The ASA has recently been investigating ads for “alternative” investments.  On 20 November it published a series of rulings relating to gold investments, and the previous week it covered wine - we're covering one of the wine rulings in this article. 

We've all done it: enjoyed a bottle of wine in the sunshine on holiday and thought it was marvellous, and then found the same wine back home and been left disappointed. In other words, past performance is not a guarantee of future performance. So under the CAP Code, marketing communications for investments must make clear that the value of investments is variable and, unless guaranteed, can go down as well as up. And past performance or experience does not necessarily give a guide for the future. The CAP Code also states that material information should not be omitted and should be presented clearly.

A wine investment company called Cult & Boutique wine management published a paid-for Facebook ad with an image of a wine cellar. It stated: “Target returns of 12% per year…FINE WINE INVESTMENT. Download our free 2024 market guide" and "As an investment, fine wine has delivered an annualized return of 13.6% over the last 15 years.”

The ASA challenged whether the ad was misleading because:

  • it failed to illustrate the risks of the investments; and
  • it did not make clear that past performance was not representative and did not necessarily give a guide for the future.

It also challenged if the claim “fine wine has delivered an annualized return of 13.6% over the last 15 years” was misleading and could be substantiated.

Wine investment is not currently not regulated in the UK, and it is not protected by the Financial Services Compensation Scheme or the Financial Ombudsman Service. The ASA considered that this was material information that consumers required to make informed decisions about Cult & Boutique’s services.

The ad contained no text stating that investments were variable and could go down as well as up, or that fine wine investment was an unregulated market. It also referred to the previous performance of fine wine and the ASA considered the ad implied that it was likely to perform in the same way in the future. However, it contained no information to explain that past performance was not a guide for the future.

On the other hand, the downloadable guidebook and the footer of the website stated that the value of wine could go down, as well as up, and that wine investment is an unregulated market. In addition, the guidebook also stated that future performance may differ from past performance. However, that information was either in small print at the bottom of the website’s landing page or within the guidebook, which had to be accessed by clicking on a link. As a result, the ASA considered that information was not presented immediately and clearly to consumers. The ad was therefore misleading.

In addition, the CAP Code says that before you distribute or submit an ad for publication, you must hold documentary evidence to prove claims that are capable of objective substantiation. 

The ad stated, “fine wine has delivered an annualized return of 13.6% over the last 15 years”. The ASA considered that consumers would expect Cult & Boutique to hold robust evidence to support that objective claim. Cult & Boutique stated they had quoted a statistic published on the Liv-Ex website, which is a global marketplace for tracking the prices of wines. However, they neither provided data to support the accuracy of that statistic nor provided any further information to support the claim. Consequently, the ASA said that it had not received sufficient evidence to support the claim and concluded that it had not been substantiated.

Anyone making claims about wine investment must make clear that the industry is unregulated and that the value of investments was variable and could go down as well as up. Examples of past performance or experience were not necessarily a guide to the future. Finally, if you publish ads like this, make sure that you hold documentary evidence to substantiate the investment claims.

When there are global crises (pandemics, wars, unstable regimes), people look for alternative investments (wine, gold, crypto), and this means that people might be more vulnerable to misleading advertising - it isn't altogether surprising that the ASA is acting to protect consumers in this space.

Personally, I'm no Warren Buffet, and all my investments seem to end up in the toilet. But in the case of my investments in wine, at least they go down via my throat.