Burch Family Wines Blog

Investing in Wine

Wine Education

Short supply, strong reputation and good quality have thrown many of Australia's best wines onto the world stage. Those buying dusty bottles of cabernet sauvignon from the South-West could be making a better investment than putting their hard-earned money into the share market, with fine wines often appreciating faster than many shares.

Langton's Classified Australian Wine Index, a secondary wine market indicator, shows that Australian fine-wine values have steadily risen in comparison with a fall in many stocks.

Langton's fine wine Principal Andrew Caillard said. “The index shows underlying confidence in ultra-fine Australian wine and its intrinsic rarity; our critics love to talk about Australia's `industrial wines'. However, when it comes to Australian fine wine, it is ultimately a very finite and ever-depleting stock, based on extraordinary individual vineyard sites. From an international perspective, there's actually not much of it available compared to top Bordeaux and Burgundy.”

Rare West Australian wine, such as an imperial bottle (equal to eight bottles, or six litres) of Howard Park 'Abercrombie' Cabernet Sauvignon, included in the 4th edition of Langton's Classification of Australian Wine Index at the "Excellent" level; denoting “high performing wines of exquisite quality with solid volume of demand”, can fetch as much as $6,000 at auction. Ranking first place in 2008 for auction results among wineries from Western Australia. While in 2003 a Howard Park imperial was ranked at 12th place at $3,200.

A single barrel (25 cases of wine) of Howard Park 'Abercrombie' Cabernet Sauvignon can fetch as much as $20,500 at Australian Wine Auction house Langton’s. Ranking in the top 20 for Australian auction results, and for winery’s from Western Australia ranking equal first place receiving $20,000 a barrel in 2003 and in 3rd place in 2005 for $20,500 per barrel at Langton's auction.

Langton's general manager Stewart Langton said fine wine investors now realised Australian wines held their own against fine wine from Burgundy or Bordeaux.

"For outstanding vintages we're getting close to $200 a bottle (750ml), which is unknown for wine which isn't a statement wine, like a very old bottle of Grange."

Mr Langton said selected vintages from Howard Park represented sound investments.

"The simple facts are that the best of anything in the world will always have a buyer. There's no point buying a $6 cleanskin and expect it to improve in value, but if you buy quality wine from the best wineries with established reputations, there will always be growth."

Former West Australian investment banker and Sterling Wine Auctions director Linton Barber states, “If you want to be sensible about it, put a few hundred dollars away a month, buy a case of this and that, keep it nice and cool, drink a bit of it, sell a bit of it and you can make some money. You really have to make it an extension of a hobby if you want to be successful have a bit of fun with it, and don't forget to drink some. If you love wine, and follow the sales and the players, you are well placed to understand the market, recognising bargains when they turn up. There is money to be made. (Or) more likely, less money to be lost.”

Mr Barber said wine, like all investments, had to be put into perspective. “If we can redefine the term `investment' as something good, something that has value, as something that has an intrinsic growth component irrespective of its fragility or volatility certainly WA wines are receiving the accolades and world recognition that would put them in that category,”

Some other tips for investing in wine

  • Educate yourself on investing in wine – study; immerse yourself in learning about wine investing. Warren Buffet read every book on investment in an Omaha public library by the time he was eleven. The earlier your studies, the better.
  • Store your wines well - If you are looking to invest in quality wines, fine red wines will keep improving for 20-30 years and the best white wines would mature in 10-15 years, however incorrectly stored wine will decline in value rapidly. Cellaring wine has to be 14C or below and constant, with about 65 per cent relative humidity.
  • Invest in reputable wineries that are managed well with a clear vision and mission – people make the difference.
  • Don’t pretend you know everything – remain humble and open to continued learning.
  • Discuss with a reputable retailer what wines are good to store, and down the track sell.
  • Review your portfolio regularly – annually, review market valuations …and perhaps drink a bottle every now and then to see if it is storing well.
  • Observe some reputable Australian Wine writers such as James Halliday and Huon Hooke.
  • Diversify – reduce volatility – balanced portfolios become timeless – try investing in wines from the best of different wine regions.
  • Don’t venture beyond your sphere of knowledge until your sphere of knowledge expands beyond your venture
  • Save, before you invest, before you speculate.
  • Start a wine tasting group where you share and enjoy wines with likeminded people.
  • If you follow the sales and familiarize yourself with the wineries; you are well placed to understand the market, recognising bargains when they turn up.
  • Buy wines early on release, store and hold value with patience
  • Buy large format wines (large bottles), Magnums, imperials, as they store very well and are good for resale.
  • Set realistic objectives – lower your unrealistic expectations – beware of over-zealous returns.
  • Know the downsides as well as the upsides of each investment decision.
  • Work your way up the investment class spectrum, not down – earn the right to risk. By stair stepping savings and investments you insure that you invest according to your risk tolerance level. Generally, the longer your investment horizon, the greater the risk you can tolerate.
  • As with any investment maintain discipline; avoid chasing fads or following fashions. Be a principled investor and disciplined, not opportunistic.


Watch video interview with Senior Winemaker on the Howard Park 'Abercrombie' Cabernet Sauvignon,
one of Australia’s most collected investment wines.

Video interview with Senior Winemaker on the Burch Family wine legacy

 
Category: Wine Education