Fancy a drink? China does. Purchasing (or not) first-growth claret

Wine seems to me one of the most amazing things in the world. You let grapes ferment, and you get this huge variety of different, wonderful, delicious liquids. Everything from a rich, dark Aussie Shiraz to a spicy, buttery, fruity Gewürztraminer (my favourite) or an unctuous, sweet yet invigorating Canadian ice-wine... just amazing.

I’ve been a wine collector / investor for some years, although my wife would challenge the “investor” bit on the basis that I haven’t to date actually sold a bottle. But I will, probably soon. One particular  case, bought to celebrate my daughter’s birth in 1990 has proved to be the single best investment I’ve ever made, almost but not quite wiping out my losses on Rok and Southern Cross shares! It’s tripled in value in the last 2 years and needs to be sold really. (Note to burglars - it's not stored at home...!)

And over the years, we’ve grown less and less keen on vintage French wine – but most of my historical purchases have been from Bordeaux and the Rhone.  Hence I think some wider selling is needed – it seems to me that there are amazing wines now from Chile and Argentina for instance, in the £10 a bottle range, that are just much more enjoyable than a £20+ French wine.

But I have still been buying a few cases of Claret in good years, with a view to special events and / or maybe selling on. I do that through the Wine Society, simply one of the best institutions of any kind that I’ve ever been associated with. (It’s a Co-operative and if you like wine, do take a look at it here). Anyway, they sent me their list of 2010 Clarets “en primeur” last week. This is wine that hasn’t even been bottled yet – you buy it now but it won’t be shipped to the UK till 2013.

So should I buy / invest? The prices look steep to say the least. I started with the first growths (the very top wines).

Chateau Latour - £3100. OK, that didn’t seem as bad as I thought, then I realised, it’s sold these days in half cases (6 bottles). £3000 for 6 bottles... wow.  Then I looked more carefully.

It’s not a half case. It’s being sold in units of 3 bottles.

That’s £3100 for 3 bottles (plus you’ll have to pay VAT and duty on shipping, which will add another £600+). So over £1200 a bottle.

This is all China’s fault. Claret has become a huge status symbol there; buying a friend or business contact a bottle of top claret is seen as the right thing to do. And unlike collectors in the US and Europe, who if anything tend to keep vintages for too long before drinking, the Chinese drink it now.  Sometimes mixed with Coke.  So stocks of good vintages are declining, pushing prices higher, which makes the status thing even stronger... etc.

I can’t bring myself to spend this sort of money, and I don’t think at that price it’s a great investment opportunity. I might buy a couple of 2nd or 3rd growths at a mere £500 for a half case – if you’re lucky and choose one that proves to be a star, you might just make some money. And I can just about contemplate drinking a £100 a bottle wine on a very special occasion if the investment aspect doesn’t work out. That is of course the great thing about buying wine – unlike shares, if the investment doesn’t work out, you can have fun drinking it. But paying £1000+ for a bottle? The procurement value for money thing just kicks in and says “NO”!

All of this though has some wider implications for all of us. (Now for the serious procurement bit). It’s a great example of how the rise of China is changing the dynamics of many markets, and also of the difficulty in predicting the future price trends of all sorts of commodities. Will I be cursing for not investing in the 2010 first growths? Or thanking my lucky stars I stayed well away from the £1200 bottle...? Perhaps we'll do an annual update.

(And do note of course that none of this constitutes investment advice - for or against, in any manner whatsoever)!

Voices (6)

  1. martin pruszynski:

    i’d consider looking again at the wine society, you’d think as a co-op their prices would be better, but they’re sometimes very expensive, compare their prices of yquem 01 to those of farr vintners or berry brothers neither of whom are known for being cheap.

  2. Jason Busch:

    One last thing to add … the best alternative asset classes are always “liquid” … 🙂

  3. Jason Busch:

    D-

    My father sold his original Fender Jazz bass from the 60s a number of years back … it’s the one I played growing up in high-school jazz band. I think the thing would now be worth upwards of $5K or more … I remember as a kid thinking that new basses sounded and looked so much better, why the heck was I cursed with this old thing.

    Peter, love the wine story. I think we both classify ourselves as “investors” in the same manner and our wives would dispute this classification.

    1. The Guitar Man:

      Jason, I bought a pre-CBS 1962 White Stratocaster for a mere £75 in the mid 70s used it in a C&W band for a short time and was very pleased with myself when I sold it for £150 to buy my first car. Worth about £12,000 now!

  4. The Guitar Man:

    Peter,

    Some of my very best friends (yourself included, I hope) are wine connoisseurs and collectors. I prefer to describe myself (as Dean Martin once said…) as “little old wine drinker me”. Thus although I feel I can differentiate between a good, average and indifferent wine, I’m far from an expert and could not trust myself for a moment in an investment of this magnitude! A friend once bought me a rather ornate and attractive ‘wine bottle stopper’ following an overseas visit that I could not, for the life of me, find a sensible use for. My mantra always being that if you opened a bottle of wine then you must consume it (normally within 30 minutes or so!).

    You make some fine points about investments and your reflection on your share portfolio makes prompts some thoughts about what might now constitute a good and long term investment opportunity. The days of investment in stamps, art and possibly property need to be examined in the modern era and it seems with due consideration to wine and China!

    As a part time ‘Muso’, I was interested when a friend told me that, upon expert advice, he was moving the future of his pension plan into the acquisition of vintage and collectable guitars. Wow, how great is that? Apparently, the right ones (particularly with provenance) are rocketing in price to say nothing of the fun in the sourcing (note a procurement reference there!). As you’ll know, I own a number of guitars of moderate value but far from ‘vintage’. The downside being (like your wine story) that you’re not allowed to play them but lock them away. How cruel!

    If all else fails, one day we can drink fine wine and pluck away on Jimmy Page’s Les Paul used in the recording of Led Zeppelin 2. Sounds like a good way for retired Commercial Directors to spend their evenings. Anyone else like to join us?

    D

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