I had a conversation with some friends yesterday about wine as an investment. Ever since I became aware of the magnitude of this activity I have been somewhat suspicious as to whether this isn’t just something for people with LOTS of money to burn. Opinions vary and the auction market is chugging along strong, even in a down economy.
The conversation started on the topic of fraud of investment grade wines. Billionaire wine collector William Koch has been waging war on what he believes are fakes that he has purchased from several auction houses. While not a new issue, the industry has taken notice for sure. The December 15, 2009 issue of Wine Spectator had several articles on fakes, include the cover feature on Koch, and a piece about how wineries are taking steps to mitigate the possibility of fakes while providing enhanced methods of verification of authenticity of their wines. This was an interesting read and is scary to consider if you are the type of person who is going to go after the big money wines.
There is much that influences the value of a vintage even before it has been made. Weather, pests and blights/molds all work their magic on vines even as vineyard managers fight back. The winemaking process isn’t foolproof either, although technology has improved the repeatability from one year to the next. Technology has also provided tools to correct issues (some of the above in particular) with the fruit when it arrives for processing. The pedigree of the winery, the critical opinion of the wine by the established wine rating outlets and the broader global economy also all get their turn to influence how investment-worthy a wine ultimately is.
Here are some links from various media outlets that provide additional perspective or delve in deeper to the issue of wine as an investment.
http://www.nytimes.com/2008/11/28/your-money/28iht-mwine.1.18173820.html (October 2008)
http://www.nytimes.com/2009/05/21/business/businessspecial3/21wine.html (May 2009)
http://blogs.reuters.com/felix-salmon/2010/03/30/why-wine-isnt-an-investment/ (March 2010)
http://online.wsj.com/article/SB10001424052702304370304575152421952773844.html (April 2010)
So what does all that mean to you and me? I say you should buy wine to augment your lifestyle. If you cook, pairing with wine will be a fun challenge and with a few successes you should find increased enjoyment of both. Wine makes great gifts; matching wine with people is just as hard as matching it with food. Travelling to wine country opens the possibility of discovering new (new to you) wines that you will want to seek out for the right occasion. Opening a bottle with friends can inspire conversation and enhance your social activities. Those are REAL investment returns to me, and your capital expenses don’t have to be large to achieve them.