First things first… how does the market work?
What determines the value of a wine? The short answer is Robert Parker Jnr the world’s most powerful wine critic. What he says goes. The US commentator has a history of calling top wines before his peers.
Parker scores wines out of 100. If a vintage tops 96, you can be sure it will soon be in high demand – and its price will shoot through the roof as a result.
Of course, a number of other opinions count, as does the balance of supply and demand.Once a wine is out there to enjoy, its price reacts to drinking habits: every time a bottle is opened, there is one less for the world to enjoy. A Chateau can only produce a finite number of bottles each year, and these cannot be replenished. By way of example, the Chateau Mouton Rothschild made approximately 13,000 cases in 2008.
How do I actually Invest?
Here are four practical steps to climbing onto the wine investing ladder:
1. Choose your chateaux
Once a good brand, always a good brand. Look to pick wines from the most famous Chateaux. This is where you’ll uncover the highest demand and potential for growth.
Chateaux are divided into different tiers. At the top end you have First Growths and Second Growths. Here are the top five First Growth Chateaux (in no particular order):
Lafite Rothschild, Mouton Rothschild, Latour, Margaux and Haut Brion
Now, you may have noticed that thus far we’ve only referenced French reds from the Bordeaux region. There is a simple explanation for this: they are the safest and best investments right now.
Wine investors say you can rely on a Bordeaux wine like no other. Even a relatively bad year for the vineyards in the Aquitaine won’t stop the bottles flying off the shelf – they’ll still be considered of excellent quality.
2. Phone a merchant
The next step is to phone a wine merchant. They will sell you the wine you want to invest in.
You should always deal with an established, reputable merchant. This point cannot be over-emphasised. The reason is that the wine trade is unregulated, making it easy for scam operators to con naïve investors into parting with their money for dodgy bottles of wine.
Marcus Edwards, managing director of one of UK’s leading merchants, Albany Vintners, explains the dangers: ‘It is very important to purchase from a merchant with a proven history of supplying wine and making sure it is bought and stored to the standard requested for investing, as there are some individuals who buy wine from unsolicited sources. With a well-known established merchant you can be sure of the wine’s provenance.’
Here is a list of firmly established independent wine merchants (no particular order):
Berry Bros, Justerini and Brooks, Albany Vintners , Corney and Barrow, Wilkinson Vintners and Farr Vintners
It’s worthwhile establishing a relationship with a number of different merchants as they will be your point of call when checking the value of your wine, discussing the market, or selling your holdings.
Wine merchants do not charge a direct fee for their services. Instead they take a 10-15% margin on the wines they sell to private investors. All merchants charge at around this margin, which means the most reputable companies are also just as likely to be the cheapest.