Are wines a good investment?


by Werner Feldner

Every beginning is difficult

The subject of wine has not only occupied the connoisseurs of this drink for years. No, rather and increasingly consumers and traders who view wine as an object of speculation. For a reason. Wine cannot be increased. What I mean are cult wines from certain top vintages, which are becoming less and less every day and of course cannot be reproduced like apple juice. Many of these wines still find their way through the throat of a wine drinker, but to the chagrin of producers, more and more bottles are finding their way into the cellars of collectors and investors. Wine has been made for centuries and has been traded for decades with profit and loss - almost like on the stock exchange. A real boom has emerged in the age of the Internet. The subject of wine is just as much a part of general education today as knowing who is a soccer world champion. The latter is not so important for wine investors, because for wine freaks the real world champions are in Bordeaux, Burgundy or other wine regions. The many growing areas and the even larger number of producers in each region make the idea of ​​investing in wine an almost insurmountable hurdle. So where do you start?

To the right of the Gironde, so-called blue chip investment wines are produced (which you can also drink!)

 

Why wine

A friend of mine bought a small yacht, invested a lot of love and time into improving it, and 2 years later sold it for less than half. When you buy a car - even if it's a luxury car - it's worth a lot less by the time you leave the dealership. Have you tried to sell the gold coin you bought yesterday today? You will lose money. And wine? Here, too, not all that glitters is gold. Nevertheless, there are a handful of wines that more or less become more expensive by themselves. Without any risk. But with a lot of effort. Unfortunately, you don't get these wines from the bank like shares or gold ducats. That is why the procurement of profitable cult wines is the main problem. Wine as an investment, however, has been much more successful than stocks for more than 50 years with the necessary knowledge. The cultivation areas of these cult drinks have been the same for about 200 years. And so there are also limits to production. At the same time, however, the demand is growing. And as every layperson knows, supply and demand still determine the price of a commodity. So also with wine! The graphic below shows the increase in value of a blue chip * wine after delivery by the Negociants (French: dealer). Mouton Rothschild 2000 received 97 + / 100 Parker and is certainly not the "top" investment wine - like Lafite Rothschild 2000 or Petrus 1990 - and yet the price has increased by 175.91% in the last 6 years. The fact that this wine is just beginning to be ready to drink will enable a further price increase.

 

* from the stock market sector: shares with a high market capitalization blue chips are issued exclusively by companies that have a good reputation around the world and convince with their high earnings.

 

Which wine?

As I mentioned at the beginning, there are a handful of wines that are suitable for investment. In any case, it should be said in advance that there is not a single wine that brings the big profit overnight. Not even the blue chips among wines. But more on that later. There are various criteria that make a wine an investment good. These are:

  1. Name and classification: A few top wineries from Bordeaux, Romanée Conti from Burgundy and, for the small stock exchange, also cult wines from Italy. I would not buy all other countries as investment wines. The reasoning follows in the section. Buy and Sell.
  2. Reviews: Only wines with 96-100 points awarded by the best critics, especially Robert Parker, are suitable as investment wines. With a few exceptions, blue chips have 99/100 or 100/100 points. Not to be underestimated in German-speaking countries are Rene Gabriel's ratings. Its 20/20 point system is not very popular, but it is appreciated because it hits European tastes with its ratings more than its American counterparts.
  3. Shelf life: The decisive factor for investors is how long a wine can be kept in the bottle, i.e. how long it is ready to be enjoyed. Nobody would invest long-term in a wine that has a short lifespan. That is why the Bordelais is the first address! Even 100-year-old wines from this area were still considered to be beautifully drinkable.
  4. Vintage: a key factor! Even if many authors see it differently, there are only a few years I would recommend to date. From Bordeaux the vintages 1982, 1989, 1990, 2000, 2003 and 2005, as well as from Burgundy (red wines) 1985, 1990, 1996, 1999, 2003 and 2005. I would not recommend previous century vintages any more. Simply because it is easier and safer (!) To buy 3 bottles of Petrus 2005 than just 1 bottle of Petrus 1961 for the same price. The best wine of the millennium 1961 is of little use if you can hardly buy one of these cult wines. Or - as one often reads - acquires a forgery. The real superstars of these vintages are in a "steady relationship" anyway!
  5. Cult and tradition: 2 elementary decision-making aids. Would you invest your money in an unknown wine because it received 100 points from Parker? Hardly, except for the candlelight dinner on the weekend. Every investment wine also needs a certain tradition! The name is decisive in the subsequent sale. This is not achieved with an evaluation but through decades of top quality.

