By: George Balling
Hard assets have been relatively stable or even growth investments over the last couple of years. It’s not unusual during a high inflation cycle for physical assets to out perform financial ones. In just the last couple of months we have been asked by several folks from neighbors to customers about the potential for wine to be a good investment. I will tell you that for me I’d rather drink wine than hold it as an investment, but as it turns out the answer is fairly lengthy on whether it is a good idea.
As a wine professional I should be the last person to consult for investment advice, but when it comes to wine in that context, I know a little bit and not surprisingly I have an opinion or two. Perhaps, the most sound piece of advice is to not look to wine as an investment unless you have cash you don’t mid losing. It is in the best of circumstances a tricky business and not something to be entered into by wine consumers. We have known several folks who have done well at it, but they are true collectors who over years build up a “portfolio” of the finest collectible wines on the planet.
This is also one of the most important things to know. There are a very few wines that are sought after by the group of very wine savvy investors and collectors who have been able to figure it out. The list of those includes names like Domaine de la Romanée Conti, Harlan Estates, Grace Family Vineyards, as well as some of the first growth Bordeaux, other of the tip top of the Napa Valley wine industry, and the top bottlings from Italy and Spain. No matter how special some of your favorite wines are to you, they are most likely not that special to anyone else. In short, they may be delicious just not a good investment over time.
You should also be prepared to invest quite a lot to make a good return. The best lots that get sold at auction, or change hands between investors are not a bottle here or a bottle there. The most successful wine investors buy these great wines in size, and do so year after year. By buying every year investors are able to create verticals of the collectibles, meaning a 10-year selection of the same wine. Buying in size means groupings of 3, 6, or 12 bottles of each of those yearly releases. Many of the highest end bottlings pursued by collectors are packaged in 3 or 6 pack wood boxes direct from the winery. Having the bottles in the original wood boxes that have never been opened drastically increases their value to potential buyers and can improve your return on the investment.
Here's the rub. Most times you can’t get that many bottles. Using Domaine de la Romanée Conti, or DRC as it is known, as an example, which is the most expensive wine in the world and one of the most sought after by collectors, we receive either 2 or 3 bottles per year! They are sold before they ever make it to the shop to some of our best customers who traffic in that caliber of wine. To invest in those kinds of wines with that level of notoriety and demand takes commitment to build relationships with the winery or retailers to ensure you can get the number of bottles you are seeking each and every release. All the wines that have investment potential are all as equally difficult to come by.
The other requirement to make investment grade wine saleable to collectors is well documented provenance. Provenance is the ability to establish the chain of ownership from the time the wine is bottled until you sell it. The best results will come from wine you have owned from the time they are released by the winery. Hang on to the original receipts to establish the time you purchased the wine. If you purchased the wine from a previous private party owner do your best to get their original receipt and then establish through some documentation that you purchased the wine from them. The last part that is important to document is how the wine has been stored. Establish through photographs that the wine was stored on its side to keep the cork moist and that it was stored in a temperature-controlled environment. While wine you consume on a regular basis is very tolerant of temperatures, collector wines many of which can age for decades need to be laid down in a cool and in some cases humidity-controlled space.
I’ll finish where I started, I recommend against using wine as an investment vehicle. Just buy wine you enjoy drinking and do it for the joy it brings you. If you must invest in wine make sure you know for certain the wines you think are great, that others will feel the same way.