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Wine investment

JOHN STIMPFIG continues his wine investment series with a look at the most reliable wines to invest in.

Not long ago, it was easy to pick a ‘banker’ wine investment. All you had to do was go for a great vintage and head straight for the Médoc’s top cru classé wines with maybe a detour for the best of Pomerol and St-Emilion. There were maybe no more than two dozen châteaux to choose from and maybe three great vintages a decade. Nowadays, of course, it’s a little more complicated. Wines are harder to obtain, quality has improved across the board, prices are higher and there are a lot more wines and regions to consider beyond traditional Bordeaux. Now there are ‘garagiste’ wines, Cult Californians, Super Tuscans, classic Burgundies, New Wave Spanish and Australian Icons. Suddenly, investing in the right wine isn’t so simple. Bordeaux still remains the hub and apex of the investment market. In which case no serious wine portfolio should be without a strong representation of the Left Bank first growths from great vintages. Even at today’s high prices the returns on these most sought-after wines have been consistently solid, sometimes spectacular.

One rung down, the super seconds have followed in their slipstream and prices have risen accordingly. Wines like Cos d’Estournel, the two Pichons, Léoville-Barton and Léoville-las-Cases don’t have the cachet of the premiers crus but their quality and price has put them firmly in the investment category. However, some second growths such as Rauzan-Gassies have failed to make the grade. You need to follow the form. Equally, other châteaux in the lower reaches of the 1855 classification have punched above their weight over a consistent period. In particular, the third-growth château Palmer and the fifth-growth Lynch-Bages have been strong market performers. In recent years, much of the limelight in Bordeaux has shone on the Right-Bank appellations of Pomerol and St-Emilion. Led by the more established stars such as Pétrus, Cheval Blanc and Lafleur, money has poured into Right-Bank properties, particularly in the 1990s. One of the latest fashion trends has been the growth of so-called ‘micro-crus’ or ‘garagiste wines’, which hit the headlines during the 1990s.

But many of these wines have lost their speculative sheen. ‘Cult’ wines like La Mondotte and Valandraud appear to be too risky for investors. Some commentators are unconvinced of the wines’ long-term ageability and prices have tended to fluctuate wildly. It is too soon to tell whether they will eventually make it as long-term investments. The exception is Le Pin. Although its price has been volatile it has proved a high-quality performer for nearly two decades and trades at a similar price to Pétrus. Perhaps the strongest up-and-coming investment region beyond Bordeaux is the Rhône. Here, wines have shown exceptional returns in recent years particularly with the 1998 en primeur campaigns from the best of the Côte Rôtie and Châteauneuf-du-Pape. Superb wines such as Jaboulet’s Hermitage La Chapelle and single vineyard wines from Guigal and Chapoutier, as well as Beaucastel and Rayas have tripled in value on the secondary market, underlining their claim as investment wines.

For many investors, Burgundy is an exciting but difficult region to master, requiring knowledge of individual producers and hampered by the lack of volume, particularly compared to Bordeaux. But the top grand-cru wines from domaines such as Romanée-Conti, Leroy and Jayer will rise in value. Many great Burgundies are not traded on the secondary market though, as aficionados buy them to keep. Outside France, Italy represents the most challenging and potentially rewarding growth area for investors in the longer term. For the time being though, despite the fame of the better-known Super Tuscans (Sassicaia and co) and top Barolos (from Gaja and Conterno) and some excellent recent vintages (particularly in Piedmont), Italian wines have not yet achieved fame and fortune in the minds of investors. But things are changing. Christie’s recently held its first all-Italian sale and Robert Parker has come out strongly behind Italy. Nevertheless, it will take time for the market to gather momentum and value. The best wines from Italy are certainly ones to watch out for.

Across the Pond

In the US, the market has been dominated by the rise of the Cult Californians. Although investors do buy wines from other regions, they have bought heavily into wines such as Screaming Eagle, Harlan Estate and Bryant Family. These micro-wines can only be acquired on release through mailing lists and frequently sell at extraordinary auction prices of beyond $1,000 a bottle, although they have yet to establish a track record and their current value could be determined by rarity as much as quality. It remains to be seen what will happen to the prices of these ‘speculative’ wines if the US economy continues to falter.

Australia and Spain are also two countries to consider in the longer term. In its Langton’s Guide, the Australian auction house claims that Australia’s secondary market has grown from a niche market into a recognised category. Last year, it increased its list of ‘Exceptional’ wines from three to seven wines to include Leeuwin Estate alongside Grange and Hill of Grace. Similarly, Robert Parker has recently become increasingly enthusiastic about smaller Australian producers and pronounced that Australian wines have unquestionably come of age. As for Spain, Vega Sicilia has been challenged by wines such as Pingus and L’Ermita. But both of the latter still have to prove their staying power over the long term. As for port, only the principal names such as Noval, Fonseca and Taylors, with great vintages attached, continue to command strong interest from investors, despite renewed US demand. Champagne has even less of a secondary market, especially now with the post- millennium over-supply. Investors should avoid these two sectors.

What makes an investment wine?

An investment wine is one that has the potential to increase in value, year on year by some minimum set return – say 10–12%. For that to happen the wine must have the added value of rarity and quality and come from a highly regarded vintage. In addition, the property must have a proven track record of being consistently in demand over a reasonably long period. Last, but by no means least, any ‘wannabe’ investment wine must now have the blessing of the powerful and influential wine critic Robert Parker. If it doesn’t get a mid-90s score, the wine won’t pass muster as a gilt-edged equity.

Next in the series: Where to get the best wine at the best prices.

John Stimpfig is a contributing editor to Decanter

Top investment tips

  • Before buying a wine, check its Parker rating. The score will invariably affect the price of a wine positively or negatively.
  • The cru classé system is not a perfect guide to investment return or potential.
  • Only buy great vintages for investment purposes.
  • ‘Cult’ wines are questionable long-term investments as their ‘fashionability’ and price tend to fluctuate wildly.
  • Always invest in a portfolio of wines across properties, regions and vintages to spread your risk.
  • Do as much research as you can on the properties you intend to invest in.

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