Wine Investing: 3 Blue Chip Bordeaux Bargains - By John Kapon
Forbes doesn’t often write about the merits of investing in vintage wine but I recently connected with John Kapon, president and owner of one of the world’s oldest and most active wine auctioneers, New York‘s Acker, Merrall & Condit. John was talking up the virtues of buying certain vintage Bourdeaux’s “on weakness.” He likens it to buying great blue chip stocks on the dips. Below is a guest post from John Kapon, CEO of Acker Merrall:
VINTAGE TASTINGS
As I sipped on a velvety 1950 Trotanoy, an insider’s vintage from the Pomerol region of Bordeaux, the last thing on my mind was return on investment. That warm spring evening in New York was a tasting to remember. Everything was as it should have been in this spectacular wine, which resonated with aromas of plum, cassis, chocolate and white smoke. There was a rich and mature complexity to its palate that made it that rare work of art that can be enjoyed and experienced. How could you put a price on a moment like this?
And yet, you can. For all its ephemeral beauty, a great wine also makes for a wise investment, and now could not be a better time to venture into the wine market. Today, some of the biggest investment opportunities are in Bordeaux. Why? Because, as any smart investor knows, you buy at the bottom of the market, and Bordeaux recently has hit the skids.
Setting aside the lush and creamy palate of a 1982 Latour, or the spectacular experience of a 1989 Petrus, Bordeaux is also the king of the wine market for economic reasons. It is the number one traded commodity in the world of wine, with roughly a 50% share of the market. It’s traditionally been the most reliable wine investment because of the frequency, volume and consistency that we see fine Bordeaux at auction.
That said, the great investment vintages are expensive, and are more often going up rather than down. Even if you looked at the bottoms of the last decade, they would all point upwards, and significantly. So seize the opportunity while it’s here. We’re facing a rare lull in pricing due to various factors, including the potential European economic crisis, and China taking its foot off the pedal a touch. With strong demand from Asian collectors, prices rose in 2009 and 2010 as much as 40%, and then large quantities of wine came to market accordingly; there was a bit of a gold rush, except it was wine. Supply finally started to exceed demand, and a result, prices dropped as much as 30% over the last six+ months. However, the near and long term demand from China given its continued economic success and growth remains a strong positive for investing in the great wines of the world, in particular the top Bordeaux.
It didn’t help that Bordeaux wine growers have continued to keep their release prices excessively high, even when 2011 wasn’t a particularly great year for Bordeaux, leaving a bad taste in many collectors’ mouths. Some are even boycotting Bordeaux and not buying anything.
But they will be back, and even if they aren’t, the market certainly will. All of the aforementioned factors have combined to temporarily dampen Bordeaux prices. While other wine categories have performed well at auction as interest in Burgundy and other regions has grown, Bordeaux has taken the brunt of the market pressure. But that will change sooner rather than later. History has already taught us that. Following every major stock market crash of the last few decades, prices of Bordeaux fell often in tandem with those stock market declines but often outpaced their recoveries and gains.
There is always calm before the storm, and I fully expect Bordeaux prices to return and exceed their previous highs, although Chateau Lafite Rothschild may not get back to its highs as soon as others. This became the darling of the Chinese wine market, the equivalent of a wine status symbol, so there might have been a bigger bubble there. But history should repeat itself; the same happened at the end of the first wave of the financial crisis in 2008, and it will happen again as wine investors always come back to Bordeaux. No other wine can age a century like Bordeaux.
So as you’re thinking about diversifying your investment portfolio and venturing into wine, here are a few gems to look out for:
1990 Chateau Latour
Chateau Latour is one of the very greatest wines made every year and has been for decades. Vintages back into the 1800s are often brilliant wines and experiences. 1990 is one of the top vintages from Latour in the past quarter century, acclaimed by every critic as a great wine, and it is down over 20% this year, and a great time to buy accordingly. Many other vintages of top Latour are 30-50% higher in value, too.
1998 L’Eglise Clinet
This Pomerol has become a favorite of Robert Parker, and its scores commonly exceed or match those from two very famous, and far more expensive neighbors – Petrus and Cheval Blanc. Not much is made, only between 1000-1500 cases typically, far less than most famous chateaux. 1998 is a great and undervalued Pomerol vintage, which makes this wine ripe for investment.
