Investing in bottled Australian and New Zealand wine

It’s difficult to make money from investing in Australian or New Zealand wine. I generally suggest that people simply buy what they want to drink, even if it means allocating ten percent of after-tax income to buying wine for fun. Expensive as it might sound, it’s an awful lot cheaper and significantly less painful than attempting to turn a hobby into a serious business.

Right now, there’s a lot of older wine coming back onto the Australian secondary marketplace. Where from? The superannuation funds whose managers were seduced by the temptations of wine investment around five to eight years ago, when Australian wine became the high-flying flavour of the month. It still might be, but other than for a few examples, it’s cheaper now than it was then.

The golden time for investment in Australian wine has passed. It occurred around a decade ago, before the rest of the world had awoken to the value and quality of the wines made in this country. Some collectors, by virtue of the fact that they were there at the right place at the right time, made a killing.

There has been a plethora of new investment schemes in bottled wines, many of which are unlikely to deliver on their promises. The imminent closure of the Australian Wine Exchange, which attempted to trade wine in a fashion almost identical to the share market, simply reinforces this point.

Unless you’re prepared to do the homework and discover for yourself some unknown star performer of the future, there are some basic rules to follow when buying investment wine. These are:

* Stick with established brands, large and small.
* Avoid poor or ordinary vintages like they’re carrying a communicable disease.
* If you buy in dozens, unopened boxes are best.
* The market, especially the overseas component, is spending big on older vintages of top labels and good years.
* Just because a currently available wine may be expensive, it doesn’t mean that a it is any good, and b that it will appreciate in value.
* Right now, shiraz is king, and it’s unlikely that the overseas buyers who are currently driving up prices will switch their tastes to other varieties with which Australia doesn’t have as quite as distinct an advantage.
* Magnums cost more than they should in Australia, but do appreciate more quickly.
* Before you buy or sell, check not only the track record of the agent or auction house, but also the selling and buying commissions applicable.

The best Australian investment wines fall into two entirely separate categories, cult and classic. Led by Grange, the classic investment wines are those like Henschke’s Hill of Grace, Mount Mary Cabernets – wines that, over the years, have developed a proven track record for quality and investment return. Langton’s Classification of Distinguished Wine, a catalogue developed and maintained by Australia’s largest and most influential auction house, is as thorough a listing of these wines as you can get.

On the other hand, recent years have seen the emergence of a number of small wineries whose tiny productions – typically of old-vine shiraz – now sell at stratospheric prices. American wine critic Robert Parker jnr simply needs to allocate a wine a single score above 90 to catapult an unheard of wine into the pricing stratosphere. Wines from makers like Torbreck, Wild Duck Creek, Three Rivers, Greenock Creek, Veritas, Noon’s and the Burge Family have become the hottest-performing wines on the Australian auction market, before they are quickly shipped off to the US for resale. It would also appear that a relationship exists between the Dow Jones index and the cost people are willing to pay for the most sought-after Australian wines in the US.

In 2003 we saw the hysteria surrounding the release of the 1998 Penfolds Grange. If you were one of the lucky able to buy at $300 and sell at $800, you might think that wine investment was easy. If you were one of those who bought at $800, I want to know what you were thinking. The last time a Grange was released to such a reaction was the 1990 vintage, which rapidly shot from under $200 to around $600. This great vintage of Australia’s flagship red now fetches $500, less than it did five years ago. Please login to post comment