a two or a ten.
Anthony:
They make some solid wine,
Meb:
They just nailed it every time. But the fancy… And again, this isn’t a bunch of sommeliers, but the really good and the really bad would swap places. People would be high up on whatever the fancy was. So did this one at least get some good reviews, I hope?
Anthony:
Yeah. I mean, we tasted over 20 wines that night, and that one was a top three consensus for everyone. Everyone knew this was quality, but I don’t think anyone would’ve guessed that it was a [inaudible 00:49:54].
Meb:
I just imagine the guilt spilling some of that on your shirt, and be like, that’s like $500, those drops right there. I can’t even take this to the cleaners, I feel so bad, this shirt is now worth more than it was prior to spilling it.
Anthony:
That’s a great fashion statement to have. This stain is $500.
Meb:
We did that once with whiskey, and my favorite was like Jack Daniel’s, which I purport to not even like. So I was like, wait a minute, this is great. So, all right, I got a couple on my list. Good.
Anthony:
The thing I love about blind tasting, it definitely humbles you, and you shake away your preconceptions, and you just come in open and see what you’re [inaudible 00:50:39].
Meb:
Yeah, I think it would be fun to try to go down the sommelier certification path. There’s so much to know, and some… I definitely don’t have the palate. My nose has been broken enough to where I’m convinced I just… There’s no hope. I think I could get reasonable, but my wife is like… I mean, she’s like a bloodhound. So I think it’d be fun to do, but so many hours in the day.
Anthony:
Yeah. Definitely a fun hobby to do together. It’s not too hard to pass that intro certification, and a lot of it is just more technical items that really anybody can learn and use a lot, use it every single restaurant you go to.
Meb:
Yeah. Anthony, where do people go? Obviously following you on Twitter, you guys got an account on Instagram? Vinovest.com, or .co, excuse me. Great place to be. Where else?
Anthony:
I’m fine. That’s it. Vinovest.co. You can sign up for both wine and whiskey. My personal email is anthony@vinovest.co, so always love hearing from y’all, whether it’s just tell me what to drink, pairing with what, I’ve had readers come up and ask me that, or more complex investment-related question, I am happy to hear it all. So please email me or follow me on Twitter. Always happy to continue the convo.
Meb:
Very cool. We’ll put the links in the show notes, listeners. And when Cambria opens our cask, and/or gets all of our bottles sampled, we’ll have to throw some sort of party. I need to get a partnership with the Cambria Winery up the coast a little bit. We need to tell them we got to cut a deal, so we can send some Cambria wines people. Anthony, thanks so much for joining us today.
Anthony:
Yeah. Likewise. It’s been a pleasure, Meb.
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