2021-05-17 22:19:28
Behind the pandemic and other shocks, a remarkable phenomenon has gone unnoticed: the demand for collection wines has revived in the world. No, in Moscow wine cellars, queues for dusty bottles filled with sealing wax, until, of course, line up. But the trend is already visible: the main exchange index of wine blue chips – London Liv-ex – showed growth in 2020. In a difficult year for the economy, the investment attractiveness of eternal human values has again grown, among which the greatest wines of the world have long been inscribed.
More specifically, after the 2019 drop, Liv-ex has risen across all categories, from a conservative 2% on the most general Liv-ex 1000 list to an optimistic 6-7% for the Champagne 50 and Italy 100. The volume of deals made on Liv-ex more than doubled last year. From 2021, experts expect continued growth, so it’s time to think about wine investments.
From esterification to sewerage
Vicious love for old wines has been experienced by people for more than a millennium. This seemingly noble feeling can be called vicious for at least three reasons. Firstly, because in his desire to bring the wine to the desired condition, the collector often sacrifices the natural and immediate beauty of youth, turning to wines set aside for aging, when, alas, they are already withering. Secondly, because such decadent passion costs more. And, finally, because it is still love of convenience. An error in which is fraught with acetic souring and well-known sewer consequences. On the contrary, properly spent aging really makes the wine better and objectively more expensive. Therefore, it is worth spending some time to understand what and how aging changes in wine.
Aging in oak barrels is called oxidative and is carried out primarily for the micro-oxidation of tannins in red wine (the barrel gives white wines vanilla, nutty and some other specific flavor tones, as well as an oily texture). When a young wine has already received the dose of oxygen it needs and, in the words of a textbook, “oxidative processes cease to have a beneficial effect on its quality,” it is considered “bottle-ripened.” After capping, the development of wine continues in the bottle, and it is mainly associated with recovery processes. The most important of the reactions that take place in bottled wine with minimal access to oxygen is the interaction of alcohols with acids. It is accompanied by the formation of esters – the very components of the bouquet that determine the dignity of old wines. That is why it is called esterification.
Wine aging is a long process, it can take decades. And every year wine inevitably rises in price, acquiring a new quality and absorbing time, which in itself costs a lot of money.
Futures en primeur
The most thoughtful, proven by more than three centuries of history and the most stable wine market in the world has formed around the best Bordeaux wines, first classified back in 1855. The creators of this market, wine merchants, have found a tool with which they managed to share the burden of the added value of aged wine between the seller and the buyer. Wine futures have become such a tool – the sale of wines at the initial stage of their aging: en primeur (“an example”).
The futures campaign begins in Bordeaux in the first week of April, when vintners and independent experts from all over the world come here to taste the wines of the last vintage. At this point, red wines are still rough and uncouth – they have just completed their malolactic fermentation and are full of contradictions of an unformed character. Further aging should smooth out their imperfections – about a year more in the barrel, and then from 6 to 12 months in the bottle. But the trained flair of the tasters already allows us to assess the potential of the wine, and following the results of these very first public tastings, producers begin to form their prices. Since the end of May, wine castles have been putting up lots of their wines for sale in several tranches. Merchants, through the mediation of courtiers, buy this wine and almost immediately offer it to their customers – importers, restaurateurs, cavistas and private customers. The quality of the harvest, its volume, as well as the state of the market determine the price level.
The wine of a good harvest has more potential, which means that it will age for a long time, adding in price from year to year. Guessing the wines with the best potential and investing in the purchase of such “en primer” wines means securing a good profit for yourself, for the first two years – from 30 to 100%. And the best, truly sought-after wines of successful harvest years continue to gain in price not only in the first two years of their life, but also closer to old age, becoming fully collectible. However, you can also miscalculate if you do not guess the potential of the wine or the market trend.
