COLLECTING AND INVESTING IN FINE WINE - A MATTER OF TASTE?

COLLECTING AND INVESTING IN FINE WINE - A MATTER OF TASTE?

written by Patrick Thornton-Smith

Much has been written recently about the renaissance of fine wine for collectors, consumers and investors after a period in the doldrums. No need to state the reasons but the future looks brighter than it has done for years. This period of optimism has been fuelled from a number of wide and varied sources.

Climate change is on everyone’s mind and the recent heat wave has severely affected all forms of farming, not least wine growers. Yields are significantly down in most regions and we are seeing new crop growing technologies appear, new grape varieties, lifting of restrictions to allow for irrigation and spraying and (some) government intervention in subsidies and replacing vines with other crops. We are seeing the profile of some wines radically changing due to increased heat and some of the above reasons.

Similarly, much has been written about the changing appetite of consumers and collectors. At the mass consumer end of the market, the no/low alcohol movement shows no signs of stopping. We are told of conflicting attitudes of the younger age groups towards wine, some say it is dwindling, others cite the boom in artisanal, orange and the seemingly unstoppable juggernaut that is rose (see climate change effects). We have seen in recent years, some venerable and ‘claret-only’ heritage Bordeaux houses producing white wines and production and heavy promotion of some red wines to be drunk ‘early’. Inevitably, a huge marketing and promotional push to encourage people to drink vintages within just a few years of bottling and to try new varieties, let alone a raft of new label designs and advertising campaigns. The rise of the alcohol influencer impact has risen. The fine wine end of the market has not been oblivious or inactive to these societal changes.

Wine is a global business and there are many signs that collectors and consumers and starting to re-focus on the opportunities and joys of collecting and drinking fine wine. There has been much written about the growth of ‘value drinking’ (I don’t mean Weatherspoons) across all age groups preferring to drink less, but better. Producers are reacting and the increase in the promotion, yield, pricing and distribution of second and even third wines from respected estates underlines that many of us are leaning towards quality not quantity in this health conscious and financially aware world. The quality and value of second wines has increased substantially over the last few years presenting a ‘pathway’ to their grand vin relatives.

Geopolitical ripples affect the market, the on-off tariff wars have changed some producers distribution models and currency fluctuations always create winners and losers. The price of oil and its derivatives have played havoc with the markets and inflation still does not appear to be tamed. With such a backdrop of volatility (I used to be in the futures market and did we love a bit of market unpredictability and uncertainty) there are always opportunities for asset appreciation and relative value.

Very recently we have seen a post from Micheal Burry, famous for The Big Short going viral as he has provided a compelling notion that investing in fine wine is an almost perfect hedge against the financial market forecasts. This recent article expands on this point Fine Wine Is Becoming Scarcer | Cellar Advisor The core economic values of supply vs demand over fine wine have not changed for decades, it is about the simplest and easy to understand economic model there is.

Climate change, reduced volume, growing demand, attractive financial returns, some tax benefits, and price increase projections all make the narrative for investing in fine wine increasingly attractive. Yet one fundamental point is missing. Let me elaborate.

One of my uncles was in the wine trade for all his life and around the time I was 18 in 1979, we shared a 1953 left bank claret as his initiation and coming of age birthday present, it was Haut Brion in case anyone was interested. I can clearly remember his storytelling of the wine, the producer, the terroir while the wine was resting in a decanter. Even before the first sniff or sip, the romance of the bottle was revealing its magic. I think the younger generation would now say ‘boom’ as I smelt and tasted the wine. A lightbulb moment. Memory and the senses are extraordinary and the latter can take one back to a place and time decades ago as if it were yesterday. It was only years later that I fully understood and appreciated the primary, secondary and tertiary characteristics of aged wine. The latter was fully expressed and the forest floor, pencil shaving, leather, smoke and all the rest hit me like a train (in a good way). I was hooked.

When we step back and look at the world of wine from a high vantage point as I have tried to do earlier, it is often all too easy to forget the utter joy and sensual delight in not just the physical, spiritual and emotional enjoyment of the liquid but the whole story of the time, place and history of the ritual of sharing a bottle.

Therefore, when we look at perhaps the more clinical, factual, empirical, geopolitical and societal impacts, important though they are, we must never forget that in buying, collecting, storing or investing in fine wine is just one step in the wine’s travels from grape to glass. Time and patience are important but in entering into the purchase of that first bottle or case, one is ‘paying it forward’ as one day in the future the cork will be drawn and someone out there in years to come will be able to enter that world of delight I first experienced 48 years ago. Let’s hope that those of you who are already carefully investing in the future will make sure that you keep enough back for your own enjoyment or that of your family and friends in many years to come. With the underlying economic model, to buy at X and sell years later at Y creates not just value but allows, in a dwindling supply, pleasure for many. Fine wine can change hands many times in storage without even moving and by entering the world of wine by buying that first case or opening a great bottle, connects us.

We can be confident that the wines from Bordeaux (and wider afield) will change quite significantly. Over the centuries we have seen ‘clariet’ of the Middle Ages to the early Victorian era tasting nothing like that we know now. The clariet style was a light, almost rose wine. Similarly, Carmeniere was the de facto grape for centuries, phylloxera changed all that with the grafting of American root stock so it will again yet change.

But, the Bordeaux wines that have been produced and drunk in since the late mid and late 1800’s have a common DNA and taste profile, the classification of 1855 further created a regional powerhouse that become the benchmark for ‘fine wine’ across the world. This is all changing. Not least climate change but the introduction of heat-resistant varieties and inconsistent yields will mean that the ‘old’ Bordeaux taste palate will give rise to something different.

By buying for collection, investment or future consumption those vintages over the last say 10-20 years will guarantee a time capsule bottles that we may never see again. Imagine that, the Bordeaux red wines many people have been brought up on may soon have that taste profile removed, forever. I can’t think of a better reason to start buying now be it just a few bottles to a broad and professionally managed collection for holding for many years.

This is not a pleasure for old men in red trousers. Starting young and according to your pocket is the key, all the signs out there are saying that now is one of the best times to enter the fine wine experience be it for your financial health or sheer love of beautiful things, or both.