Should I invest in Champagne?

As Bordeaux licks its wounds following a couple of weak campaigns, investors are often tempted to look to wines from other regions. While Bordeaux will inevitably recover, it does give us a chance to reflect on other wines that might be of interest to the investor, in particular Champagne. In the last decade, Champagne has become a popular choice for investors and deserves to be taken seriously as an investment grade wine.

How does Champagne investment differ from Bordeaux?

ChampagneChampagne doesn’t usually offer the longevity of Bordeaux – it isn’t destined to be stored for half a century by any means, but the top wines will cellar for a decade after release and the wines of some vintages much longer. There is no ‘En Primeur’ campaign for Champagne – although the media attention that a release of a top vintage wine warrants has a lot in common with En Primeur, as wine merchants grapple to secure their allocation.

One reason why investors are drawn to Champagne is it is perceived to be good value compared to wines of a similar level. You could expect to pay in the region of £80 – £120 per bottle (on release) for wines like Taittinger’s Comte de Champagne and Moet’s Cuvée Dom Pérignon. The marketplace for fine Champagne is both buoyant and global. And as many corks are popped not long after release, the remaining wines that are laid down tend to increase in value quite rapidly.

Encouraging signs

There are signs from the last 12 months that the market for investment grade Champagne has really taken off – this is often attributed to two very strong vintages being released in a short period of time (2002 and 2004 are both excellent). While wines like Dom Perignon will always be popular, there are also signs that investors are broadening their search to include wines not previously considered. Liv-ex reported on this trend in August 2013. Similarly Decanter reported on the growing success of Champagne as an investment grade wine last year, and it seems to show no signs of slowing down.

Portfolio diversity

Ultimately it will only benefit you to have some diversity in your portfolio, so why not take a look at what Champagne has to offer? The top wines are only made in vintage years so there are no ‘red herrings’ among them – the quality speaks for itself, and has never been better. As long as corks are being popped and Champagne is increasingly recognised as a great wine for food pairing as well as merely a celebratory fizz, this trend seems set to continue.

BWC Management & Consulting Interviewed by China Daily Newspaper About the Chinese Wine Investment Market

Hong Kong, May 22nd, 2014 – BWC Management & Consulting was recently asked by China Daily to comment on the Sir Alex Ferguson wine auction, held by Christie’s in Hong Kong.

The ex-Manchester United manager has been a keen wine collector over the years, and recently decided to part with much of his collection, putting 257 lots up for sale in the Hong Kong auction.

Chinese Wine MarketBWC’s Insight into the Chinese Wine Investment Market

When asked to comment on the auction, BWC Management & Consulting’s senior market analyst, Daniel Paterson, offered some insight into China’s recent penchant for purchasing valuable European wines.

Paterson told China Daily that the number of collectors worldwide has increased, while the availability of investment grade wines has dwindled. This has led to an increase in the value of blue chip wines, and the Chinese market has been quick to identify this phenomenon.

“We have seen ‘staggering levels’ of increased interest from the BRIC economies as well as in Europe and the United States,” Paterson said. “The Chinese, Russian, Indian and wealthy South American countries are also consolidating their positions as both consumers and investors.”

Taking this data into account means there is good sense in Sir Alex Ferguson choosing to hold the auction of much of his wine collection in Hong Kong, where interest and demand are high.

Recent Years Show High Return on Wine Investments

Samuel Cheung, senior broker at BWC Management & Consulting, was also quoted in the China Daily article, commenting on the types of gains wine investors have been reaping in recent years. Cheung cited an example of a case of wine sold in 2001 for 1,000 pounds, which would sell today for 2,760 pounds – a 180 percent return on investment.

Highlights in the Ferguson collection include a case of Petrus 2000, expected to fetch HK$550,000, and six bottles of Romanee-Conti Grand Cru 1999, which could go for as much as HK$850,000.

The ugly truth about wine fraud

If you are new to wine investment, you might feel slightly uneasy about the recent high profile cases of alleged wine fraud, such as the recent press articles surrounding a fellow named Rudy Kurniawan. Increasingly the industry is becoming distrustful of collections that seem to appear from nowhere without explanation, and experts don’t like to think that they have been deceived about the contents of the bottle – it makes a mockery of the fine wine industry.

Wine Collection‘The Billionaire’s Vinegar’

Kurniawan’s case is certainly not the first to make investors nervous – Benjamin Wallace’s book ‘The Billionaire’s Vinegar’ depicts the story of Hardy Rodenstock, a German collector that is thought to have not just duped the wealthy collectors that purchased bottles from him but also expert wine tasters. With all the uneasiness that comes with cases of fraud, how concerned should the everyday investor be that they might fall victim?

Investing in wine involves a considerable financial commitment and the sensible investor will want to get it right from the start, so with any luck, the concept of ‘bottle provenance’ won’t be new to them. Provenance is the traceable history of the bottle and its contents. It ought to show that the bottle can be traced all the way from the winery in which it was made to its current location, and all the while it ought to have been cellared securely, and in optimal conditions of humidity, light, temperature and away from harmful vibrations, in order for it to be in good condition to drink when the time comes. This isn’t as complicated as it sounds, any decent wine cellarage facility will be able to provide evidence of the proper care of the wines cellared there including their secure transportation to and from other facilities as the wine changes hands.

Stumbling across a collection of wine

What we’ve lost though is the romantic notion of stumbling across a collection of amazing wines – anyone that has tasted wines from Kurniawan’s or Rodenstock’s collection will be forever taunted by the possibility that the ‘fine wines’ they were drinking were in fact nothing of the sort. It is reported that there is a substantial black market for empty bottles of First Growth Bordeaux wines, which has led to them being ritually smashed after tastings and even in restaurants in China to ensure they are not recycled for wine fraud.

Should the investor be worried? Well, if you work with an ethical wine investment business, you’ll be in good hands, as they know the risks to them as well as to you of dealing in bottles whose history can’t be traced. With all eyes on Kurniawan’s case and the film version of ‘The Billionaire’s Vinegar’ in development, frankly it isn’t a risk worth taking. But you should still be prudent, and keep provenance at the centre of your thoughts – don’t be taken in by collections of wine that seem to appear from nowhere, as all may not be what it seems.