Guide: Buying Wine for Investment

As an investment category, fine wines are delicious in their potential. We seek out expert advice as Asian buyers change the landscape of collecting

Bidders’ paddles shot up in the air-conditioned tent as the auction headed into the home stretch. Braced by unbound generosity — and perhaps the easy flow of NapaValley’s finest wines — the 2013 AuctionNapaValley broke all records in early June.

Now in its 33rd year, the live and online auction, brought in US$16.9 million in America’s premiere wine region in Northern California. The Saturday live auction at the Meadowood Hotel attracts well-heeled international bidders to taste Napa’s cult wines and bid on them. Where else would you see one Balthazar-size bottle of Screaming Eagle Cabernet Sauvignon go for US$500,000 or four double magnums of Harlan Estate accompanied with dinner fetch US$800,000?

Then there was a trip to Seoul with wine, dinners and tours offered by Dana Estates, a newcomer to NapaValley. When the bidding escalated beyond US$500,000, vintner (and Korean food czar) Hi Sang Lee doubled his generosity, bringing the total selling price to US$1.2 million.

The Case for Investing

The question remains: Is this a wise investment for a wine collector?

Perhaps not — when it’s a charity auction. But at auction houses such as Sotheby’s, wine investing is a wise move, says Jamie Ritchie, CEO & President at Sotheby’s, Americas & Asia wine department. To be certain, this is investment grade wine, not the random bottle of chablis purchased from a retailer.

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1999 Chateau Mouton Rothschild (image courtesy of wikimedia commons)

On a global level, Sotheby’s Wine Auctions, in 2012, brought an overall total of US$64,462,965 exceeding pre-sale expectations of US$49.3/67.1 million. Split among three cities, the New York auction totaled US$17.7 million, London sales achieved US$19.7 million while Hong Kong once again posted the highest total of the three locations with a result of US$27 million.

It is worth remembering that the 2012 figures here are no threat to the record books; auction figures were higher in the previous two years. The 2011 sales brought an overall global total of US$85,467,096, a little short of the 2010 figure of US$88.27 million, the highest in the company’s 40 years of wine auctions. 2010 saw extraordinary demand from Asian collectors with every bottle offered in the eight Hong Kong auctions finding a buyer and major Asian participation in London too. The Asian market has always been important for the world-renowned auction house.

“The fundamental change happened in January 2009, when the Mainland Chinese market started waking up to enjoying, drinking and investing in fine wine,” says Ritchie. In addition, a new crop of buyers emerged in Taiwan, Indonesia, Singapore and Thailand. Like most buyers, Asians buy for two reasons — enjoyment and investment. Like any investment though, it requires some level of knowledge and comfort.

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Haut Brion vineyard (image courtesy of wikimedia commons)

Blue Chip Wine

“Many people have badly gone wrong due to poor advice, buying non-investment wines, lesser Growths, lesser vintages, etc.," notes Ritchie. "We’ve also seen people who’ve made significant amounts of money investing in wine by buying smart, by knowing which vintage and what properties to buy and at the right price.”

So, yes, one can make good investments and it is possible to make money. He advises to invest in blue chips — Bordeaux’s five First Growths (Haut-Brion, Margaux, Lafite, Latour and Mouton Rothschild) or so-called "Super Seconds" (Cos d’Estournel, Pichon Longueville, among others) or top Right Bank wines such as Château Petrus or Cheval Blanc.

Ritchie also suggests looking for wines on a trajectory such as non-First Growth wines likely to go up in value. Wines such as Château Ausone and Château Pontet-Canet are on a consistent rise and broadly appreciated by the market.Hong Kong-based Simon Tang, who heads Christie’s wine department in Asia, concurs that wine has proven to be an important liquid asset. However, he notes that a Christie’s client invests in wine in a different way than a traditional banker.

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