Is Wine Back as an Investment?
It has been a while since talk of wine as an investment has come up on my radar. In the late 1990s and early 00s, particularly during the Internet Bubble, there was a good deal of stirring among many about wine not only as an investment but as a way to make a quick buck.
Today I came across an article at the Wales.co.uk in which the fine art of wine collecting as an investment and the factors that go into this pursuit. A fine wine retailer from Cardiff is quoted at length and offers some pretty interesting perspective on using wine as an investment.
Among other things, he suggests sticking with Bordeaux and only in very good vintages as well as buying multiple cases if the budget allows. But what caught my eye was his analysis of how the market for collectible wines changed in the mid 1990s. The retailer explains that three things changed in particular:
1. People stopped buying Vintage Port as a mainstay in their wine investment portfolio
2. New wine regions emerged, enlarging the market of collectible wines
3. The emergence of the wine writer as purchasing adviser replaced the once reliable wine merchant.
But what was not mentioned was the new reality of arbitraging with wine: no one has more information today than anyone else. This is the key to making a great investment: having more information than the person on the other side of the transaction.
I was speaking with Oren Michels, a pretty brilliant guy, not too long ago. Both of us were at Winebid.com in its early days, me in marketing and Oren as President. We were discussing the current condition of Winebid.com, wine auction houses in general, and the differences that have emerged in just a few short years to that have made it more difficult to really make a killing on wine fast.
"Everyone has the same information about prices now," Oren noted. "You just go to winesearcher.com and you can easily find the lowest price on nearly any given wine. It makes it near impossible to flip a wine for significantly more money when everyone has the same information."
He’s right. Back in the day, not even the wineries were aware of what their wines were getting on the open market. One could purchase some Napa Cabs for $75 and sell them the next day for $300 to those who were not lucky enough to be on the wineries mailing list. Since then many wineries have caught on and raised their prices. The same was the case with Australian wines before they were discovered by Robert Parker. At the time no one knew where to get there hands on these wines so they went to Winebid.com or other auction houses and paid a real premium.
Today, the game is different if you want to try to buy and quickly resell a wine at a real profit. It’s about speculating on what scores Parker will give newly released wines. It’s also about looking for those new, undiscovered wineries that just might make into the "cult" realm and having your large allocation before they are discovered or given top scores.
What can’t be counted on today is having certain knowledge about the secondary market that others do not have. It’s just too easy to know what a wine is worth given the access the Internet provides to information of this sort.
And so, we have something very akin to the securities industry where everyone is supposed to have the same information. This is probably a good thing.
Michels wasn’t so sure if this sort of market is a good thing for auction houses like Winebid.com. I’m a big believer in the on-line auction market for luxury goods, particularly goods that are in small supply. They remain an active market place for those who simply want to acquire these wines, rather than buy and sell them quickly at a profit.
The other interesting thing is the fact that we see a story on wine as an investment. Will we see others? I suspect so. This is a comment itself about the general trend of our economy.