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Bordeaux Fine Wine Investment – A Micro Economy? - 13th September 2010
By Oliver Charles Gearing -

Following on from 'THE WALL STREET JOURNAL' and their latest article on Bordeaux investment, Cult Wines Ltd & have been advisers to Kimberly Peterson on the latest 2009 En Primeur (Link To Article).

Philip Gearing was featured as saying "...the 2009 Lafite costs 860 EUR a bottle". It was interesting that a spokesperson for Lafite Rothschild refused to comment, and yet the article marvelled at the fact that the 2008 vintage was released at only 185 EUR a bottle showing a sharp incline in the face of recession.

Many people who get involved in the wine market for investment will be told very often that their risk level is very low when dealing with the Bordeaux market. This statement in itself is bland and slightly misleading. Although a huge amount of money is made from the Bordeaux market, it is always made by the top 1% of the market. If you want to really play as safe as possible then you are looking at around 0.5% of the market, with wines such as Lafite Rothschild and Petrus. In essence the investment in wines such as these is so impressive because of demand outstripping supply, and of course the fact that these wines are necessity at most major banquets and premier restaurants and cellars around the world. 10,000 cases each year over a twenty year period rapidly diminish and most are kept locked away by ardent collectors.

When a terrible economy hits the world, the top 0.5% of the wine market has shown to be wrapped inside a bubble of security with a network of stock-like exchanges, merchants and collectors, hurrying to buy the tiny allocations. This is why most economists today call the wine investment market a ‘micro economy’. However we have seen the tidal wave of a bad economy hit some of these wines momentarily during a dip, taking 10-20% of the asking price. This dip in price rectified and even increased with the recent recession, because anything in the general commodities markets seemed to be kryptonite to money, therefore a huge surge of investors looked elsewhere and the wine market grew exponentially.

What happened to the rest of the market is very similar to other luxury products in a middle price range. The prices were knocked down and of course the smaller independent traders, no matter how talented, have seen their audience diminish. I have to say however that lower priced fine wine, available in boutique shops around areas such as London; have seen an increase in purchase. It seems that with a recession people tend to drown their sorrows a little more, and who can blame them with the amount of money most people have lost in other areas. Property, equities, savings and many more options have become fairly useless with of course the odd exception in the stock market, made usually off the back of a miserable event savaged on by hungry brokers.

I look forward to the general economy picking up and I hope that the talented makers of wine from around the world see their figures increasing soon. Even in Australia which produces some wonderful highly rated wine, has seen their extremely niche specialist market drop off. Fantastic makers such as Torbreck and Two Hands have produced 100 point wines that are simply wonderful, especially if you like your wines dark and heavy, with a nose to end all noses. It is in fact these wines which are struggling to keep the boutique industry growing through such hard times. America is one of the main buyers of these wines and unfortunately it has turned off the attraction. America has also become one of the smaller buyers in the investment market in general, with Asian and Europe and specifically London being the central hubs to fine wine investment.

I will raise a glass to the industry and hope that the good luck we see in the investment market spreads to our talented independent growers. As anyone in business knows, it is the new talent that keeps a thriving industry alive.

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