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Wine Investment: "What do you think?"

A recently received email:

Firstly, can I say how impressed I am with the amount of detail and effort that has gone into the Wine Doctor website. It’s an invaluable resource. I’m planning to invest about £2,000 in some to quality Bordeaux wines. I’ve done a lot of research and I was wondering which 3/4 chateaux you would recommend. I like the look of Montrose, Palmer and Margaux. What do you think?

That’s it – I’ve just removed the name of the sender, no more. I left it a few weeks as I have no interest in giving out free wine investment advice (for a variety of reasons), but then rediscovered the email when doing a little electronic filing, and sent this reply:

Reading your question, I think you need to spend a lot more time considering your plan, and ask yourself a few more questions. For instance:

- where are you going to find cases of the chateaux you mentioned for less than £2000?
- who is going to sell you Margaux, no strings attached?
- where are you going to keep these wines – do you have a bonded account?
- what are the storage charges?
- which vintages are you looking at?
- where is the wine market now – is there room for continued growth, or is it a bubble?
- is your plan quick return or long-term gain?
- what is the planned return?
- have you factored in storage costs?
- what does Parker say about the wines? Is there room for upscoring?
- is the quality of the vintage considered sufficient to make upscoring likely?
- is it a recent vintage Parker may have “over-scored”? This makes downscoring rather likely.

Unless you have answers to all of these questions now, I would steer clear of trying your hand at wine investment.

What is up for debate though is perhaps not my reply (although feel free to comment) but the question in the first place. I have seen it written that a sign of a bubble market is when “the man on the street” (the “cab-driver” is an alternative source) starts talking about investing. Is this a sign of a Bordeaux bubble? If it is, does it mean the bubble will burst soon?

11 Responses to “Wine Investment: "What do you think?"”

  1. I’ve generally found the idea of “wine investment” very odd. I buy it to drink it, its far more enjoyable to imagine what a bottle will taste like in 5 or 10 years than hoping what it will be worth. If people wish to spend thier money in the hopes that they’ll make some cash 10 years down the line then fair enough.
    However for me that mentality misses the whole reason why wine is made in the first place, to drink; not to hoarde like some miser Scrooge counting his pennies.
    If the value of my wine is the same in 10 years as it is now, well so what; as long as it tastes good and I get to share it with my better half.

    Rick

  2. Rick, I agree wholeheartedly with your sentiments. Wine is for drinking, and wine investment sadly pushes many great bottles out of the financial reach of many.

    Nevertheless fine wine investment exists, and whereas it used to be an almost charming side effect of cellaring wine which benefitted wine drinkers (who could sell a few mature bottles, or even a case bought on the one-to-drink, one-to-sell basis, thereby very nicely financing their cellar) these days it is increasingly seen as an important aspect of “portfolio diversification”, which I guess means something new to invest in using all the loot that you don’t have tied up in property, stocks, shares, gold, bundles of foreign currencies in plastic bags, dodgy third-world mining ventures and so on.

    Even at this point it still tends to be the remit of “interested” people, in this case dedicated investors rather than dedicated drinkers. But when average punters with just a couple of grand to spare want to “invest” then we have gone beyond these groups. Is that a sign of a bubble? I have heard it said that is the case.

    In which case bubbles can burst, as in the classic car investment market in the past. This would be of interest to you Rick, as prices currently beyond your reach (and mine!) would collapse. We could fill our cellars with wines for drinking, rather than investing.

  3. Well,
    I totally agree with both of you two. One thing I would like to add. Chris, speaking of the bubble, that’s something I have been thinking about the last 6 months. Especially with the lafite-carruades-duhart story and also with 09 primeur prices that bacame crazier and crazier. Unfortunately, some of my wine friends followed these crazy prices, because they just wanted that chateau, or Parker gave it a 95+ score, or even as an invest. So not only “investors” have fallen into the Bordeaux trap…

    Personally, I spent 50% less on the 09 primeurs compared to the 08 primeurs. Hereby also replacing top chateaus in 08 for “still good value for money” chateaus in 09.

