[question] Question submitted by Teo Chang Ching, Singapore. There have been a number articles dismissing investing in New World wines such as Australia, and advised that investors should go for First Growths in Bordeaux or Spain and Italy instead. What’s your take on this? Why should an investor choose Australian wine over French wine? [/question] [answer] Several years ago it was indeed possible for people in Australia to buy what are now recognised as the country’s most expensive wines for around A$30-40 a bottle. Between 1990 and 1996, which coincides with Robert Parker’s ‘discovery’ of the 1990 vintage of Penfolds Grange, prices for these ‘collectors’ wines’ on the secondary market increased dramatically. Back then I used to talk to people like Rick Kinzbrunner of Giaconda and Steve Henschke from Henschke about this issue. Their concern was that they were spending a great deal of energy, time and talent to create ‘icon’ wines, which they were then selling for a relatively small margin. But a customer who bought their wine early, for around $40 per bottle, could sell those same bottles for two to four times that amount just a few weeks later. At the time, my point of view was that the market was dictating the real price of these wines, and that the producers should increase their retail or ex cellar price to fit just beneath these levels. If their wine is genuinely worth high prices, and can sustain them over a period of time, I can’t see why the producers shouldn’t make the profit ahead of the wine speculators who just happened to be at the right place at the right time. It’s therefore no surprise to me that the prices of Australia’s ‘icon’ wines have increased ex cellar, but that they are no longer achieving the rate of return as an investment for finished wine that they did when sold by their makers at well below their true worth. They are released at close to their genuine prices. The wine media and trade helped to create the environment for certain wines to become very expensive, and the producers are now reaping the benefits of this. The best outcome from this situation is that the makers typically reinvest a large proportion of their income into the continued improvement of their vineyard and cellar practices. This is a common trend the world over, and is leading to better outcomes for the wine drinkers who are prepared to pay for them. So, from the point of view of wine investment, my advice is to buy plenty of Australian wine. It’s possible to create an extraordinary cellar for the benefit of you, your friends and your children, to drink! [/answer]