From Bordeaux, the fashion for wine tasting “en primer” spread throughout France and throughout Europe, and also spread across the ocean. Today, Burgundy, the French Rhone Valley, Tuscany, Piedmont, and the Portuguese Duro Valley have their own version of tasting “en example”. However, samples of wines selected from barrels are officially and unofficially sent to Bordeaux even from those regions that have not yet joined the global “en example” movement – from Spain, Greece, Chile and other countries where French wine consultants and merchants work.
On the last Friday of May 2021, an unprecedented tasting of Russian wines en primeur will also take place in the Krasnodar Territory – in the village of Sennoy, where more than 20 Russian wineries will gather on the territory of the Fanagoria wine house, having decided for the first time to publicly present their “examples”. As part of the wine festival, which was called the “First Sample”, there will be not only an expert tasting of young premium wines, but also a charity auction. So the pricing ambitions of the pioneers of Russian winemaking can be tested in practice.
However, there is a serious obstacle in the way of the “en primer” movement in Russia. It is that individuals and organizations that do not have an alcohol license will not be able to return their investment, even if it is a very successful purchase. In other words, they will not be able to sell the wine they have purchased. So the winners of the auction will have to share the coveted lot of 288 bottles with friends or drink by themselves.
Liquidity check
If the hedonistic aspect of wine investing isn’t your primary concern, and if a $100,000 entry threshold with a ten-year investment horizon doesn’t sound too high, welcome to an investment fund that promises a return of around 7% in euros. In any case, such conditions are announced to their shareholders by the Russian wine investment fund Vinoterra, established under the Russian wine trading company of the same name.
The Fund purchases collection wines, the growth of prices for which in the foreseeable future does not raise doubts among experts, and after some time, “as the target level of profitability is reached”, it “leaves the asset”, selling wine to those who wish from its client base. The scheme looks quite conservative, but if the market functions without shocks, then the fund works without interruption. In Europe, wine investment funds began to appear at the end of the 20th century, on the wave of steadily growing prices for premium wines. Russia turned to this practice only about 10 years ago, and until now, legal restrictions on the circulation of alcoholic products do not allow investment funds to fully use the potential of the wine market.
As for the novice wine investor, who does not want to “play big” yet, he may be interested in the Vindome mobile application launched last year. With it, it is quite easy to acquire a more modest wine asset. The minimum investment through Vindome is only 150 euros for a case of six bottles. For those who are not yet well versed in the value system of the modern wine world, the application’s virtual wine expert will offer assistance in choosing a wine.
Using the application, you can follow the quotes of the wine asset, choosing either a short-term investment period (1-3 years) or a longer investment period (5 years with the possibility of extension). For those who are eager to check the liquidity of their asset in the truest sense of the word, the company promises to supply wines from warehouses in France or Italy with the help of its logistics partners. Well, if you want to get rid of the asset, you can also use the “quick sale” function. Vindome receives a 4% commission on every trade. In 2021, the app’s expected number of users will exceed 13,000, with total revenue projected at €9.6 million.
Wines and prices of Earth orbits
The best wines acquire their collection value not only due to taste. The most expensive and famous wines sometimes skyrocket in price quite unpredictably.
For example, a box of Chateau Mouton Rothschild 2008 (not the most outstanding, according to experts) at the end of 2010 almost doubled in price in a month – from 4.254 to 7.898 pounds, after the author of its label was named. For the first time, the Chinese artist Su Li performed in this capacity, and since the number 8 is considered lucky in China, the demand for the “Chinese Mouton” of the happy year among Asian collectors has grown rapidly. Those who during the campaign of “examples” did not fail then intuition could be envied.
Prices for the already expensive 2000 Chateau Petrus, the first wine sent into Earth orbit for research purposes, are sure to soar soon. One of the 12 bottles returned to Earth after a 14 month space odyssey will be auctioned off by Christie’s. In addition to the “cosmic Petrus”, the lot will include another bottle of the same “millennium harvest”, but which did not leave the sinful Earth, as well as handmade designer packaging. Estimated price of the lot is $1 million.
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