Wine critics should not be investment advisers

Since when did wine critics become investment advisers? In this month’s ‘Winestate’ magazine, a normally sedate, predictable read from Adelaide, Editor Peter Simic peers into the crystal ball and foresees quite extraordinary price growth for Meshach (Grant Burge’s flagship red) in the months ahead.

Simic publishes bold predictions in a table headed ‘Meshach Investment Profile’. According to Simic’s table, by the end of 1997, Meshach 1988 is set to leap from $70+ to $180+; 1990 from $70 to $150+; 1991 from $70 to $150; 1992 from $50 to $100; and 1993 from $60 to $100+.

And that’s only the 750ml bottles. Magnums, Simic tips, might notch even greater gains: 1990 to spring from $135 to $500; 1991 from $120 to $400+; and 1992 from $150 to $400.

Could Simic be right? Not likely. Sure Australian reds, especially Shiraz, enjoy increasing international demand. But it’s bold stuff touting a relative newcomer like Meshach as a new Grange set to dash into the limelight between May and December 1997.

We’re perhaps better off taking the more conservative view that 1) this is wine, made to drink and enjoy and 2) if it really were that easy to double and triple our money we’d all be millionaires.

Meshach is an exceptional Australian red. It’s the best Grant Burge can muster from one of the largest private vineyard holdings in the Barossa. From the first vintage (1988) Meshach made its mark and the evolution seen in subsequent vintages tends to confirm the early promise.

But it takes time to take on a blue-chip status. First the style of the wine needs to mature in the wine makers hands. Then older vintages need time to fulfil all the early promise. Meshach seems headed that way, but let’s see a few more vintages first.

Penfolds Grange and Henschke Hill of Grace are the outstanding examples of early promise and time-proven performance leading to international blue-chip status and, finally, heady prices.

Now, if you’d bought substantial quantities of either wine at the comparatively modest prices of the sixties, seventies, eighties or early nineties, you could now make a killing. Many people have.

But now’s boom time and that’s the time to be wary. Whether buying wine as a drinking or financial investment (or both) timing is of the essence and provenance is your security.

The time to buy is at release when the retailer specials are on, or you might get lucky and find historically-priced stock in an out of the way bottle shop.

When vintages sell out, the secondary markets take over and that’s where your fate as an investor lies. If you’re the one paying top price at auction, with investment rather than drinking in mind, just remember Alan Bond, Channel 9 and Kerry Packer!

We saw with the release of Grange 1990 just two years ago how some buyers grabbed retail stock at $140 and only months later turned that into $300 (less about 20 per cent commission) at auction. Those who bought at $300 are the Alan Bonds.

Retailers became canny after that and prices moved from cost-plus-margin to what the market could bear.

So that when the 1991 was released last year, retailers tended to eke out small quantities at a ‘normal’ retail price to loyal customers, while offering the bulk of their stock at market price.

The same mentality may prevail with the release this week of the 1992 Penfolds Grange and its cellar mate Cabernet Sauvignon Bin 707 1994.

Interestingly, Penfolds themselves have once again refrained from profiteering. They’ve taken a modest (given such strong demand) increase on Grange of around fifteen per cent – a clear signal in my mind that they view retail prices of around $250-$300 for current vintages as unsustainable.

The Penfold selling price, in theory, allows for a retail price of around $175 a bottle. But if, as seems probable, retailers view market value as closer to $300, then that’s where the price will be.

The 1992 fits squarely into the usual deep, ‘sweet’, solid, Grange mould. It just needs another fifteen years in bottle to blossom. From the international perspective, it’s worth $175 a bottle, but beyond that it looks overpriced, in my opinion.

From the same international perspective, Penfolds Cabernet Sauvignon Bin

707 1994 looks tempting even at a full retail price of $80 (it’s almost certain to be discounted below that). I think it’s as good as Grange.

The difference is that Bin 707 has not yet acquired Grange status. I think it will. And there’ll be a few bottles salted away at Chateau Shanahan. But I’m not looking for a Simic-like price doubling this year. I’m thinking more of dinner parties around 2010 when it’ll be ready to drink. Isn’t that what wine’s for?

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