A mature investment: vintage wines

A mature investment: vintage wines

 

WINTER 2016

By Victoria Wells

For many of us, wine is something to be shared and enjoyed. But for serious investors, the joy is in bottles they will never open – or may never even see. 

Investing in wine is big business worldwide. Bottles can change hands for hundreds or even thousands of dollars each. In 2014, Sotheby’s sold a collection of 114 bottles of famous Domaine de la Romanée-Conti burgundy for US$1.6 million (NZ$2.3 million) – that’s more than US$14,000 a bottle. This collection was the most expensive single lot of wine ever auctioned.

Understanding the fine-wine market

As with any investment, knowledge is key. The London International Vintners Exchange (Liv-Ex) charts fluctuations in the international fine-wine market. Savvy investors know the producers to watch, the vintages with the best ageing potential, and what’s in demand. 

Master Sommelier Cameron Douglas says to be successful at wine investing you need to do your research and be prepared to wait to see a return. Douglas is New Zealand’s only Master Sommelier and one of just 227 worldwide. His accreditation makes him part of a global network of wine professionals working with trade and private clients. This has given him access to some of the most exclusive and valuable cellars around the world. 

In order to warrant investment, a wine must first be proven to develop with age. However, Douglas says: “The ‘sweet spot’ of drinking may not be a factor, because a wine can be sold many times over and the box is never opened.”

For wines to maintain their value, they should be stored in a secure, climate-controlled facility. The owner should also be able to prove the provenance (history and authenticity) and sales history of their wines.

Vintage investing

Investors can expect to wait anywhere from five to 15 years to realise the value of their cellar, so invest in wines with ageing potential. These will hopefully become scarcer as other bottles are consumed or simply held back from the market. 

“The rarity of wine carries a lot of value. The point must come with all these seriously old wines where there really can’t be that many left,” says Douglas.

The older vintages that Douglas is referring to are generally red wines from the best-known houses of Bordeaux (including Château Lafite Rothschild, Margaux, Château Latour and Château Haut-Brion). And from Sauternes in the southern Bordeaux vineyards, the sweet white wine from Château d’Yquem is renowned for its longevity. 

“You could sit on a Bordeaux for as little as 20 years or as many as 50 years or more,” says Douglas. 

Bordeaux wines are valued so highly that critics and investors flock to the region each April for the ‘en primeur’ (wine futures) tastings. This opportunity to sample wine while it is still in the barrel can be an advantage for buyers who are pre-purchasing wines made in limited quantities. But it carries the risk of a vintage not performing as expected.  

However, there’s no need to limit yourself to Bordeaux wines. 

“People who are going to develop a cellar for investment need to think globally,” says Douglas. “For example, Penfolds Grange is widely considered Australia’s most collectable wine. Have a look at the other bin numbers Penfolds produces as well, such as Bin 620. There’s investment in older red wines out of the United States too – from Napa, Sonoma, the Opus One kind of investment. You find those on wine lists for hundreds, if not thousands, of dollars a bottle.” 

Douglas warns that New Zealand’s relative winemaking youth means it’s too early to assess any significant ageing potential. “Some New Zealand wines could easily age for 20, 30 or 40 years, but I think the number of wines that sit in that window are very few.” 

His top local picks are wineries with a track record of creating Bordeaux-style red wines, such as Stonyridge, Te Mata and Trinity Hill. 

For other varietals with greater ageing potential, pinot noir from Quartz Reef, Misha’s Vineyard and Burn Cottage get Douglas’s tick of approval, as does Rippon Wines riesling. 

Dipping your toes in

Douglas says that if beginner investors can’t do their own research, they need to hire someone to do it for them – and pay accordingly. 

“For every NZ$5000 investment in wine, which might only get you four or five bottles if you’re buying old Château d’Yquem, you pay a percentage for someone to get that for you.” 

International vintages can be purchased locally. “New Zealand is a recipient of Bordeaux wines and burgundies, and they come to personal cellars, and to retailers who like to invest,” says Douglas. 

“It’s entirely possible to start your collection of Bordeaux wines without having to search overseas. But we don’t get that much, and it’s a first come-first served system.”

Douglas suggests wine investors should watch what’s available at local and international auction houses. Auction house Webb’s Fine and Rare Wine department holds eight wine sales a year, typically including premium New Zealand and Australian vintages, as well as renowned French wines.  

You can learn more about the reputation of individual wines by reading reviews from experts, such as Masters of Wine Jancis Robinson and Robert Parker.

Part of the appeal surely lies in the thrill of securing a little piece of living history – something crafted to age and to be enjoyed. But as with any investment, “only invest what you’re prepared to lose” says Douglas. 

“You should achieve a good return, but you can always turn around and drink it!”