ENTHUSIAST'S CORNER June 2003
The Smart Money's on Napa and Bordeaux
The Smart Money's on Napa and Bordeaux
These two fabled wine regions are the places to start for investment-grade wines worthy of your cellar.
Investing in wine is a tricky business. It's not for the faint of heart or the ill-informed. During the stock market boom of the mid-90s, some Masters of the Universe started speculating in wine—they were buying wine futures with a Wall Street trader's mentality. Even before the dot-com bubble burst, however, many of these people took a proverbial bath: unaware that investing in wine involves procedures and expertise quite different from stocks, they discovered that they didn't know how (when, where, to whom) to sell it.
Those days of rampant speculation and huge profits are over, but the basic principles of investing in wine haven't really changed. To get in on the ground floor, you buy wine futures, or en primeur, while the wine is still in barrels or shortly after harvest. If you buy small amounts for your own use, you will be assured of having the wines you really enjoy, and will save a great deal of money, since the en primeur price is often lower than the price of the wine on release. But if you invest larger amounts, with the intention of reaping a profit, you would be well advised to temper your expectations.
During the stock market boom of the 90s, it wasn't uncommon for people to realize profits 30 to 40 times what they had invested. Wine has never reached those numbers. The best return you can hope for with wine is a factor of 10 or 15. Even that is rare and involves consulting experts to arrange the sale—it's not something that can be competently handled online or with a few phone calls. But whether for profit or enjoyment, any risk involved can be minimized if you restrict your investments to Bordeaux and Napa Valley.
Bordeaux is the equivalent of a blue chip, while Napa Valley wine is more volatile. Bordeaux wines in a good vintage will always appreciate. According to European Editor Roger Voss, Chateau Pétrus 2000 was a brilliant investment. The en primeur price for the 2000 was $833 per bottle; today the current delivered price is more than $1,500.
Over the last decade top California wines—we're talking the cult Cabernets of Napa Valley—have seen tremendous gains, sometimes going up 15 or 20 times over a 10-year period. The 1992 vintage of Bryant was released at $22 and is now fetching $300 at auction. Experienced wine collectors—those in the game for the long term—have doubts whether this boom will be sustained. And the production of many of these top Napa wines is so small that people on the lists for Screaming Eagle and Harlan were buying it and trading it for other wine, rather than trying to reap a financial gain.
So how do you get inside information on this market? For Bordeaux wines you can be assured that if wine critics ballyhoo a certain vintage the future track of the 1st growth wines from this vintage will be positive. Positive reviews of a Napa Cab can presage a similar boomlet. But of course everyone has access to that information at the same time. Are there other ways?
Of course. As a public service to potential wine investors, we present the new faces of Napa and Bordeaux. This month, Roger Voss profiles up-and-coming vintners of Bordeaux. And Jeff Morgan puts the spotlight on a quintet of Napa Valley winemakers—the men and women behind the cult bottles of tomorrow.
Most of these investment-grade wines are Cabernet-based. Their maturation potential is great but only when they are given the proper care in the right environment. And no serious investor would think to store investment-grade wines in a closet or in cardboard boxes near the furnace. In this issue, Karen Berman takes you on a tour of some collectors' cellars and gives us a soup-to-nuts approach of how to create a beautiful and safe home for your future cache of first-growth Bordeaux and Napa Valley cult wines.
Investing in wine may not have the staggering profit potential of your dreams—but then, in this market, what does? And the upside to investing in wine is one that any true wine lover can relate to: If things don't pan out as you hoped, you can always pull a cork and enjoy a glass of your delicious investment to drown your sorrows.