Investing in Expensive Wine
We all plod the aisles of wine shops and liquor stores looking for something that isn’t too skunky at a price that doesn’t involve selling a kidney. For others the price doesn’t matter, except in that it gives the buyer bragging rights over mere mortals.
An Investment not a Tipple
Oliver Pickup in The Telegraph asks “Wondering how best to invest that £10,000 – or more – you have spare?”
(Actually no, Mr. Pickup. My concern is where that ten grand is going to come from in the first place. But, a writer shouldn’t put himself in the story so we’ll set that issue aside.)
The same United Kingdom newspaper comes up with the answer by advising us that fine wines have “been one of the best performing asset classes of the last 20 years.” Forget about putting money into mutual funds, buy a case of expensive plonk and sit on it.
If you are a high roller, you’ll want to be collecting bottles of Domaine de La Romanée Conti. This small Burgundy winery, known to the cognoscenti as DRC, only turns out 5,000 to 5,500 bottles a year.
The value of each undrunk bottle zooms up and up. One imagines very few are uncorked and drunk to accompany say a barbecued hot dog; the value is that the wine stays in the bottle.
The Burgundy 150 Index is sort of like the New York Stock Exchange Index only for vino. According to the wine index, DRC wine rose in value by 298 percent between 2002 and 2017.
Why does Domaine de La Romanée Conti command a price of $2,000 a bottle? Wine writer Jeannie Cho Lee says the 2014 vintage is “complex and generous.” Apparently, it is also “earthy,” with a “persistent texture of velvety tannins” with “plenty of vertical intensity and long length.”
Wow! No price is too high to get a taste of happy juice of that quality.
That DRC output is what is known as a “trophy” or “cult” wine. People will pay exorbitant prices for the stuff because they believe someone else will pay an even more exorbitant price for the same stuff a few years down the road.
It’s a bit reminiscent of the Dutch bulb hysteria of the 17th century when people would pay an entire year’s income for one bulb in the belief they could sell it for more later.
Among wine investors, the higher the price the greater the attraction. In 2006 a vintner told Decanted magazine “on several occasions we have had difficulty selling wines at $75, but as soon as we raise the price to $125 they sell out ...”
Of course, with cult wines the prices are higher. A bottle of 2010 Screaming Eagle Cabernet Sauvignon from California’s Napa Valley will set buyers back about $3,400.
But, here comes Fine Wine Concierge to prick the bubble of the long-term investor. Cabernet Sauvignon “With its tannins, this is among the best-ageing wines out there. Bottles will keep for 7-10 years.”
Open up a 100-year-old bottle of Bordeaux and it might well smell and taste like sheep dip. So, best to move the vintages along before they turn funky.
The Thomas Jefferson Wine
With people willing to pay thousands of dollars for a bottle it's inevitable that some shady characters are going to be attracted to the trade.
Hardy Rodenstock is a world-renowned dealer in wine, but writes Benjamin Wallace in The Independent (October 5, 2008), he used to be “Meinhard Goerke, a high-school graduate and apprentice labourer with the German railway whose tastes ran to beer and schnapps.” He also worked promoting popular music.
In 1985, Rodenstock announced a remarkable discovery in a bricked-up cellar in an old house in Paris. Workers had demolished a wall and found a hidden store of old wines, that, according to Wallace “included 18th-century bottles from some of the finest châteaux in France.”
Among the vintages were a few bottles of 1787 Chateau Lafite engraved with the initials “Th. J.” The bottles were assumed to have belonged to Thomas Jefferson who had lived in Paris from 1784 to 1789, prior to becoming the third President of the United States.
One of the world’s greatest wine experts, Michael Broadbent, examined the wine and pronounced the Lafite authentic.
When three bottles of the ancient brew came on the market William Koch, the President of the gold mining and energy company, Oxbow Corporation, was happy to pay $500,000 to acquire them.
The Billionaire's Vinegar
But, then suspicions started to be raised about the wine’s provenance. Rodenstock had always been secretive about how the “Jefferson Wine” came into his possession. And, there were other finds of rare, old wines that seemed to fall into his lap.
When the stories reached William Koch’s ears he decided to investigate. He hired a team of private investigators along with a former FBI agent and they started to turn up evidence that Rodenstock had a murky past.
One of the Jefferson bottles that had been bought in Germany was tested and the wine inside was dated to 1963. There were other inconsistencies that led Koch to begin a lawsuit against Rodenstock, claiming he had been the victim of fraud.
After a long court battle, a jury agreed with William Koch.
In October 2014, 114 bottles of Romanée-Conti Burgundy were put up for auction in Hong Kong. They sold for £1,035,000 ($1.4 million) – around $13,328 a bottle),
If you can say the name of Scharzhofberger Riesling – Trockenbeerenauslese – without trying a reef knot in your tongue you should expect some sort of reward. But, it won’t be a bottle of the 2003 vintage, which sold for £13,110 ($17,800) in 2017.
In the summer of 1966, the writer was traveling through the tiny principality of Andorra, high in the Pyrenees. Andorra was, and is, a duty-free haven so a bottle of scruff red could be had for about a dollar, with a deposit on the container of $1.25. Sadly, the unfinished bottle tipped over during the perilously mountain descent into Spain and the car reeked with a sour odour similar to that of stale cat pee for months afterwards.
- “Investing in Wine: Seven Things You Need to Know.” Oliver Pickup, The Telegraph, January 1, 2015.
- “The 10 Most Expensive Bottles of Wine in the World.” Sophie Christie, The Telegraph, August 14, 2017.
- “A Vintage Mess: How Hardy Rodenstock became the most Notorious Name in Wine.” Benjamin Wallace, The Independent, October 5, 2008.
- Wine Searcher.
- “How Long Does a Wine Keep?” Fine Wine Concierge, undated.