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Alternate Investments: Wine
Most people who love wine have a modest collection of it. They will share recommendations with their friends and possibly read a wine column or two in the Sundays as they try to find the perfect bottle to enjoy with a relaxing meal.
Not your average tipple
The vast majority of wine that is purchased from retailers is drunk within 24 hours, and most people will keep no more than a couple of odd bottles in the kitchen cabinet at any one time.
But there is also a growing trend towards buying and holding wine as an investment. The performance of fine wine prices has attracted growing interest; it no longer seems like just our Friday evening tipple.
Arguably the most enjoyable and cost-effective way to invest in wine is to do it yourself. Like all investment options there is risk involved, but wine offers a unique worse-case scenario; if the value of your portfolio goes down you can still enjoy a few glasses of commiseration per bottle!
Buying wine as an investment is obviously not the same as buying for day-to-day consumption. Most wines are unlikely to appreciate in value over time. But within the spectrum of investible wines there are price points to suit most budgets: a case of Chateau Lafite or Domaine de la Romanée-Conti can cost several thousands of pounds, but a less prestigious wine from the same region will cost a lot less.
Ten steps to starting your wine collection
1. Buy what you like
In the alternative investment markets the potential to appreciate in value is rarely the only criteria. Most successful art collectors buy paintings that they like, and the same is true of wine.
2. Find the cheapest entry point
Between specialist auctions, wine merchants and online vintners there are many potential places to buy, and the same wine can be offered at wildly varying prices from different sources. Check all options, and find the lowest-priced entry point for your investment. Auctions are the 'wholesale' secondary market for fine wine, and generally offer the best value for buyers.
3. Follow fashion
Changing tastes and drinking habits have a big influence on the relative value of individual wines, and wine-growing regions. For example; Port is no longer as popular at the dinner table as it once was, and as a result Port has proven to be a poor investment in recent years compared to other sectors of the wine market.
4. If you don't know, don't guess
Don't invest blind; there are too many potential pitfalls. Get expert advice or do the research yourself - if you are going to take a gamble on a wine, make sure it is an educated gamble.
5. Research the provenance
The history and storage conditions of a wine are important factors in its value - ideally you should be able to trace the provenance of a wine all the way back to the vineyard which produced it. A reputable wine merchant or auctioneer should be able to provide this information, if not, buy elsewhere.
Ten steps to starting your wine collection
6. Store your investment appropriately
Keep your wine in professional, temperature-controlled storage conditions - most of these facilities are happy to accept wines from small investors and collectors. Nothing will wipe out the value of your wine quicker than storing it next to a radiator under the stairs.
7. Track global trends
Most macro shifts in the value of wine can be traced to major changes in demand - wine is a limited commodity, so increased demand will push up prices. For example; recent interest from Chinese buyers has had a significant impact on the value of some of the top Bordeaux and Burgundy wines.
8. Old World rules
Stick to Old World producers (France, Italy, Spain) for more reliable long-term capital growth.
9. Buy from producers that are investing
Identify wine-makers who are investing in production facilities, expansion or larger marketing budgets. If this increased spending is successful, the price of the wines should out-perform others over time as a result.
10. Buy vintages that have time to appreciate in value
Like most investments, it is best to take a long-term approach to allow time for your wines to increase in value. As such you should focus on younger, highly-rated vintages, rather than wines for current drinking.
Wines to consider for an investment portfolio
Chris Hambleton, Consignment Director at BidforWine, shares some specific recommendations for wines that are suited to an investment portfolio:
Red Burgundy is beyond doubt where the smart money has been heading recently, producers like Fourrier, Rousseau, Comte George de Vogue and Dujac are the ones to watch. Expect to pay £50-100 per bottle (£600-1,200 per case) depending on the relative quality of the wine.
Great vintages like 2000, 2005, 2009 and 2010 in Bordeaux will always command higher prices, but ultimately also generate better returns. Wines to look out for in particular are classed-growth clarets like; Pichon Baron, Lynch Bages, Leoville Las Cases and Ducru Beaucaillou. Look to pay from approximately £125 per bottle (£1,500 per case) or higher depending on the wine and the vintage.
Spanish heavy hitters like Finca Dofi, Vega Sicilia and Artadi are all starting to see upward price movements. Expect to pay roughly £50-75 per bottle (£600-900 per case) for a good Spanish investment wine.
The best 'super Tuscan' wines are undervalued relative to their quality; try Solaia (up to £175 per bottle - £2,100 for a case - for an investment vintage), Ornellaia and Sassacaia (up to £100 per bottle - £1,200 per case - for an investment vintage) , as well as the Piemonte wines of Angelo Gaja and Mascarello.
How to enjoy wine
M&S wine and spirits buyer Emma Dawson introduces the first rules of wine-tasting:
1. Get the right glasses
The shape and quality of a glass can really affect the taste of a wine. The fine rim and shape of the glass help emphasise the wine's aroma and direct it to hit your palate to increase the flavour and aroma potential. You don't need the most expensive glasses but as a rule wider, more bulbous glasses work for reds and leaner, more gently sloping glasses work for whites.
Hold the glass at the stem and swirl it gently in an anti-clockwise direction. This helps air enter the glass which forms a chemical reaction to release all the pleasant aromas and flavours. Smell is an important part of taste, so if you don't do this you can miss part of the enjoyment of the wine.
I'm always saying to friends that for wines that don't have sediment you don't really need a decanter. But the process of decanting a wine can help it 'wake up' - particularly fine wines that have been in bottle a long time. What I do instead is just pour that first glass of wine about half an hour before I want to drink it which does the same thing.
How to enjoy wine
This bit can seem pretentious so I'd recommend doing it discreetly! When you taste wine it really helps to pass it around your mouth a bit like a mouthwash. Experts try to breathe in a bit of air at the same time which helps release flavour. The swishing effect means it hits all your different taste buds which recognise varying flavour components.
When you start to enjoy wine you want to remember your favourites and have a way of working out why you like a particular wine or type. So it is worth trying to break down what you can taste and considering what flavours or aromas are present which will help you remember a wine. Think back to your childhood when your flavour memory is most powerful; varying from food to nature.
Wine tasting in the UK
M&S runs regular wine tasting sessions at 50 stores - why not check with your local branch?
And if you fancy visiting an English vineyard, the following have visitor centres:
For more information
- Auctioneer of fine wines. www.dnfa.com
- Online auction site for fine and rare wines. www.bidforwine.com
- Monthly magazine covering the wine market. www.decanter.com
- Fine+Rare Wine:
- Large broker of international fine wines. www.frw.co.uk
- Search engine which lists wines and prices from thousands of merchants around the world. www.wine-searcher.com
- Wine and Spirit Education Trust:
- Courses for those who want improve their knowledge. www.wsetglobal.com
The views expressed here are solely those of the author,
and do not necessarily reflect the views of M&S Bank.