For many well-heeled individuals, investing goes beyond stocks, bonds, and property, with classic cars, art, whisk(e)y, and fine wine also making viable opportunities to turn a profit. The rarified world of the latter, in particular, can make it prohibitive to enter.
Fortunately, Langtons, Australia’s leading fine wine destination, has been simplifying the world of fine wine for over three decades. Launched in 1990, the Langtons Classification is a data-based system that recognises the top-performing wines in the country based on their consistency, quality, clearance rate, and tradability in the market.
A new revamp to the system sees it simplified and divided into two tiers, ‘First Classified’ and ‘Classified’. The former comprises the pinnacle of Australian winemaking and is representative of the local drops that have been at the top of their game for generations and compete with the world’s finest. The ‘Classified’ designation is for the wines that are in demand and have performed highly on the secondary market, but may lack the storied heritage of their First Classified counterparts.
In addition to making it easier to select a surefire hit for your next dinner party, the Langtons Classification works to make the esoteric art of investing in Australian fine wine a little more accessible. With the performance of fine wine occurring independently (and often in contrast to) the stock market, investing in wine can act as a supplement to a more conventional investment portfolio. To get the lowdown on investing in fine wine, we tapped Michael Anderson, head of auctions and secondary market at Langtons, for his insights and advice.
Is fine wine a good financial investment?
“From what we have seen over the last few years, certain fine wines (just like certain stocks) appear to be an excellent alternative investment opportunity,” says Michael Anderson.
“Depending on when you bought the wine is the key factor, with wines like Penfolds Grange and Henschke Hill of Grace appreciating nicely over the last few decades. If, for example, you bought the 1990 release of Grange (then around $100) you could sell it in the secondary for around $700. Burgundy, too, has seen big increases on certain cuvees with wines appreciating 300% and 400% in just a few years.”
As for how it compares to the stock market? Well, for Anderson, the answer is more qualitative than quantitative: “It’s certainly more interesting.”
Have there been many newer entrants into the fine wine market?
“It depends on what you consider to be fine wine. There are stunning wines across the world at $25AUD per bottle but whether these would be considered fine wine is another thing,” explains Anderson.
“At the more expensive and rare level of wine there are always wines coming and going. Wineries like Penfolds ideate and develop new wines each year and they are often automatically seen as a new entrant to the fine wine market.
In the same vein, Anderson notes that wineries can have their identity watered down or shutter altogether, something that typically detrimentally affects financial performance. That’s not always the case though — “in a few rare examples, wineries that close down can be elevated to an even higher sphere or fine wine rarity like wines from Henri Jayer and Engel.”
What influences fine wine performance?
According to Anderson, fine wine performance is multifactorial, with one of the key factors being brand perception and scarcity.
“Something we have noticed while assessing the data for the most recent Classification, is whether the winery is nurturing their brand,” explains Anderson. “What that means in layman’s terms is, is the brand creating buzz around its wines while limiting supply to ensure their product isn’t everywhere? Let it be known that Australia has a rich history of affordable, brilliantly crafted wines for the everyday drinker, but when it comes to the fine wine secondary market it’s all about scarcity. If you want your product to fire, there needs to be a limited supply in the market and the customer needs to recognise the urgency of bidding on that wine, and bidding big.
“Other factors include seasonality (bigger reds for winter, layered whites for the warmer months), economic factors (if your mortgage has just doubled you might be looking for alternatives to $5,000 bottles of wine… although this is often the best time to buy should your means allow), and reputation. Is your wine, region, style, winery in fashion at this time? Certainly with the new release of the Classification we have seen a movement away from the bigger reds of yesteryear towards cooler-climate styles like Pinot and Chardonnay.”
Which countries are the best to source fine wines from?
Much like other luxury markets, France is a consistent leader in fine wine investment.
“France has always been and looks to continue to be the pinnacle of fine wine,” says Anderson. “They have the heritage, practices, personalities and overall nous for the finer side of life. The term fine is built into the fabric of their country and people and that is seen through their incredible wine industry. Further, they are staunchly protective of their wine trade and will stop at nothing to protect their industry, its regions and producer’s livelihoods.”
Anderson also notes that the sheer volume of regions like Sonoma and Napa have made the US a growing market for fine wine investment.
Are Australian wines a good investment?
When it comes to the comparatively emerging fine wine market in Australia, Anderson recommends sticking to names with a strong history and good brand reputation.
What are some of the factors to consider when investing in wine?
Anderson warns against sourcing fine wines from potentially dubious sources. “It’s important to stay away from deep discount sites offering unheard of wines with big discounts,” he says. “Often these wines are made up by a savvy marketing team and slapped with a huge retail price that the wine will never actually sell for. Then, the wine is discounted by 80%+ to seem like a deal too good to be true, until you get the wine into the secondary market and it simply won’t sell even at the discounted price you paid.”
Sometimes the traditional route is best — “stick to the well known, well worn paths of solid names and great producers with good write ups from trusted wine reviewers.”
How can the Langtons classification system aid with selecting fine wine in the domestic market?
“The Classification is the absolute benchmark for investing as it’s completely data driven via the results of the strongest and most trusted fine wine auction house in the country,” says Anderson.
“Every wine on the Classification is traded regularly and for rewarding sums of money. We spend weeks analysing the data to come up with wines like Rockford Basket Press that sits in the 1st Classified section of the Classification. A wine that sells for well over release price every time it goes to auction and clears quickly garnering huge customer bidding.
“That tells you that the wine is worth collecting.”
What is the best way to store fine wine to ensure it retains its value?
Fine wine tends to get better with age — the caveat is that you need to store it correctly. Anderson recommends storing wine at a consistent temperature (typically between 12 to 14°C) in a dark space, with the latter important to maintain the wine’s colour pigmentation and prevent the wine within from being damaged.
“Keeping wines with corks on their side is a must to ensure the corks stay moist and don’t dry out,” notes Anderson, adding that those concerned about keeping their bottles in pristine condition can also wrap the labels with cling film to ensure they don’t stain.
Top tips for investing in fine wine
Here, Michael Anderson, head of auctions and secondary market at Langtons, shares his recommendations for beginners who want to start investing in fine wine
- Buy from a reputable house or retailer
- Buy more than one bottle if you can
- Buy from good vintages
- Read reviews and know how your investments are ranked in the industry
- Know the Classification back to front, and understand the Bordeaux and Burgundy systems for classifying wine
- Keep an eye on your investment’s condition as wines can change!
- Finally, don’t forget the hidden costs of collecting, including wine cabinets or storage, power, space to keep the wine, insurance and so forth… it all adds up.
Feature image courtesy of Richard Avedon
