A word of warning: it’s not going to be that easy making money by buying and selling Autralian wine. So, if you are one of the hundreds who have just spent a few thousand dollars on top-drawer Australian red wine with a view to making something of a financial coup d’etat over the next five years, you may not enjoy the remainder of this article. If you have just cashed in your superannuation for Hill of Grace, sold your investment property for a few cases of Grange or traded in your shares for Jasper Hill, I hope you know exactly what you’re doing. Perhaps you think I’m being extreme? No chance. People out there are doing exactly that, hoping to strike it rich by becoming part-time dealers in wine. And that, in a nutshell, is the trap. Let’s consider some facts. Firstly, the price of Grange is increasing at a truly phenomenal rate, well above most legitimate forms of investment. Henschke’s Hill of Grace is climbing even faster. There’s little doubt that the auction market, especially Langton’s Fine Wine Auctions, are a major factor fuelling these price increases. Other factors are the welter of favourable overseas publicity for premium Australian red wines which in turn has created a dramatic new demand amongst wealthy Asian wine buyers, many of whom are actively seeking out the world’s most prestigious and expensive wines. It’s no coincidence that the largest single outlet for Grange in the world is Melbourne’s Crown Casino. But although Australian wine is receiving unprecedented publicity overseas, especially for our premium red wines – and especially those made from shiraz – that enthusiasm has yet to be reflected in auction and retail prices outside Australia. You can still pick up Grange in New York and London for its initial release price, which is actually cheaper than its retail price in Australia. You now hear Southcorp executives talk of ‘repatriating’ Grange – a fancy way of saying that they will bring back to Australia some of the stock they can’t sell overseas. To this point at least, the only country in the world where the price of Australian wine is rising so meteorically is Australia itself. Thirdly, there’s no doubt at all that there will still be a steady overall trend upwards in the price of Australian wine, based on its unquestioned quality and steadily increasing demand within and Australia and overseas, allied to an increasing willingness everywhere to pay more money for it. Australian wine retailers already cannot get enough premium Australian wine for their shelves, regardless of the price rises at the top end of the market. But the secondary market, where the speculators expect to make their killings, is an entirely different proposition. Let’s consider some harder facts, some of which are going to hurt. Most of the speculators, whose secretaries have scoured the countryside over the telephone to cobble together their boxes of Grange, haven’t created proper cellaring conditions. Neither do most of them know a great deal about wine, nor do they even drink premium wine. Would you buy a ten year-old bottle of Grange from one of them? Silly as it sounds, there’s a lot of Grange cellared in Australian kitchens, under Australian staircases, next to Australian windows and, would you believe, in disused Australian fireplaces. The onsellers who are expected to pay top bucks for these wines in future are hardly likely to risk their own reputations by reselling goods with that sort of provenance, be they retailers or auctioneers. Who is going to buy these bottles? Word around the traps is that in ten years time the current release of Grange, the 1991 vintage, will collect $2,000 per bottle. Surely not even the Asian high rollers would be insane enough to come at that! It’s inevitable that the extreme component of the Grange bubble will have to burst. We will then be left with a large volume of semi-mature Grange, especially from 1990 and 1991, which nobody wants to drink. The prices will have to come down, otherwise nobody will touch the bottles, many of which will have been cellared in less than ideal conditions. The true danger is that the recent price hysteria has spurned a new generation of amateur wine dealers prepared to convert their nest-eggs to wine cellars. Oblivious to the dangers of choosing the right wines, paying the right price, creating the right conditions and then finding a market for the product at a worthwhile profit, these speculators are doing little more than driving up retail prices. Simply because they might have access to a large amount of money, many have the naive belief that Penfolds are about to come running to their door hoping for an easy way to off load Grange by the palate. That’s sheer fantasy. All top Australian red wine is in genuinely short supply right now and it will only become harder to find in any quantity. With only a few exceptions, such as the NSW-based cellaring operation owned by Anders Josephson, you simply can’t buy the small number of true blue riband Australian wines in the volumes needed to profitably store and market them. Certain well-informed buyers will indeed make realistic long-term returns by carefully selecting batches of well-priced Australian wine for which they haven’t paid a king’s ransom, to properly cellar for future re-release. They will need to invest in wine expertise, temperature and humidity-controlled cellaring facilities, marketing and stock. Success will be no harder or easier to achieve than with any business which is properly managed. Look around the world at the price of older wines against current vintages. It’s usually the case that outside a few wines, only the recognised classic vintages of older wines fetch more than current release. That’s already the case in Australia, including those identified in the top level of the Langton’s Classification of Australian Wine, which is based on auction performance. Local retailers are already tiring of the advances of amateur wine dealers hoping to offload Grange and Hill of Grace at absurd prices. The best of them simply aren’t taking the bait; they want to keep their customers. Sooner or later premium Australian wine will again be largely bought by people intending to drink it. Don’t be caught short when that actually happens.
