If you’re reading this, you’re probably already aware that demand and interest in fine wine and spirits is pretty darn high, and they have become a strong asset class with a credible global market value in the billions. Wine and spirits are not just pretty things to admire, either – you can sip and savor them, share with friends and loved ones, and enjoy the evolution of a wine for many years over its lifetime. This experiential aspect makes them what biz-savvy folks call “passion” investments. But that’s also a potential downfall. Over my 30 years in this industry, I’ve worked with hundreds of collectors and have learned 7 key things you need to know before investing in wine and spirits. (Plus, read on for a bonus!)
1. What makes wine a good investment to begin with?
Econo-nerd time: it has been historically proven that wine investment returns become more consistent and less volatile the longer it is held. This occurs as a result of the fundamental principles that drive fine wine prices – a supply/demand imbalance. Fine wine has an inverse supply curve which is exacerbated over time as the available wine is consumed and supply therefore diminished. Natural deterioration of wine over time can be but is not always a contributing factor to loss of value, as scarcity is often prized more highly than drinkability. Similarly, the fact the wine may be from a less-regarded vintage is not necessarily a marker for a lower valuation; those wines may be from smaller harvests and tend to be consumed earlier in their lives, so their scarcity commands a premium. Basically… it runs out, so what’s left increases in value!
2. Anyone can do it.
You don’t need a seven-figure income or custom-built wine cellars in three continents to begin your investment journey. My father – who got me in to this whole world – told me early on that if you can scrounge up enough money to buy two cases of a wine proven to increase in value and store them well, you’re golden. You can sip from one, popping a bottle every year or so, enjoying the progression of the wine as it ages, and then sell the second case when it has doubled in value… essentially drinking that first case for free. Free wine? Sign me up.
3. Storage is KEY.
I am a broken record on this one, folks. Wine is perishable. It has a finite amount of time on this earth (except for Maderia, which I call the “zombie wine” because you simply can’t kill it. But that’s pretty much the lone exception!) Over time, wine will eventually lose fruit, and/or oxidize, maybe turn vinegary. The quickest way to have that happen before it should is improper storage. Your “always cool” basement? It will still be subject to temperature fluctuations. The bottom of your closet, or -gasp- on a rack above your fridge? Way too much heat. Poor storage will speed up deterioration, and too high temps can make the wine taste burnt, metallic, or ashy. So, keep your wine at 55-57 degrees Fahrenheit, away from light and vibration. Small apartment? Invest in a 12- or 18-bottle wine fridge. One fancy bottle? I’d rather it be too cool than too warm so pop it in the fridge. If you’re investing in wine, you’ll need to keep track of provenance, and that includes storage conditions. It is key, key, key.
4. Go through proper channels.
Speaking of provenance… you should always buy wine and spirits from reputable sources. One party to an alcohol transaction is required to be licensed, so if you’re “helping out a friend by taking a couple bottles off his hands,” you’re breaking the law! (I’m not saying there’s no such thing as a “grey market” out there, but beware.) Always buy from trustworthy auction houses and retail stores, or directly from the producer where possible. And if the wine/spirits is very high end and expensive, keep those purchase receipts.
5. Counterfeits are everywhere.
Fakes are another reason to only go through proper channels, but even reputable sources aren’t totally immune to forgeries. Widespread wine counterfeiters like the convicted Rudy Kurniawan and now-deceased Hardy Rodenstock were prolific, so there’s no real way to know how many of their forgeries are still out in the marketplace. But I’ve also personally seen a lot of pretty shoddy fake wine, so there’s also no way to tell how many people are slapping together one-offs in the hopes that collectors won’t look too closely. The labels, capsules, and fill levels should be appropriate, and if you have deep concern, give us a call – we’re one of the top firms in the U.S. for counterfeit investigation. Spirits are trickier, there are a LOT of empty bottles on ebay just begging to be faked. Caveat emptor, and don’t buy if something looks suspicious.
6. Keep track of what you’ve got.
If you have a collection with some value, make sure you know what you have. A simple excel spreadsheet will suffice, or if you’re fancy, one of those apps or cellar inventory systems. List all the details like number of bottles, bottle size, vintage, grape variety, and designation, and for spirits: cask number, age, if it’s a special edition or bottling, type of cask for maturation, proof/abv, packaging, tax stamp, and other signifying information. Otherwise, if there’s a disaster and you require an insurance claim, or a legal matter like estate or divorce needs, you’ll end up paying an appraiser a lot of money to execute an inventory. I’m happy to do it! But if you’re on top of your investment, you’ll be prepared.
7. Sure, go ahead, “dusty” hunt, just don’t expect to find much.
Until the early 2000s, there were limited collectable spirits that garnered market attention, like older bottles of Macallan Scotch or Pappy Van Winkle Bourbon. However, over the past decade, fine and rare spirits have grown in value by nearly 600 percent. This thriving market and the fact that spirits are not vulnerable to deterioration like wine, has led folks to scour small-town liquor store shelves and relatives’ attics for old bottles (called “dusties” because they’re… wait for it… dusty.) Feel free to jump on the bandwagon, but you may be a little late to this trend, as people with their ear to the ground likely swooped in five or ten years before you. Though when I travel to random places, I always take a tour around a little grubby liquor store just in case!
BONUS:
So, Minx, what should I invest in?
Burgundy has shown a strong, steady increase for many years, making some industry folks wonder when its bubble will burst… but it seems to remain immune. However, Burgundy is expensive, so investors just starting out may not want to commit such a large amount of capital.
No budget? Snap up Domaine de la Romanée-Conti (any cru, but their monopoles – singly-owned vineyards – of La Tâche and especially Romanée-Conti are tops.) Georges Roumier, Leroy, Coche-Dury, Dujac, Armand Rousseau, and Liger-Belair are other producers whose bottles routinely pass the multi-thousand dollar mark.
Bordeaux may not be as fashionable as it once was, but top estates continue to show growth in value. The five First Growths of the Médoc (Ch. Mouton Rothschild, Ch. Lafite Rothschild, Ch. Haut Brion, Ch. Latour, and Ch. Margaux) along with top Left Bank estates like Ch. Petrus, Ch. Ausuone, and Ch. Le Pin are proven investments, but collectors with smaller budgets can look to “super seconds” (classified second growths) like Ch. Pichon-Longueville Comtesse de Lalande, Ch. La Mission Haut Brion, Ch. Pontet-Canet, Ch. Palmer, and many others for slightly more-affordable quality.
Champagne (yay) and Italian wines (like Barolo, Barbaresco, and “Super Tuscans,”) have held steady for the past few years. Top California “Cult” wines like Screaming Eagle, Harlan, Colgin, Schrader, Bryant, Scarecrow, Hundred Acre and others may not exponentially grow in value – possibly except for Screaming Eagle – but will increase dependably.
So, Minx, what should I avoid?
Although they’re potentially long-lived, we really don’t see huge growth in fortified wines like Port (unless exceptionally old,) and sweet dessert wines like Sauternes, except for Ch. D’Yquem. Though popular, some California names like Kistler, Morlet, and Peter Michael won’t suddenly turn out to be worth thousands.
And unless you already have them or money is no object, I’d avoid top spirits. This trend may fizzle out as quickly as it boomed, or give way to something more fashionable, and the massive growth has already priced out most “normal” people.
At the end of the day, you should invest in something you enjoy drinking. I’m always available to consult with you on building a collection in your budget, so don’t hesitate to reach out! Cheers.
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