Wine as an Investment

Just like any investment, wine requires plenty of knowledge, start-up capital, exquisite timing and a little luck. But there are some unique aspects to thinking about wine as an asset. Wine needs special care and storage to retain or increase its value. But it is also the ultimate liquid asset—a liquid that can be shared with very grateful friends.

All investments are risky, but if wine investments are purchased based on their value as a beverage then the wine will have intrinsic value regardless of what happens to the market. The 2005 vintage in Bordeaux is an example of what can go wrong. Great Bordeaux is usually offered for pre-sell purchase about two years after the vintage. The buying decisions and pricing for the 2005 Bordeaux were made in late 2007 and the wines were delivered to restaurants and retailers a few months later. Guess how that worked out. Yep, the wine prices crashed and have been very slow to recover. Even those who were able to get the greatest wines at what is called first tranche, buying 2005 or 2006 vintage Bordeaux at the top of the market did not work out well for most investors. With enough time the values of those two vintages may come back, but the markets are now refocused on the 2009 or 2010 vintages or other future great vintages of the Bordeaux region.

If you purchase wines for your palate that are of investment grade, you win even when the market goes against you. The ultimate wine investment goal should be buying a case on release and then selling one bottle a few years later to redeem the entire purchase. If you could do that with every wine in your cellar, you would be a vinous billionaire.

Just like any investment there are risks when speculating on wine. One risk that has been in the news recently is wine fraud. Consider Rudy Kurniawan. He bought and sold the “very best” wines for years, but is facing a lengthy prison sentence for fraud. He was selling wines to many auction houses that were “created” with fake labels, but were in fact bottled with cheap wine.

Another risk is poor storage. A temperature and humidity controlled cellar is vital, don’t invest in wine without one. Also don’t buy investment grade wines unless their “provenance” is reliable. This is a term used to cover the history of the individual bottles—where they were stored, how many people have owned them and other details. Very old wines are sometimes re-corked by the winery, this would be part of the provenance as well.

The capital required to purchase the greatest investment wines is staggering. A bottle of Romanée-Conti or Pétrus is easily several thousand dollars each depending on the vintage. And while the payoff can also be staggering, so can the potential loses.

Any serious collectible wine is susceptible to fraud or other devaluation. I tend to stick to lesser wines—bottles that will gain value, but won’t be equivalent to a down payment on a luxury car. The old adage about buying low and selling high also applies. I’ve bought plenty of investment grade wines at auction and my best successes have come from lesser-known wine regions. For instance, I was buying Burgundy at great value while Napa Valley and Bordeaux were hot. Another advantage of speculating in less-pricey wines is that wonderful temptation to open a bottle every few years and share it with friends.

Chris’s Investment Tips
Along with choosing the right vintage and producer, choosing the region that will be the next big thing is very important.

Hot Investment Regions
Rhône Valley

Cooing Investment Regions

Scary expensive collectibles (approximate values per bottle):
2009 Domaine Romanée Conti Romanée Conti Grand Cru, Burgundy: $13,000
1947 Château Cheval Blanc, St-Emilion, Bordeaux: $8,000
1992 Screaming Eagle, Napa Valley: $7,000
2000 Château Pétrus, Pomerol, Bordeaux: $4,500
2000 Château Latour, Pauillac, Bordeaux: $3,000