Alternative Investing

Fine Wine, Nifty Profit

Michelle Lodge, |Special to
1988 Romanée-Conti
Source: Bonhams

The offerings to the wine-drinking public grow more varied each year, with even China now producing award-winning vintages.

But for reliable investment-grade wine, look only to France, principally select wines from Bordeaux, and a few from Burgundy and the Rhone Valley.

“Top Bordeaux and Burgundy have increased the most in the last few years, particularly Chateau Lafite Rothschild [a Bordeaux], which was being bought in the Far East in a big way,” says Richard Harvey, senior international director, wine department at Bonhams in London. “The 2008 vintage of Chateau Lafite increased by 400 percent in value from summer 2009 to summer 2011, although it has fallen away by 40 percent in the last six months. In Burgundy, the wines of the Domaine de la Romanee-Conti are very highly sought after.”

It's no accident that Bordeaux wines are especially revered. This region in southwest France with a maritime climate is ideally suited to produce fine wine, say experts, and the vintners naturally employ many of the world's most skilled winemakers.

But the French also ensured that their country's reputation for top-quality wines was a matter of public record. In 1855, as part of the Exposition Universelle de Paris, staged by the Emperor Napoleon III to showcase the best of France, wine brokers were asked to classify wines of Bordeaux for display at the fair.

The brokers came up with a list of four top winemakers, later expanded to five. The finest, the premier crus, or first growths, are from Chateau Lafite Rothschild, Chateau Latour, Chateau Margaux, Chateau Haut-Brion and Chateau Mouton-Rothschild, added in 1973. The designation was meant to be used only for the event, but it stuck and carries weight to this day.

Not on that list, but among the premium Bordeaux wines, are also Cheval Blanc and Petrus, the latter of which often lands record prices from buyers.

“Bordeaux is the most age-worthy wine in the world,” says Robin Kelley O'Connor, head of wine, Americas, at Christie's in New York.

Some of the best vintages for top Bordeaux wines are 1988, 1989, 1990, 1995, 1996, 2000, 2003, 2009 and 2010, according to Serena Sutcliffe, master of wine, worldwide head of wine at Sotheby's in London.

The 2005 vintage is considered by some experts to be the greatest among recent crops, she adds, and 1998 and 2008 are very good wines, and because they are somewhat under-price a possible entry point for new wine buyers.

For vintage 2005, prices per 12-bottle case of the top five Bordeaux range from $8,400 to $15,000; for the same wines, vintage 2000, they are selling from $9,000 to $24,000. To maintain investment value, the wine case must be intact, meaning it contains the complete set of bottles in their original wooden box.

For return on investment among the wines, today's prices for Lafite vintages 2000 and 2005 are $28,200 and $15,528, respectively, according to Tom Stanley at Morrell auctions; the 2000 jumped from $13,700 in 2007 and the 2005 went up from $10,800 in 2009.

The biggest return, and investment, is among the Romanee-Conti wines, adds Stanley. Today, a case from 2000 sells for $97,200, about a third more than five years ago ($65,000).  A vintage 2005 now sells for $174,600, some 60 percent more than its price in 2009 ($110,340).

At Christie's current auction of fine French wines, one bottle of Romanee-Conti, 2005, sold for $14,520, while cases (12 bottles) of Petrus, vintages 1982 and 2000, fetched $58,080 and $45,980, respectively.

1982 Chateau Petrus
Source: Sotheby's

While good wines do improve with age, and some older vintages still pull sky-high prices, due to weather changes of recent years, bad vintages are rarer than they have been in the past.

“Global warming has been Bordeaux and Burgundy's very good friend over the last 12 years,” says O'Connor.

The less variable weather with fewer storms brought on by the climate shift, suggests O'Connor, has meant that the recent vintages have been superior overall, making them good investments that will only increase in value.

Individuals everywhere with lots of disposable income form a core of buyers, but among the newer purchasers are Brazilians, Russians and Chinese. Since Hong Kong abolished the tax on wine and beer in 2008, residents there have also become big buyers of fine wine.

“If you want to get into the field, you have to buy at the right time, at the right place, with the right provenance and conditions,” says Sutcliffe. “But don't jump in without studying the wines. And beware of people who want to take advantage of you.”

One way is to minimize the chances of buying a fraud is to deal with reputable wine merchants and trustworthy auction houses and merchants, such as Bonhams, Christie's, Morrell and Sotheby's, which each year hold dozens of auctions in New York, London and Hong Kong.

Even the best auction houses have their moments, though. In 1985, at Christie's in London, a collector bought what was advertised as a 1787 bottle of Chateau Lafite Bordeaux, once owned by Thomas Jefferson. Journalist Benjamin Wallace recounted the tangled tale of deceit in his 2008 book, "The Billionaire's Vinegar." Say no more.

As the French say: "C'est la vie."