    Another sad but logical thing is that together with the 09 primeurs also the prices of older, fairly prized vintages went up. So let’s just wait till the bubble bursts so we can fill our cellars. But from who??? The person who sent you the email and stocked his bottles in his kitchen, garage, ceiling????

    Lars

  4. Thanks Lars for those comments. You’re right to cast doubt on the provenance of wines in the secondary market, but this has always been the case. If the bubble does burst (and I’m not sure that it will personally….not sure that it is a bubble at all) there will be plenty of wines on the market with good provenance to choose from. What about all the investment funds that will have to liquidate their stock, no doubt all professionally stored? Rather like the Swedish claret parcels Majestic (UK retailer) had 8-10 years ago – I’m still enjoying many 1995 and 1996 clarets from those special parcels, all of which were clearly well looked after before they cam onto the UK market.

  5. I can see your point regarding the speculators driving the top wine prices beyond our reach. I’d love to have a case of Mouton or Margaux in my celler but thats clearly never going to happen.
    A more realistic adjustment in wine prices would benefit everybody, even the producers I would suggest.
    The ludicrous part of wine speculation is that some daft muppet with more money than sense is willing to pay £3000 for a bottle of Petrus. If this person didn’t exist, then wine speculation wouldn’t exist.

    Rick

  6. That’s true Rick. To produce a return on a case of wine sold en primeur for thousands of dollars/pounds/euros, there has to be someone down the line willing to spend big bucks to eventually take the wine out of circulation.

    This works at the moment because wines like Mouton, Palmer or Lafite from 1945, 1961 and 1982 are sufficiently rare and prized to sustain very high prices. But will this work in 20 years time with 2009 Pontet Canet or Cos d’Estournel?

  7. I only bought one case of La Tour Carnet 2009 en primeur (was cheaper than their current prices for the 2005/2006 vintage) so OK to buy, but most other prices were just crazy, I was intending to buy Pontet Canet and Montrose, but that was just out of the question after I saw the release prices, unfortunately many still bought this wines (including wine-friends of me), leading to a sold out in Belgium after a couple of days, giving the indication that the price-setting was OK.

    The price evolution for Carruades de Lafite is just more than crazy : I bought two bottles 2004 3years ago (17 euro/bottle) and sold them a year ago for 80 euro/bottle euro (really not my habit to sell wine!) and if I would have waited till now I would have earned 150/200 euro for a bottle, and all this for a wine that barely will reach a 90 notation (sorry Chris for the other notation).

    I’m hoping that the bubble will burst but I doubt it, there is however a sign that the stores are having difficulties in selling their stock : a big store in Belgium gives a big Bordeaux tasting with the proprietairs present, the main tasting vintage will be 2007, I will go to have a taste ofc but buying at those prices is not an option

  8. Hi Kris

    It is so difficult to know what is happening with the pricy 2009s. The chateaux say “sold-out” but what does that mean? How much was intentioally kept back – 10%? 50%? Sold out to the Bordeaux place or to merchants or end-consumers? Where is the stock now? It’s interesting to hear your tale of slow-moving stock considering Bordeaux is supposed to be “sold-out”.

  9. I heard some rumours that most châteaux only released a very tiny amount of the production into the en primeur market, trying to create a feeling of scarcity and so pushing the prices

  10. I did some reading concerning the Bordeaux 2010 vintage : excellent quality and low yields so most likely sold even more expensively than the 2009 vintage : I won’t be buying any for sure if the rumours concerning the price-setting are correct

    but who will still want to buy the overpriced 2007, knowing that the vintages before and after were much better, and I’m quite sure they still have a lot of unsold 2007 in their stocks

  11. Hi Kris

    I think it would be very sensible for a chateau to help maintain buoyant opening prices by a measured release of stock. Whether it is true that any chateaux held back more stock than usual I do not know, but there are many different definitions of “sold out” in Bordeaux.

    Yes 2010 looks promising but we must wait and see how the wines taste. It’s another good vintage perhaps….which makes 2007 look like the ugly sister. But what to the chateaux care….you can be sure they didn’t hold back any 2007s, the négociants will have taken those off their hands for sure…or risk losing subsequent allocations.

    Cheers

    Chris