Fine wine market flattens but still has fizz

If you ever dreamed of tippling some of the oldest plonk in the world, well, you're running out of time.

During the second weekend in March, a group of wine experts gathering in Epernay, France, popped one of the three oldest bottles of vino on the planet — a bottle of Perrier Jouët's Sillery 1825.

The tasters, essentially prominent wine writers, reported that sipping something this old was akin to drinking gold.

"It is virtually impossible to assign a value to the 1825 vintage. We've never seen anything like it on the market," said Serena Sutcliffe, head of the international wine department at Sotheby's, the U.K. auction house.

Of course, the wine itself was heavily oxidized, another term for "flat," and had lost much of its sparkle, according to news reports.

Indeed, those same adjectives might be applicable to the fine wine market as a whole — where prices have dropped. But, investors are still finding that, even in these hard times, they can scrape some positive return from what is in their basements.

Fine wine is usually old and something that you might actually drink.

Of course, sipping a $300 bottle of wine was a trait more reserved for the economic boom of two years ago, perhaps most famously embodied by the “Barclay Six,” the bankers who ran up a $75,000 wine bill at one of celebrity chef Gordon Ramsay's restaurants in London, England.

In recent years, however, more people have started viewing vintage red or white wine as an investment, either to be squirreled away in a basement cellar or as part of a fine wine portfolio held in a financial device similar to an equity mutual fund.

Unfortunately, for these oenologists, what was once seen as a priceless commodity now has taken on more characteristics of a plain old slumping stock in recent months.

Wine into vinegar
The London International Vintners Exchange (Liv-ex) of 100 fine wines — considered the leading market indicator of wine prices — was down 15 per cent in February 2009 compared to the previous February.

Compared to the literal vaporization that has occurred with stock market valuations, however, sinking some cash in older wine, whether drinkable or not, might still be a reasonable place for some cash.

"Although it is important to take a long-term view, it is undeniable that the best wines have proved to be sound long-term investments over the past 20 years," said Berry Bros. & Rudd, a prominent U.K. wine merchant, in its February 2009 market outlook.

Back into gold
Essentially, wine as an investment acts as a commodity similar to gold, diamonds or any other valuable mineral, experts say.

People buy the product as a place to store their money while they wait for equity and currency markets to settle down.

But, the grape drink also benefits from the scarcity of supply. Essentially, it is harder to get your hands on more aged wine simply because there are fewer bottles left for purchase.

For example, last July, owners of a British castle found a bottle of 1893 Veuve Cliquot dry champagne in a locked cupboard, now considered to be priceless.

Even later vintages can command premium prices.

Liv-ex's index measures the market price of 100 of the top fine wines in the world. The 1988 Krug, which is one wine included in the measure, would fetch between $337 and $455 a bottle depending upon which merchant was selling.

Similarly, a Talbot from 1986, another member of Liv-ex's 100, would be worth in the range of $200.

Taken together, the Liv-ex index has not lost — or gained — value since November. But, the same cannot be said for equity investments.

The New York Stock Exchange, for example, has seen its overall value drop by 18 per cent since the end of January.

For many players in this high-priced and pretty opaque market, a zero return is better than a loss and should turn positive as the economy recovers and consumers head back to their tippling ways.

"We have long espoused the view that wine will not be immune to the general financial issues affecting all asset classes," said Robert Lench, managing director of the Vinum Fine Wine Fund, U.K. financial fund specializing in investing in vintage wine. "We do, however, contend that historically, wine has been less volatile and the rate of decline comparably less rapid than in other assets areas."