Ever had a notion to keep that rare bottle of wine you are about to drink ? Fancied having a wine holding for investment purposes ? That cliché don’t put all your eggs in one basket has a certain ring of truth about it when you consider diversifying into wine investment. You might even make money at the same time – John Lowe the Money Doctor brings you on a wine crawl to ascertain the facts.
Guess how much a case (12 bottles) of Le Pin 1982 (Pomerol), which cost € 322 ($400) the year it was released, is worth today? The answer is € 120,716 ($140,031)! That’s a gain of over 37,490% in over 36 years. There were only 3,600 bottles produced of the mainly Merlot grape – it is 12.5% alcohol. Naturally, not all wine investments perform as well – but over the short, medium and long term a well-chosen portfolio of wine should produce excellent returns. Liv-ex.com, a stock exchange and industry leader for the wine industry, is a good barometer for wine investment. During the last decade, Decanter.com, another index that measures market performance, has shown average annual returns of 20% up to recently. Profit is not the only reason why wine makes such an attractive investment. Even if you aren’t an oenophile – a wine buff – it is a fascinating subject to study. What’s more, if your investment fails to make you money, you can always drink it !
The first step to investing wine is to understand the market. The best wines mature once they have been bottled and carry on improving with age. Every year the greatest producers can only create a finite supply. As that supply is consumed so availability becomes limited and prices begin to rise. To maximise your gains you may choose to buy your wine ‘en primeur’ – in the summer after the harvest and a full 18 months before it will be bottled. The safest and most secure investment option is to buy French wine – the top performers historically have always been the leading 30 chateaux in Bordeaux. Some Spanish and even New World wines could well appreciate – but the risk is substantially higher. It is worth remembering that how much a wine costs is not automatically an indicator of its quality. Fashion often pushes prices up. In the 1960s, for instance, German Liebfraumilch became popular and prices rose. Mass production and poor quality control meant these gains were short-lived.
The most influential wine commentator in the world is almost certainly an American called Robert Parker Junior ( turned 70 years of age last July ). He once described the 2005 Bordeaux vintage as ‘the finest vintage in memory’. 1990 and 2000 were equally good vintages from the 7,000 + chateaux bearing the Bordeaux appellation. Not everyone believes that a well-trained palate such as Parker’s is required to spot a potential winner. Orley Ashenfelter, an economist at Princeton, has analysed the market going back many years and found that the average temperature during the growing season, rainfall in August and September and rainfall the previous winter are actually the key factors in determining price. On this basis the 2005 vintage, which could cost anything up to €3,500 a case ‘en primeur’, may not produce such large gains as other vintages.
Disagreements over the investment potential for any particular wine highlight the need for expert advice. Experienced buyers may choose to purchase at auction, but for anyone else it is more sensible to purchase via a wine merchant. You can check whether a wine merchant is reputable, incidentally, by visiting www.sourgrapes.ie you have the pick of the bunch… if you’ll pardon the expression. Your merchant can also arrange storage for you. This must be in a temperature-controlled warehouse. When you come to sell your investment it will be worth considerably less if you don’t possess documentation to prove it has been stored properly. It may make more sense to buy and store your wine in France where both supply and demand are stronger than here in Ireland.
Always seek professional advice but under such circumstances, however, it is not unreasonable to have grape expectations.