2003 Margaux
2003 Margaux is down an astonishing 35%+ from its 2010 high. Considering how prestigious this First Growth Chateau is, and how much its star has been rising over the last decade, this is a no-brainer play right now, and as good a value in high-end Bordeaux as there is currently.
VINTAGE TASTINGS
As I sipped on a velvety 1950 Trotanoy, an insider’s vintage from the Pomerol region of Bordeaux, the last thing on my mind was return on investment. That warm spring evening in New York was a tasting to remember. Everything was as it should have been in this spectacular wine, which resonated with aromas of plum, cassis, chocolate and white smoke. There was a rich and mature complexity to its palate that made it that rare work of art that can be enjoyed and experienced. How could you put a price on a moment like this?
And yet, you can. For all its ephemeral beauty, a great wine also makes for a wise investment, and now could not be a better time to venture into the wine market. Today, some of the biggest investment opportunities are in Bordeaux. Why? Because, as any smart investor knows, you buy at the bottom of the market, and Bordeaux recently has hit the skids.
Setting aside the lush and creamy palate of a 1982 Latour, or the spectacular experience of a 1989 Petrus, Bordeaux is also the king of the wine market for economic reasons. It is the number one traded commodity in the world of wine, with roughly a 50% share of the market. It’s traditionally been the most reliable wine investment because of the frequency, volume and consistency that we see fine Bordeaux at auction.
That said, the great investment vintages are expensive, and are more often going up rather than down. Even if you looked at the bottoms of the last decade, they would all point upwards, and significantly. So seize the opportunity while it’s here. We’re facing a rare lull in pricing due to various factors, including the potential European economic crisis, and China taking its foot off the pedal a touch. With strong demand from Asian collectors, prices rose in 2009 and 2010 as much as 40%, and then large quantities of wine came to market accordingly; there was a bit of a gold rush, except it was wine. Supply finally started to exceed demand, and a result, prices dropped as much as 30% over the last six+ months. However, the near and long term demand from China given its continued economic success and growth remains a strong positive for investing in the great wines of the world, in particular the top Bordeaux.
It didn’t help that Bordeaux wine growers have continued to keep their release prices excessively high, even when 2011 wasn’t a particularly great year for Bordeaux, leaving a bad taste in many collectors’ mouths. Some are even boycotting Bordeaux and not buying anything.
But they will be back, and even if they aren’t, the market certainly will. All of the aforementioned factors have combined to temporarily dampen Bordeaux prices. While other wine categories have performed well at auction as interest in Burgundy and other regions has grown, Bordeaux has taken the brunt of the market pressure. But that will change sooner rather than later. History has already taught us that. Following every major stock market crash of the last few decades, prices of Bordeaux fell often in tandem with those stock market declines but often outpaced their recoveries and gains.
There is always calm before the storm, and I fully expect Bordeaux prices to return and exceed their previous highs, although Chateau Lafite Rothschild may not get back to its highs as soon as others. This became the darling of the Chinese wine market, the equivalent of a wine status symbol, so there might have been a bigger bubble there. But history should repeat itself; the same happened at the end of the first wave of the financial crisis in 2008, and it will happen again as wine investors always come back to Bordeaux. No other wine can age a century like Bordeaux.
So as you’re thinking about diversifying your investment portfolio and venturing into wine, here are a few gems to look out for:
1990 Chateau Latour
Chateau Latour is one of the very greatest wines made every year and has been for decades. Vintages back into the 1800s are often brilliant wines and experiences. 1990 is one of the top vintages from Latour in the past quarter century, acclaimed by every critic as a great wine, and it is down over 20% this year, and a great time to buy accordingly. Many other vintages of top Latour are 30-50% higher in value, too.
1998 L’Eglise Clinet
This Pomerol has become a favorite of Robert Parker, and its scores commonly exceed or match those from two very famous, and far more expensive neighbors – Petrus and Cheval Blanc. Not much is made, only between 1000-1500 cases typically, far less than most famous chateaux. 1998 is a great and undervalued Pomerol vintage, which makes this wine ripe for investment.
2003 Margaux
2003 Margaux is down an astonishing 35%+ from its 2010 high. Considering how prestigious this First Growth Chateau is, and how much its star has been rising over the last decade, this is a no-brainer play right now, and as good a value in high-end Bordeaux as there is currently.