Blue chips in the OHK

Buy and Sell

You only notice how important it is to buy the right wines when you want to sell them again. The internet has created a secondary market for wines that didn't exist 10-15 years ago. Auction houses such as the globally important Christies and Sotheby’s, but also eBay, Koppe & Partner, MWC or Wermuth, Steinfels in Switzerland sell wines for several million euros every year. Nevertheless, the bottom line can result in a minus if you bet on the wrong "horse". Auction fees, cellar furnishings, storage and other ancillary costs can quickly dwindle a good return. The minimum investment period for cult wines should be 5 - 10 years. Then there is a nice plus with the right wines, as also confirmed by experts such as Jan-Erik Paulson (RareWine) or Michael Broadbent (long-standing expert and consultant at Sotheby's). Why 5 - 10 years? Because that is the approximate time it takes for the top wines to be ready to drink for the first time. Then the demand for such wines increases, and with every bottle drunk so does the price. Where to shop The best thing is to go directly to a dealer, as the investment wines are not available from the farm! Top priority: Never buy blue chips on eBay, unless a dealer offers original wooden boxes (OHK) with proof of origin via this platform. In general, you should try to buy and store investment wines only in OHKs. When reselling you will find that 12 bottles in the OHK bring a lot more than 12 individual bottles. It is the same with large bottles. A Petrus 1990 in the Magnum (1.5l) costs around 7,000 euros. The same amount in the normal bottle, i.e. 2x 0.75l, costs around 6000 euros. But good money can also be made in the short term with less expensive wines. Who would have thought that a bottle of Masseto 2001 would increase its value by more than 200% within 5 years! Whereas in 2003 the wine cost “only” 150 euros, today you have to pay more than 500 euros at the retailer. That the 100 points for this wine do not come from Parker (98/100), but from WineSpectator, should only be mentioned in passing. So with a lot of patience and constant observation of the market, nice returns can also be achieved away from the Bordeaux grands. However, to believe that buying certain wines and selling them again after 10 years would make big money would be too easy. More on that later. In my opinion, wines from Italy, Spain or the New World are not good investments. But what about cult wines like Sassicaia, Solaia, Vega Sicilia, Grange and what they are all called? Certainly not in the long term! With very few exceptions, Italian wines have one major disadvantage: they are not long-lived enough. Buy older vintages and try to sell them at a profit in 10 years. That is almost impossible for those still available. Another point is the rather rare 98-100 points for cult wines with a long tradition. The only Sassicaia that ever received this number of points was the 1985 with 100/100. There are tons of luxury wines in the New World. For example, Screaming Eagle from Napa Valley is more expensive than most Petrus. Nevertheless, the demand is only very high in the USA, but the production with approx. 600 boxes is very small. Penfolds' Grange is an exception in the New World, but if you watch the growth in value over the past 6 years, you would have made more money with a normal savings account.

 

Secure returns with the Premiers Grands Crus Classes


Expensive additional costs!

When making a decision to invest in wine, it is also important to be aware of the additional costs. Cult wines that can be sold at a profit after 10 years need proper storage. There have always been and always will be buyers for blue chip wines. But also the question: "How and where were the wines stored?" Not every house has a cellar with constant temperatures of 10-14 ° C year in and year out. The purchase of an insulated cellar room with special wine air conditioning units, shelves and space for wooden boxes can cost thousands of euros before the first box is stored in it. There are no upper limits. Forget well-intentioned advice about the cool bedroom, the well-ventilated basement or the old refrigerator. In the short term, every wine can withstand a temperature of up to 20 °. Even months if the temperature doesn't fluctuate too much. But anyone who buys wines as an investment good has to ensure that their treasures are stored at a constant 10 ° -12 ° Celsius and vibration-free, rarely get light (no problem with OHKs) and have a relative humidity of 65-85%. Once you have finally created the conditions and stowed away the longed-for “liquid assets”, you have to add the running costs for electricity and maintenance of the cooling units - unless you have bought a house with a basement because of the new investment strategy. If you have now bet on the right wines from Bordeaux or Burgundy, you can lean back and watch the increase in value. Because even in times of greatest crisis, wine is and was less volatile than, for example. Shares. It should also be mentioned that the share of wine investors in Austria is below 1%.

DEVELOPMENT of the BLUE CHIP WINES (12 OHK) in the last 6 years
using the example of the 2000 vintage
(Similar increases in value are forecast for the 2005 vintage)

Wine

approx. subscription
price €

Current ~ market value €

Increase in value
%

Cheval Blanc 2000

4.200.--

11.500.--

+ 174%

Skin Brion 2000

2.400.--

6.600.--

+ 175%

Mouton Rothschild 2000

2.700.--

7.500.--

+ 178%

La Mission Haut Brion 2000

1.500.--

6.000.--

+ 300%

Margaux 2000

2.200.--

9.500.--

+ 332%

Latour 2000

2.500.--

10.000.--

+ 337%

Lafleur 2000

4.900.--

22.000.--

+ 349%

Le pin

8.000.--

36.000.--

+ 350%

Lafite Rothschild 2000

2.600.--

12.000.--

+ 362%

Ausone 2000

4.800.--

30.000.--

+ 525%

Peter 2000

5.000.--

36.000.--

+ 620%

 

More BLUE CHIP WINES:

BORDEAUX

* min. 10 years to the 1st drinking maturity. Parker has assessed very carefully and has announced a complete follow-up tasting in 5-10 years at the earliest due to the great potential of the vintage (WineAdvocate Issue 176).
Romanée Conti - Domaine de
la Romanée Conti (DRC)
1985 (hard to get), 1990,
1998,1999, 2005
1990, 1996, 1999, 2003, 2005
Conditionally recommendable as an investment: Wines from Dugat-Py, Armand Rousseau,
Leflaive, Henri Jayer, Domaine Leroy
Burgundy blue chips are much rarer than Bordeaux wines, since the top producers produce the vanishingly small amount of 500 boxes (12 bottles each). For comparison: A Premier Grand Cru from Bordeaux produces around 14,000 cases!

 

up