DRINKING THE PROFITS

At the end of last year the financial pages were full of stories trumpeting wine as a wonderful investment. But is it really all it’s cracked up to be?

ALTERNATIVE INVESTMENTS

IN DECEMBER, DECANTER.COM REPORTED THAT fine wine was second only to oil as an investment in 2007. According to wine exchange Liv-ex’s 100 Index, wine gained 39% between January and December. And the Liv-ex 100 performed better than the FTSE 100, the S&P 500 and the Nikkei. Wine was a better investment than gold, which went up 23% in 2007 and the only commodity that performed better than wine was oil: barrels increased by 47%.

Realistically, it is only Bordeaux châteaux that produce blue-chip wine in enough quantity to allow you and me to get hold of it. The top five properties in Bordeaux – Châteaux Lafite, Margaux, Haut-Brion, Mouton and Latour – make about 30,000 cases each a year, and in good years these are excellent investments. For example, Lafite 2000 went from an average of £4,775 (€6,395) a case in 2006 to £9,100 (€12,190) in November 2007, a 91% increase.

Not all of us have the sort of money that will allow us to put down £5,000-odd on one case of wine. But if you’re in a lighter-walleted league, there are still very decent investment opportunities further down the Bordeaux hierarchy.

These cheaper investments are best demonstrated by the Wine Investment Challenge, a fantasy portfolio game run every year by London merchant Robert Rolls for British charity Comic Relief. The rules are simple: choose a portfolio for a fantasy £5-£10,000 (€6,700-€13,400), and the winner is the player who shows the best return, judging by the wines’ performance in the real market.

The latest winner made a 72% net gain on an initial investment of £5,000 (€6,700). Her best investment was Château Léoville Poyferré 2003, which went up in value from £360 (€480) a case to £750 (€1,000) – a gain of 108%. Other big wins that year were Château Pape Clément at £365 (€490) to £720 (€960) and Cos d’Estournel at £940 (€1,260) to £1,500 (€2,010). The only wines to lose their value were a Châteauneuf du Pape, and the ultra-icon Californian, Opus One.

In all, the wines on the list showed a net gain of 36% – almost the same gain as the Liv-ex 100. And these are mid-ranking Bordeaux properties, “which perform consistently well,” says Rolls. And, these were gains over a year – you don’t have to sit on the wines for 20 years to see an increase.

So how do you go about buying these wines? By far the best route is to contact a reputable merchant. Berry Bros & Rudd in London, Justerini & Brooks, Corney & Barrow or Farr Vintners – or Robert Rolls himself – have extensive lists and are well-established: there’s no danger of them going bust before you see your wines. They will also advise on storage and other practicalities. Remember that in order to get hold of wines in the very best vintages you’ll need to work up a relationship with your merchant. If it looks like a brilliant year, the clamour for wines will be such that new customers will come second to old and established buyers.

To get an idea of how wines are performing, look at www.liv-ex.com, which shows real-time prices of thousands of wines, and how they are moving up and down in the market. This will arm you with pertinent suggestions for your merchant.

So, while it’s true that you won’t be buying that beach house in Mustique on your investment unless you’re prepared to spend hundreds of thousands, you’ll find that you can make a respectable return on your outlay with less than £10,000 (€13,000). And if the wines turn out to be performing less well than you hoped, you can always drink them.

ADAM LECHMERE IS EDITOR OF DECANTER.COM. LEARN MORE ABOUT WINE INVESTMENT BY GOING TO www.DECANTER.COM/INVESTMENT.

WORDS BY ADAM LECHMERE