Cautionary tales for investors in top wine vintages

WITH STOCK MARKETS CONVULSING, there has been a lot of speculation in and about fine wine, with some analysts suggesting it is no longer a commodity, but virtually an alternative currency. There are even stories in the London trade of nervous collectors selling out earlier this year, but coming back into the market after realizing that more conventional investments haven’t performed as well as wine. Anyone who purchased the very top 2005 vintage Bordeaux when they were released en primeur two years ago has made somewhere between two to three times his investment.

But those sort of returns come only once every decade or so. Anyone who sank money into the 2004 or the 2006 vintage would be nowhere near that far ahead. Also, there will not be such quick returns if you come into the 2005 Bordeaux market today. With the recent turmoil in the global stock markets, it’s best to cherry-pick from the earlier vintages, such as 2000.

The lesson to be learned is that in the short- to medium-term, timing is all.

Another popular theory was that wine guru Robert Parker’s point scores were the only thing that mattered and the best wines to get were the “garage wines” – those made in miniscule numbers and hailed by Parker because of their intensity of flavor and aftertaste.

However, these types of wines have actually fallen in price since the great 2000 vintage and investors have taken a hit. Other Parker fruit bombs such as Château Pavie 2000 may have been given 100 points, but they are still only one third of the top scoring First Growth Clarets from the same vintage.

Lesson: don’t forget that top scores are important, but only if they are held by old favorites that are sought across the globe.

Still on the question of 100 point scores, it might seem sensible to stick to those wines and ignore the rest. This would not be the best way to make high returns. For example, Château Mouton Rothschild 1986 (100 points) is around the same price as Mouton Rothschild 2000 (97), yet you would assume it should be nearly half as expensive again, given its top score and that it is nearly 15 years more mature. The problem here is not the score but the vintage. (Mouton Rothschild 1982 is also 100 points and is far more expensive than either of these two.) When it comes to 1975, 1986, 1996 and 1998, outstanding wines were made in one or two but not all three of the Bordeaux regions, which leads to considerable confusion.

Yes, they are legendary vintages, but only for the left bank in 1986 and 1996, while 1975 and 1998 were only great for right bank and some Graves wines. It is far safer to invest in wines where everything is great, such as 1982, 1990, 2000 and 2005, as they are vintages that even non-specialists know about, and that is vital for long-term investment. You must also remember that if you just stick with 100-point wines, you will take a bath if they are downgraded, and it does happen.

There is also an assumption that the only wines worth investing in are Bordeaux as they are the ones that get the majority of publicity and their brands are universally known, plus there is a fair amount of them about. (Most first growths make between 15,000 to 20,000 cases annually). But again, this would be a mistake. One friend was boasting recently that he beat all the charts for price increases over Bordeaux by merely sticking to great Burgundy and nothing else. Those fabled wines of Domaine Romanée-Conti, Domaine Comte de Vogüé and Domaine Leroy may not be well known in Asia just yet, but oenophiles have long sought them out. A case of 1990 Domaine Romanée-Conti was sold privately to a Chinese buyer recently for around HK$2 million. All of the very top Burgundies (mainly red but also some whites) from 2005 have performed amazingly well, but because they were produced in tiny amounts, getting hold of them is not easy.

Another category that has shown brilliant returns is vintage Champagne, especially Krug, Cristal and Salon from the 1990 and 1996 vintages.
There is good money to be made in both Champagne and Burgundy but you really need specialist knowledge and patience if you are trying to acquire even 10 cases of the top ones. Corney & Barrow, the UK agents for Domaine Romanée-Conti, strictly allocate these wines to their best customers and, even then, only give a bottle each of Romanée-Conti itself or the fabled white Montrachet.

These are also blue chip investments, but you must be cautious when you stray too far from Bordeaux’s Gironde River. Rhone wines went up stratospherically in the late 1990s but have levelled off since. It would be best to consider them as great buys for pleasure rather than profit.

And finally, a lot of new investors look at the prices of top wines from the greatest vintages and then compare with them lesser vintages of the same wines, which can be as little as 10 percent of the top ones. This is the case with Château La Mission Haut-Brion. The 2004 vintage is around $9,000 whereas the 2005 vintage is $90,000. A similar discrepancy is found with Château L’Eglise-Clinet for the same vintages, whereas the scoring difference for both is seven points.
The problem with that equation is that the lesser vintages will never increase at the same rate as the great ones, no matter how much the price discrepancy. Unless you can place seven or eight zeroes after the figure for your assets, stick to the great wines for investment but snap up the cheaper ones for pleasure. Happy investing – and drinking.