Buyers Guide to Fine Wine

The wine market can be a very profitable market for any investor. In recent years, there have been strong sales for wine at auction. In 2010, 3 bottles of 1869 Chateaux Lafite-Rotschild sold for $ 230,000 each, while a year later, two bottles of Champagne recovered from a 1840 shipwreck went under the hammer for $78,400.  In 2014, 114 bottles of Romanee-Conti Burgundy were sold for £9800 a bottle!

Historically, the wines that have turned out to be a good investment are Bordeaux and Burgundy, but Tuscan wines such as Sassicaia, Tignanello, Ornellaia, and Californian wines such as cabernet “Screaming Eagle” have also shown great promise, as have Champagne releases from Dom Perignon, Krug, Bollinger and Cristal. However Tuscan wines, Californian wines and Champagne do not behave in the market as strongly as Bordeaux and Burgundy and experts suggest them to be just a small part of your portfolio.

Before the investment, remember to research:

What to buy?

Availability and Provenance

The wines with the best return on investment are those that are produced in smaller batches. Anything below 20,000 cases is considered a small batch.  It is the supply-demand imbalance that will make the bottle increase in value, so the longer you can hold on to it, the more likely that your returns will be higher.  When making your investment in fine wines it is of primary importance to consider if the production of cases is limited and if there is a large demand coming from all over the world.

You should also be ready to play the long game. Wine collecting does not have a fast turnover and any investor should be ready to house their bottle for at least 5 years before trying to sell it again.

A wine’s history or provenance is also extremely important.  Understanding how it has been sourced and stored previously can greatly influence the wine’s worth.

 “The best way to prove unquestionable provenance is to store fine wine in wooden cases ‘in bond (IB), which means in a bonded, ‘duty paid’ warehouse such as London City Bond or Octavian Vaults. These bonded warehouses provide the optimum environment for storage, with the temperature, humidity and other microclimatic factors carefully regulated”. (Oliver Pickup, Investing in Wine: seven things you need to know, Telegraph 1/01/2015).

Quality and Condition: Vintage and Aged

Be sure to research the vintage of the wine.  A wine’s vintage refers to the year in which the grapes were grown and harvested. Many collectors believe the climate of a given year can affect the quality of the harvest.  There are several sources that track vintage that can be found easily online, such as The Wine Advocate. 

While the importance of a wine’s vintage is still considered important, there is evidence that this idea is changing with several critics saying the “unthinkable”, that a bad vintage is only down to a bad wine maker, and not the weather. 

You also want to make sure your wine will last, so check if it is a wine that will age well. Contrary to popular belief, wine is perishable, so you will need to understand how well your wine will age. There are four traits that can make sure you invest in a wine that will age “well”:

AcidityWines with higher acidity tend to last longer.

TanninRed wines with higher tannins tend to age better.  Tannins come from the pips and skins of the grapes during the production, as well as the oak of the barrel during storage.  If it is balanced, a wine will smooth out over time. This is specific to red wines - white wines do not need tannins to age well.

Alcohol levelHigh alcohol levels can cause wines to turn vinegar more quickly. Lower levels of alcohol in a non-fortified wine will mean it will last longer. There are exceptions to this, however this is generally the case for dry red and white wines.

Residual sugarThere is a large following for collecting dry wines, however those that are sweet, including port, sherry, Riesling and sauternes tend to last the longest.