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No. 2 The finest wines available to humanity

Sovereign Man – June 2015

By Simon Garveen

It’s that en primeur time again. In fact the Bordeaux 2014 en primeur campaign is rapidly drawing to a close. I’ve been buying quite a lot of fine wine, particularly Bordeaux, and over the last 20 years it’s proved to be a very good investment. It also has a pretty good worst-case scenario – if it doesn’t realise a profit you can drink the stuff yourself. Happy days.

Traditionally the best wines to purchase were first or second growth Bordeaux, the very finest burgundies and port. Sadly port seems to have fallen out of fashion and much of the investment value has gone with it. In any event it is so long-lived that if I purchased vintage port now I probably won’t be alive to enjoy it by the time it’s ready to drink.

The general rule for buying for drinking was to purchase double what you needed. If you stored half of it for five years, you could then sell it on for a profit, which would pay for the half you kept to drink. That held good probably until the superstar 2009 and 2010 “Bordeaux vintages of the century”. The prices of those vintages went through the roof, spurred on by many reviews by Robert Parker, the extremely influential American wine critic, giving the best wines 100/100 points and by new buyers in the Far East snapping up as much of the stuff as they could find. Prices of a first growth case of Bordeaux reached £12,000 or more per case – for wines that weren’t even in bottle yet!

At these prices the economics for investors of the en primeur system simply stopped working. It was basically a futures contract by which guys like me would finance the storage costs of the Bordelais – the winemakers in Bordeaux – by buying their wine while still in barrel and paying for it immediately. In return they would guarantee to release their wine once bottled at a higher price, so that the earlier adopters could make a bit of money. But the 2009 and 2010 vintages were so expensive that the prices had dropped by about one-third by the time the wines were released in bottle. I think most investors are hanging on to the wine hoping that the price will recover so there’s not too much on the market, but what there is can be snapped up considerably cheaper than when it was in barrel. Not good.

Then the Bordelais tried to prop up the system by releasing the very unspectacular wines of 2011, 2012 and 2013 at prices that were deemed way more than they were worth, so nobody bought anything. These vintages are now overhanging the market and threaten further price reductions when the Bordelais decide they need some cash and sell them for whatever they can get. Maybe that time will come, maybe it won’t. My guess is that it will.

The 2014 vintage is interesting. It’s much better than 2011, 2012 and 2013 and has been priced by most vineyards to be the cheapest on the market. The wines are supposed to be elegant and for early drinking so it could be a good buy and prices for first growth are down to around £2,500 per dozen. My very respectable wine merchants have all been cautiously recommending the vintage selectively but it should be the cheapest on the market. After all what is the point of buying it if you can pay less for another similar quality vintage that you don’t have to wait 10 years to drink?

It has always been notoriously difficult to judge how wines are going to turn out from a barrel sample so the scores are always subject to revision when the wines are tasted later. Robert Parker has been so influential that, if he gave a wine a good score of 95/100 or more, the wine was almost bound to increase in value and represent a worthwhile investment opportunity. He has now largely retired. His team continues to taste but their opinions are not so influential. RP himself said wine should never be an investment. Fine words maybe, but clearly it was. So the real question now is – is it still? I have concluded that it might be – but I’m not buying. I wouldn’t mind a few cases of the 2014 when they’re ready to drink but I think I’ll be able to pick them up in the bottle for the same money, maybe even less, in a few years’ time. Certainly I don’t think they’re going to rise in value too much and I have plenty of other fine wine to drink anyway. Now……..where did I put that nice bottle of 1982 Cheval Blanc?

 


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