Wine – Know Your Market

Investing in wine for the first time is not for the feint hearted – you’ve undoubtedly read numerous reports about the potential perils. We caught up with wine expert Ashley Register of Bordeaux Wine Investments to find out what to look for, and key points to consider before making any serious investment in fine wine.

However, just as important as watching the market, and buying the right wines from the right vintages, is the provenance of the wine that you’re buying. Provenance is a combination of a wine’s storage and purchase history, crucial pieces of information as you consider your investment, ruling out the possibility that your wine could be forged or inadequately stored.

Wine fraud is becoming an increasingly big problem for the wine industry, particularly in light of the upward trend of prices over the last decade and the appeal of fine wine in China, Hong Kong, India and Brazil.

Fraudsters are lured by anything that commands a high price on the secondary market. Older wines are noticeable victims.

In days before Chateau bottling became the norm, when wines were mainly negociant bottled, variation in bottle size, corks and caps was prevalent, making the job of forging particularly easy. Serena Sutcliff MW of Christie’s once noted that during the 50th anniversary year of the legendary 1945 Mouton Rothschild more bottles were probably drunk than had ever been produced.

The infamous Jefferson bottles made famous by the book ‘The Billionaire’s Vinegar’ has brought into the public consciousness the problem of old fake bottles. As wine prices have soared, the stakes have been raised, forgeries are better than ever and a larger range of wines, including recent vintages, are targeted. It is now more crucial than ever to be confident of provenance when choosing wines for your investment portfolio, especially as it is most likely to contain great wines from great vintages, which are most susceptible to fraudsters.

I also have no doubt that provenance will only become even more important over the years. As with any valuable asset, you must be sure that authenticity, storage, transport and origin can all be guaranteed  to the highest possible degree. Buying wine for investment can be extremely rewarding, but a fake or spoiled wine could severely impede the potential value of your investment. This need never be a problem however, as you can follow some simple steps to find out where your wine has spent its life.

If you can, buy ex-Chateau. Yes it may be more expensive, but if you are investing in wine then you are most likely to be in it for the medium to long term. Buying at 10% above the market will be a small price to pay when five to ten years down the line you come to sell the wine. You will have a direct line from Chateau to negociant, to merchant, to your professionally stored warehouse.

It is not always possible to buy ex-Chateau, and there’s nothing wrong with buying on the secondary market – after all there would be no investment market if one did not exist. Find reputable merchants or auction houses that you trust. We as merchants are in the business of buying and selling some of the finest and often rarest wines in the world and it is not worth the risk to buy a wine that has anything other than perfect provenance. With hard won reputations at stake we simply won’t buy anything unless we are 100% certain of every wine’s provenance. What’s more, we buy only from people who we trust implicitly. As we regularly ship wine from overseas and within the UK, we are certain to use logistics companies that specialise is transporting wine so you can be sure that your wine has been stored well during shipping.

If you are happy with the supply route that your wine has taken, you do need to be aware of the condition of the wine, particularly with older vintages. You can be fairly confident that recent vintages that are still in their original cases and have been stored properly will be just fine. For older stock, and for bottles not in original casing, you need to be mindful that soiled or scuffed labels will lead to a discount of up to 20%, and wine with US strip labels probably means that your wine has been across the pond and back which will also adversely affect its price.

No merchant will be surprised if you request photos of the wine and often these will be already available. When this is not the case bonded warehouses will take a photo of the case, and if older or already opened, the bottles within them from. You should expect to see a photo of front and back labels as well as a picture from the top.

Look at the caps to make sure the cork has not been pushed out and look at the levels of the wine within the bottle.

A little evaporation (ullage), especially in older wines, is to be expected, but abnormally low levels will likely bring you a sale price of 25% or lower than the current market price. Follow the following rules for drinking, and for investment accept only the very best:

  • Almost to the cork – normal in young wines
  • High neck – good for wine of any age (you should be wary of any old wines at this level – they are either in exceptional condition, or they are not what they seem)
  • Top shoulder – fine for wine up to 20 years old
  • Upper mid shoulder – generally acceptable in wines over 20 years old
  • Low shoulder – risk of oxidation
  • Low shoulder and below – A risk and best to avoid

Most importantly, buy your wine under bond. Not only does this mean that you have no tax to pay when you come to sell your wine, but you can be fairly certain that it has been stored professionally.

Get as much documentation that you can and make sure you hold copies of everything you receive, particularly invoices and photos, as these will be invaluable when you come to sell your wine. Ensure that you store your wines at a professional wine storage warehouse. Most merchants will be able to store the wine for you at one of a number of bonded warehouses in the UK, but should you wish to do so independently good ones to use are EHD, Octavian, Vinotheque and London City Bond.

With the need for ever more provenance as wines command higher and higher prices, producers, merchants and auction houses are taking increasing steps to guarantee your wines. In the meantime, there‘s no reason why you shouldn’t be able to confidently buy wine, but like any investment exercise caution and only accept the very best.