Upfront disclosure - my palate cannot differentiate between a $2000 bottle of Lafite Rothschild or any other Bordeaux First Growth and a $30 bottle of Australian Wolf Blass. I cannot tell if the wine has " a velvety texture, and notes of spring flowers interwoven with camphor, melted licorice, creme de cassis,and pain grille. Not a blockbuster, it offers extraordinary intensity as well as a surreal delicacy/lightness " - Robert Parker's tasting notes of the 2003 Margaux or any of the other wonderful things which the wine tasters are able to detect with a sniff or a sip. My interest in wine is from the perspective of looking at it as an alternative investment.
Years ago a friend from Hong Kong gave me some advice on investing in wine. It sounds easy -provided you have the patience.I have yet to follow it - but have been tracking how wine investments perform. His logic was very simple. Focus on the top end, particularly those from a good vintage, buy and sit on it.If you do not need the cash leave it for your children. The prestigious estates produce a limited number of cases every year. With the yearly consumption the number of cases available gets fewer. If you are a wine aficionado or an Investment Banker , or a Private Equity Fund Manager , celebrating the closure of a very successful deal, you don't mind spending a few thousand dollars (euros or pounds) for a couple of bottles over dinner to indulge yourself or to impress your dinner companions. As the stocks keep running down, the price keeps going up. Sounds too simple?
Even better, there are a number of individuals and some magazines who rate most of the wines produced, at least from the known vineyards. The single most influential person is an American, Robert Parker ,who started scoring wines more than thirty years ago. His 100 score is the equivalent of a perfect score.His rating has the ability to move the market for a particular Chateau. The others are Jancis Robinson who also writes for the Financial Times. The Wine Spectator magazine is also influential. For Burgundy wines there is Burghound.com. There are others. The big brokers from the United Kingdom, Barry Bros. & Rudd, Lay Wheeler, and Bordeaux Index and others all have their own tasters.
The United States and the United Kingdom were the biggest market for French wine but that is beginning to change. The Far East, particularly China has now developed a taste for fine wine and is having a significant impact on wine prices.
When I first moved to Hong Kong in the mid-seventies, the drink of choice for celebrations was Cognac. The more expensive the better. The most expensive Cognac would be ordered and then coke mixed with it. That was however a long time ago. The Hong Kong glitterati palate is now much more sophisticated.Investors from Hong Kong, including some of the top business men probably have the world’s best collection of rare wines. A few years ago the senior government bureaucrats, who enjoyed a good bottle as much as anybody else, decided that the revenue generated from the duty on wine was not worth the effort in collecting it and decided to exempt it from all duties. The result is that Hong Kong is now the biggest auction site/market for French wines.
As an indication of the serious interest in wine, when I left Hong Kong in 2005, the expensive wines - upwards of Dollars One thousand were kept in cabinets under lock and key, but now you can walk into any upmarket super market or a wine shop and you will see these wines lying on the rack.You will not see that in a average wine shop in London or New York.
In the meantime in China you have the new rich who have decided to follow in the footsteps of their Hong Kong cousins.China is now a rapidly growing market for the top end, with Lafitte Rothschild being the favorite. Not sure why, but perhaps the association with the Rothschild’s – the wealthy French-English banking family. This has driven the prices through the roof. A few years ago you could buy futures (in barrels before they are bottled) of a good vintage first growth with a Robert Parker score in the high nineties and with delivery a couple of years later, at around three and a half to four thousand sterling. This year the 2009( supposedly a very good year),Lafite Rothschild-China’s favorite wine, was priced at approximately eleven to twelve thousand sterling and is now reportedly trading at around over thirteen thousand a few weeks later.
How long is this euphoria going to continue? China’s middle class and the upper class is expected to keep growing, In the meantime their neighbor across the Himalayas, India is also developing a taste for wine (although whiskey and particularly Scotch is still the preferred drink). Stir in the need for one up man ship, particularly in North India and over the next few years, you will see these prices getting a boost.
If any of you have the desire to ride the tiger there are wine funds managed by some of the wine brokers. Alternatively you can invest in futures or buy physicals through the brokers who will store it for you. If you truly want to be one up, the wine brokers can probably locate a case or two from a good estate from the year you were born.
The consolation prize, if your investments don’t pay off is to drown your sorrows with your loved one, by drinking the damn thing. What was the line from Omar Khayam ?
A Jug of Wine, a Loaf of Bread--and Thou
Beside me......
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