A real buzz surrounded the release of Mouton Rothschild’s 2014 vintage on 28th April – not least because the opening price is lower than any other physical vintage of Mouton’s. At only a few pounds per bottle more than the 2013 , which is also still in barrel, it’s exciting news, and offers some hope following the recent murmurings that En Primeur would cease to exist if no enthusiasm could be generated about this year’s campaign.
When we think about wines with a global reputation, we tend to think of France first and foremost. Certainly when we talk about wines that are popular within the world’s biggest market for red wine, China, we tend not to talk about the wines of the new world. But why not? South Africa’s wines are gaining in popularity, their quality has been proven, and it seems that China has taken an interest — if recent reports are to be believed.
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.
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.
All in the Reputation
Supply and Demand
There is no doubt that in the wine market, supply and demand plays a huge role. As the wine matures, its rarity also increases. By the time it comes to full maturity, it is more valuable due to its scarcity. While in Bordeaux the supply of wine is limited, there are other wineries that purposely keep production low so the price will remain high.
Does anyone remember that Germany and the UK were once two of the world’s largest importers of fine wine from Bordeaux? It wasn’t that long ago, but their places on the list have now been lowered as China took over the fifth spot. When the Chinese entered the wine market, few believed that it would cause such a major upset in the balance of wine consumption, but it has succeeded to do just that. And when it comes to the region’s Bordeaux exports, China and Hong Kong hold the keys, as they account for more than 60% of that market. New York, which was once considered to be the world’s wine auction capital, had to pass that title on to Hong Kong when its total sales amounted to some USD $155m. According to Hon John Tsang Chun-Wah, who is the financial secretary in Hong Kong, through newly developed ties with the wine world, Hong Kong now views wine as not only good for the stomach, but for the bank account as well.
Since 2009, China has been gaining strength in the wine world after hosting a series of wildly successful auctions, an event which lasted six days. Following some record-breaking sales that took place during those days, China has been steadily emerging as a powerful player in the market. The Chinese people have changed from buying fine wine only for consumption and now consider it to be a worthy investment as well as a top choice in gifting. Senior Market Analyst, Daniel Paterson, points to three points that helped trigger these buying trends. The first is the generous government stimulus, the second is soaring stocks in Shanghai and the third is an explosive property market. Put these three together and you get Chinese tycoons that are the world’s highest net worth individuals, who view wine as a prestigious “must have.”
In short, Asians now have a lot of money, and are making the decision to invest it in something that not only safeguards its value, but is likely to appreciate in the coming years.