The story on wine investment doesn’t begin on the balance sheet but on the tongue, and every collection starts with a single sip. Instead of a cold, hard interest in speculation, most of us discover fine wine through friends, family, or food. And then the game’s afoot. The first few cases of wine that bought for future drinking are the seeds from which the branches of a collection grow. Tastings, dinners, parties — all of these fuel a thirst for knowledge (and, of course, a thirst full stop.)
Then follow the subscriptions to websites of wine critics, and an enchantment by their florid prose and elemental descriptions of new releases. These inspire the collector to expand their portfolio of wines further, and push their drinking windows ever longer into the future. At some point, buying becomes strategic, and the first leg of the collector’s journey is complete. A collector, after all, is a consumer who buys fine wine strategically.
As personal knowledge expands, attitude to risk lessens. Logically, most collectors justify spending more and more money on wines by focusing on the probability that their value will increase in the future. But there are only two real reasons to buy wine strategically: scarcity and value. You either buy today because you believe that a wine will be hard to find in the future (in which case there’s a probability of price appreciation where demand is in place), or you buy today because you think it’s going to be better value now than in a few years’ time.
If you’re interested in fine wine and enjoy consuming it, sharing it and learning about it, it’s a natural place to put a proportion of your disposable income. That’s why you choose wine to invest in as opposed to any other passion or treasure asset such as watches, cars, art or anything tangibly similar. Because you enjoy it and think you understand it relatively better than many other options available to you.
This all became more poignant post-Lehman Brothers, when suddenly investing in things you could feel and touch became a lot more attractive. Enter the world’s most widely held and accessible passion asset — wine.
Wine vs the markets
Since 2008, the year Lehman failed and the global financial markets entered meltdown, the Knight Frank wine index reflecting the world’s most iconic wines has risen 236% compared to the FTSE 100 which has staggered to just 24%.
A more representative index reflective of the mainstream wine investment market, the Wine Owners 150, has risen 145% compared with the Dow Jones at 106%.
Liquidity vs scarcity
The wine market is not homogeneous. Instead, it is compromised of lots of different markets. Characteristically they break down into those markets driven by liquidity (where volume of supply is more or less matched by global demand) and by scarcity-led markets (where demand for wines at first release often outstrips supply).
Volume markets are dominated by Bordeaux and Champagne. Over the last decade Champagne has outperformed Bordeaux. The Wine Owners Champagne 60 index has risen 331% since 2008 whereas the Wine Owners Bordeaux First Growth 75 index has managed just 103% (the same as the Dow Jones).
Scarcity-led markets are epitomised by Burgundy and Piedmont in northern Italy. The Wine Owners Burgundy 80 index is up 331% with Piedmont managing 196%. Californian cult producers (Wine Owners California 85 index) have trumped the lot with a spectacular return of 439%, although the rarest are hard to come by outside the US thanks to insatiable local demand. Happy hunting.
Wines worth the investment
Monfortino
The greatest producer in Barolo, Giacomo Conterno’s Monfortino is a riserva made with the best grapes from his Francia vineyard, and is only produced in the best years. With only around 600 cases released, prices have escalated in the last few years. Monfortino 2010 is nigh on perfect.
Domaine de la Romanée Conti
No collection should have been without Domaine de la Romanée Conti over the last two decades. The performance of this most iconic of Burgundy domaines has been nothing short of stellar. A collection comprising just DRC would have risen several hundredfold.
Penfolds Grange Bin 95
The first vintage of this Aussie icon was produced in 1953. Fully mature vintages from the 1960s serve to show how brilliantly Grange ages and what an opulent wine it is, with great textural complexity. More recently, 2008 is considered the vintage to own.
Ridge Monte Bello
Starting in the 1960s, Monte Bello benefitted from a natural approach to winemaking before it became in vogue. Until recently, Paul Draper had been the CEO for a half century, ensuring a consistency. 2015 and 1974 are arguably the greatest vintages.
Soldera Case Basse
Gianfranco Soldera created the best wine in Tuscany, made from the Sangiovese Grosso grape variety. He passed away this year in his 80s. His benchmark was the Piedmont wines of the 1950s. He left a legacy of wines, of which the greatest is quite possibly the 1990 Riserva.
Mouton Rothschild
Mouton Rothschild is one of the finest First Growths — the five properties that represent the world’s most liquid wine markets. It’s an upstart, being the only wine to be promoted to a 1er Grand Cru Classsé, back in 1973. Yet its track record is truly star-studded.