Should wine be thought of as an investment? With fine wine prices pushed ever higher by today's investors, respected wine author Jancis Robinson MW and Gary Boom, chairman of fine wine traders Bordeaux Index, air their advice.
Here’s what advice they had to say…
JANCIS ROBINSON MW
It is a terrible shame that the fine wine world has been invaded by people who now treat this wonderful product purely as an investment commodity. One of the obvious side effects of this is the insidious way in which discussions about great wines are becoming increasingly dominated by money. So much so, it appears that people are beginning to confuse wine appreciation with financial appreciation. However, there are other more practical reasons for my innate hostility to profiteering and speculation in wine. Most obviously, it has opened the door to a string of fraudulent investment companies who continue to rip off thousands of naïve, trusting investors.
Secondly, great wine used to be relatively inexpensive, particularly when compared with great art. But ever since the investors hijacked the market, there has been a polarisation of prices which, at the top end, has resulted in hyper inflation for the trophy wines. Exquisite bottles that were once accessible to many are now the exclusive luxuries of a tiny, rich elite. To me this is a pity because I want everyone to enjoy wine as much as I do. I also believe it helps to taste the ‘great’ occasionally to put the ‘good’ into perspective.
Thanks to the hugely over-influential points systems, it is also now possible (even easy) for people to invest in wine without knowing anything whatsoever about it. Apart from playing into the hands of fraudsters, this has other harmful repercussions.
It means that the heavily pointed wines become ever more sought after and expensive which, in turn, encourages market-driven producers to try to replicate them. And so you get into a self-perpetuating spiral of higher prices, together with a uniform, homogenised style based on the scores of a handful of powerful critics. I don’t blame people like Robert Parker for this state of affairs, but I regret the outcome. I also regret the widely held notion that one can’t afford to drink something because it has become so extraordinarily expensive. Edmund Penning-Rowsell once told me that, ‘you must never think what a wine is worth when you drink it.’ However, few people seem to apply this maxim and in the main, the recent price increases appear to have caused little but anguish and envy. I have even heard people say that they don’t know anyone worth pulling corks for. But to me, wine is all about sharing and enjoying. It should not be about cold, hard price and profit. Maybe, I’m too much of a romantic, but surely this sort of speculation is not what wine is for.
Firstly, I agree with many of the points Jancis has made. I also agree that her position is a romantic one. For the fact is, whether we like it or not, certain wines are regarded as investments. That is the reality of the situation and it isn’t going to change. Just look at the economics. Fine wine has a finite supply but the demand, from the world’s super-rich, is continuing to grow. Inevitably, prices will continue to rise and under such conditions, a large number of people will continue to invest and speculate, particularly when the tax advantages on wines make it so opportune. But who exactly is responsible for the current price hikes?
I would argue that the new investor is not entirely to blame because wine investment is nothing new. In fact, I would attach more blame to traditional collectors – people who bought more wine than they could drink, selling off surplus stock (at a large profit) to fund the purchase of newer vintages. In so doing, they effectively forced up the price and set the investment ball rolling. Such people may not have thought of this as wine investment but that is exactly what they were (and are) doing. Similarly, I would point the finger at the en primeur system which actively encourages speculation. Consumers would not buy wines en primeur unless they felt that prices would rise, making the purchase attractive. Another major reason for speculation is the erratic pricing policy of the chateaux. First-growth prices for the 2000 vintage were released with an average increase of 71%. This undoubtedly has a big effect on consumers’ attitudes when they see large price increases as being the norm rather than the exception.
At the same time, I don’t believe wine investment and rapid price movement has been all bad. The international growth of the wine market has brought in new drinkers and new money. Yes, this has raised prices. But the accrued profits have also led to greater reinvestment in quality by serious producers worldwide. One result is that top-class Bordeaux is now delivering better wine than at any time in its history. This improvement in profitability and quality has also encouraged other, like-minded producers to raise their game all around the world. I believe we are all drinking better wine because of it. I would also argue that no one has done more to raise the quality of wine in Bordeaux than Robert Parker. And equally, no one has done more to open up the fine-wine market to an international audience. In the ‘good-old’ days, pre-Parker, wines like Pétrus were a well-kept secret among the cognoscenti. Now it is an internationally recognised luxury item that has found its market level. Of course, it would be fantastic to drink Pétrus at £400 a case, but those days are long gone. And there is no way they’re ever coming back.