Fancy a drink? China does. Purchasing (or not) first-growth claret

Wine seems to me one of the most amazing things in the world. You let grapes ferment, and you get this huge variety of different, wonderful, delicious liquids. Everything from a rich, dark Aussie Shiraz to a spicy, buttery, fruity Gewürztraminer (my favourite) or an unctuous, sweet yet invigorating Canadian ice-wine… just amazing.

I’ve been a wine collector / investor for some years, although my wife would challenge the “investor” bit on the basis that I haven’t to date actually sold a bottle. But I will, probably soon. One particular  case, bought to celebrate my daughter’s birth in 1990 has proved to be the single best investment I’ve ever made, almost but not quite wiping out my losses on Rok and Southern Cross shares! It’s tripled in value in the last 2 years and needs to be sold really. (Note to burglars – it’s not stored at home…!)

And over the years, we’ve grown less and less keen on vintage French wine – but most of my historical purchases have been from Bordeaux and the Rhone.  Hence I think some wider selling is needed – it seems to me that there are amazing wines now from Chile and Argentina for instance, in the £10 a bottle range, that are just much more enjoyable than a £20+ French wine.

But I have still been buying a few cases of Claret in good years, with a view to special events and / or maybe selling on. I do that through the Wine Society, simply one of the best institutions of any kind that I’ve ever been associated with. (It’s a Co-operative and if you like wine, do take a look at it here). Anyway, they sent me their list of 2010 Clarets “en primeur” last week. This is wine that hasn’t even been bottled yet – you buy it now but it won’t be shipped to the UK till 2013.

So should I buy / invest? The prices look steep to say the least. I started with the first growths (the very top wines).

Chateau Latour – £3100. OK, that didn’t seem as bad as I thought, then I realised, it’s sold these days in half cases (6 bottles). £3000 for 6 bottles… wow.  Then I looked more carefully.

It’s not a half case. It’s being sold in units of 3 bottles.

That’s £3100 for 3 bottles (plus you’ll have to pay VAT and duty on shipping, which will add another £600+). So over £1200 a bottle.

This is all China’s fault. Claret has become a huge status symbol there; buying a friend or business contact a bottle of top claret is seen as the right thing to do. And unlike collectors in the US and Europe, who if anything tend to keep vintages for too long before drinking, the Chinese drink it now.  Sometimes mixed with Coke.  So stocks of good vintages are declining, pushing prices higher, which makes the status thing even stronger… etc.

I can’t bring myself to spend this sort of money, and I don’t think at that price it’s a great investment opportunity. I might buy a couple of 2nd or 3rd growths at a mere £500 for a half case – if you’re lucky and choose one that proves to be a star, you might just make some money. And I can just about contemplate drinking a £100 a bottle wine on a very special occasion if the investment aspect doesn’t work out. That is of course the great thing about buying wine – unlike shares, if the investment doesn’t work out, you can have fun drinking it. But paying £1000+ for a bottle? The procurement value for money thing just kicks in and says “NO”!

All of this though has some wider implications for all of us. (Now for the serious procurement bit). It’s a great example of how the rise of China is changing the dynamics of many markets, and also of the difficulty in predicting the future price trends of all sorts of commodities. Will I be cursing for not investing in the 2010 first growths? Or thanking my lucky stars I stayed well away from the £1200 bottle…? Perhaps we’ll do an annual update.