Alternative Investing
Stocks, bonds and … wine? The most liquid of assets has proven to be a solid investment in recent years as prices at the top end of the market skyrocket to eye-widening figures. In October 2010, a private Asian client bought three bottles of 1869 Lafite for an astounding $232,692 each, or about $29,000 per glass at a Sotheby’s sale in Hong Kong. One week later, another private client paid $306,000 for an imperial bottle of 1947 Cheval Blanc at Christie’s sale in Geneva. Even among younger and more commonly traded wines, the return is dramatic to say the least. You could have purchased a solid case of 2000 Latour in the original wood packaging for $6,000 in January 2009. Recent cases at various auction houses have realized over $25,000. Prices like this may cause one to reach for whisky over claret, but excellent opportunities exist on both the buy and sell side in this brisk and exciting marketplace, now headquartered in Hong Kong.
Overall, the global wine market has recovered at a quicker pace than the rest of the economy, as over $400 million of wine were hammered on the auction block in 2010, double the total from 2009. Much of this growth has been fueled by the explosive growth of the Asian wine market. In 2008, the Chinese government abolished taxes on wine and beer in Hong Kong and in two short years, Hong Kong has become the global center of the wine auction trade. The thirsty Hong Kong collectors accounted for $165 million sold in Hong Kong alone, versus New York’s figures of $154 million last year. The margins continue to widen in 2011, and the first quarter results show $61 million sold in Asia compared to $32 million in the United States.
This explosion may appear to some as a bubble, but the market continues to broaden and deepen with each sale; scores of new bidders in Hong Kong, on the mainland, and around Asia attend each sale as the diversity of wines continues to expand. In 2009, sales were stacked high only with cases of Classified Growth Bordeaux while at a recent Spectrum sale I watched two Asian collectors bid up Giacosa Barbaresco and Ramonet Batard Montrachet. These new collectors are popping corks at a rapid pace, honing their palates, and educating themselves faster than the supply can appear. They are following the investment strategy of buying what they like to drink while simultaneously keeping a savvy eye on the investment potential.
As a sidebar, it is indeed a misnomer that wines traditionally are a poor match for Chinese cuisine. To the American palate, a steak matched with claret is unbeatable; I challenge any gastronome worth their mettle to find a better match for a well-aged red Burgundy than a lightly smoked tea duck. Spicier Sichuan food absolutely sings when married with German Rieslings. The Guangdong seafood specialties are a natural partner to White Burgundies, and older Bordeaux stands up well to the meat dishes from a variety of cuisines of China.
For those of us that love wine but are not ordering the $30,000 glass, several tenets exist that will help ride the crest of this wave. Ultimately, the best way to invest is to focus upon a region or type you truly love, as the only way to become an educated consumer is to actually consume! There is little sense in drinking wines you don’t enjoy, and in this way, you will be in a position to imitate the insiders and “buy three, drink free,” selling a bottle or two when the market rises, thus allowing for guilt-free collecting. Provenance remains a key as it is essential to buy from trusted sources that have imported, stored, and handled the wine safely. One of the most rewarding benefits of a wine collection is the relationships you will form with merchants, fellow collectors, and wine producers, all of whom will be key in the building of any strong cellar. The return on that investment is a bubble that never breaks.