Outside of a very small clique, viewing wine as an investment is a relatively recent phenomenon. After all, wine is a consumable, unlike gold, jewelry, real estate, or stocks and bonds. And, unlike traditional assets, wine has rarely carried enough value on a unit basis to warrant calling it an investable asset, at least in the United States. Today, commercial wine auctions in New York City, Chicago, and California can generate revenue of several million dollars for a single auction, hammer prices of thousands of dollars for a single 750ml bottle of wine, and five figures for cases of great wine or large format bottles.

One approach to discussing this fascinating subject is the tried and true method of Who, What, When, Where and Why. I’ll conclude with some important hints to improve your odds of success.

What to buy:

This is arguably the single most important factor. The primary focus should be on quality: buy the best wines from the best producers in the best vintage years. The best wines will generally be long-lived/age worthy wines; the longer the lifespan, the greater the possibility of increased value. Since wine is a consumable, the supply decreases rapidly after the wine is released, while the demand can often remain steady, or even increase. Among investments, this factor is somewhat unique to wine, and generally contributes to a rise in value over time.

The types of wine that are considered age worthy are those that have one of the following characteristics:

A. High level of flavor compounds and phenolics (especially tannins); grape varietals with these characteristics include cabernet sauvignon, syrah (or shiraz) and nebbiolo. Thus, the best wines from the best producers in the best vintages in Bordeaux and the northern Rhone in France, and Piedmont in Italy are prime investment candidates. Some cult California cabernets also fall into this category. Here are some good examples:

1. Great first and second growth Bordeaux, such as Haut Brion, Lafite Rothschild, Latour, Margaux, Mouton Rothschild, Leoville-Las Cases, Pichon Baron, Pichon Lalande, Cos d’Estournel, as well as great Pomerols such as Petrus, Le Pin and Lafleur from vintages such as 1945, 1949, 1953, 1959, 1961, 1982, 1990 and 2000.

2. Outstanding single vineyard Cote Rotie and Hermitage from northern Rhone producers such as Guigal, Chapoutier, Chave and Jaboulet from vintages such as 1978, 1999 and 2003.

3. Superb single vineyard Barolo and Barbaresco from Piedmont producers such as Gaja, Giacosa, Conterno, Sandrone and Voerzio from vintages such as 1978, 1989, 1990, 1996, 1997, 1998, 2000 and 2001.

4. Single vineyard California cult cabernets such as Abreu, Araujo, Bryant Family, Colgin, Harlan Estate, Screaming Eagle and Shafer from vintages such as 1990, 1991, 1994, 1995, 1997, 2001 and 2002.

Most of these wines, in the best vintage years, will sell at release for several hundred to a thousand dollars per 750ml bottle, and occasionally more if production is limited. If purchased later, the price normally rises as the supply decreases, unless other factors, such as the overall economy, deteriorate.

B. Also considered age-worthy are wines with high levels of acidity and/or sugar, most notably German riesling and French sauternes such as:

1. Beerenauslese, Trockenbeerenauslese and Eiswein riesling from producers such as J. J Christoffel, Fritz Haag, Heribert Kerpen, Egon Muller, Muller-Catoir and J. J. Prum from vintages such as 1971, 1975, 1976, 1989, 1990, 1998, 2001 and 2004.

2. Sauternes from French producers such as d’Yquem, Climens, Rieussec, Suduiraut and La Tour Blanche from vintages such as 1986, 1988, 1990, 2001, 2002 and 2003.

At release, a 750ml bottle of one of the above wines will normally sell for only a little less than those in category A. However, since they are usually dessert wines, they’re often sold in half bottles (375ml), which normally cost approximately half of a 750ml bottle.

C. The third category of wine with a longer the life-span and greater possibility of increased value is fortified/high alcohol content wine such as:

1. Vintage ports from producers such as Dow, Fonseca, Graham, Quinta do Noval Nacional and Taylor from vintages such as 1955, 1963, 1977, 1983, 1985, 1992, 1994 and 2000.

These are normally the cheapest of the three categories, usually selling for one to two hundred dollars at release.

Note that not every producer listed above made outstanding wines in every vintage listed for that category, but most did.

Who to buy from:

Buy only from well known, established merchants and auction houses with impeccable credentials. They possess a tremendous amount of knowledge not only about rare wines, but the wines’ provenance, condition, and previous storage. (Improperly stored wines mature and deteriorate much more quickly, so if you do not have a good idea of how that rare wine was stored, you may grossly overpay for the bottle.) It is possible to find excellent rare wines on internet auctions, but recognize the increased risk, and act accordingly.

When to buy:

Investable wines can be purchased as futures, before the wine is released (this applies primarily to Bordeaux), or anytime after release. Buying futures requires advance research through publications such as the Wine Advocate and the Wine Spectator. Get an early read on the quality of the vintage by examining the weather/climate conditions during the growing season for the particular geographic area.

Since most investable wines are not released for two years or more after harvest, keep up with barrel tasting (pre-release) reviews by critics, and target a few wines to track further. You will usually be paying for futures a year or two before you actually receive the wines, so deal only with well established merchants with a strong record of integrity and financial soundness.

If the wine is not offered as a future, you should generally buy as soon as possible after release. Do an on-line price comparison through internet sites such as Wine-Searcher.com, but be cognizant of state laws regarding shipping from out of state to your residence.

Where to store your investable wine:

If you plan to hold investable wines for a period of time, be absolutely certain to store them on their side in a cool (50 - 59 degrees F), relatively humid (50 - 75%), dark area, free from vibration and odor. For a collection of up to 500 bottles a stand-alone temperature and humidity controlled wine storage cabinet is adequate. For larger collections, a separate temperature and humidity controlled room is best. One very key point is to make sure that power to the unit or room is never interrupted for more than a day or two. Natural disasters can wipe out power for several weeks, and temperatures greater than the upper 70’s F for just a few days can do significant damage, or completely ruin wine. Consider a standalone generator that can maintain power for cooling your unit or room.

Finally, there are commercial wine storage companies in many larger cities. Virtually all will have uninterruptible power sources.

The perils of investable wine:

Many people buy investable wine because they enjoy great wine, while others simply hope to make a profit. As with other types of investment however, the latter reason is fraught with risks. The economy may become stagnant, the dollar may weaken, Shiraz from Australia may become the new rage and decrease the demand and value of northern Rhone syrah, or gold may become so hot that it diminishes the value of other investments.

Note that wine, particularly older vintages, is one of the easier things to fake; short of opening and drinking it, the labels are the only way to identify older wines, and those labels were relatively easy to reproduce. Today, more wineries are creating labels that are difficult to reproduce, stamping the top and side of the corks with the name and vintage of the wine, or even embossing the name and vintage into the bottle itself.

Other hints for buying investable wine:

1. A full case of wine in the original wooden container is often worth more than twelve individual bottles of the same wine.

2. Consider buying larger format bottles, i.e. magnums, double magnums, imperials, etc. These usually age slower than the same wine in 375ml or 750ml bottles.

3. As with stocks and bonds, diversify; don’t put all of your eggs in one basket.

4. Before investing in a specific wine, compare it with other comparable quality vintages of the same wine. Another vintage may have an identical reviewer rating, but be significantly lower in price.

5. Have your investable wines appraised by a reputable wine appraiser, and insure them with a company that specializes in fine art and collectibles, such as Chubb Insurance. Also, have the appraisal updated every one to two years.

Summary:

Buying wine for investment purposes can be both enjoyable and profitable. Just do your homework and concentrate on quality wines and sellers. There is no guarantee that the wines will appreciate in value, but if they do not, at least you can always open those bottles of great wine and enjoy them yourself.