Greg Sherwood MW: Collectable Versus Investment Wines – Do You Know the Difference?

By , 28 April 2021

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Stellenbosch property Kanonkop – producer of some of South Africa’s most investible wines.

They are questions I’m faced with on a regular basis in my day job as a fine wine buyer: What sells? What is currently hot? What is collectable? What is the next big collectable wine? What is the best investment wine? This battery of inquiries illustrates just how quickly a customer can infer that a hard-to-find wine, a sought-after wine or indeed a highly collectable fine wine will also necessarily equal a great investment wine. To the consumer, in black and white terms, ongoing demand and a diminishing supply equals an appreciable investment asset. That principle seems to drive almost every other investible asset class around the world, so why not wine?

Collectable versus investible just used to seem like something I have instinctively always known the difference between. But it was only when UK journalist Adam Lechmere from Club Oenologique asked to interview me (see here) about South Africa’s investment-grade wines that I really had to try and reverse engineer to put the practice back into theory to explain why I made the buying decision I made every day, be it for regular retail purchasing or fine wine investment purchasing.

I should probably point out at this stage the misconception that all fine wine buyers do all day is meet producers in exotic locations, taste incredibly rare fine wines over spectacular long lunches… and then just buy the ranges of wines their minds, hearts and palates tell them makes the best sense. Well, this is part of the job of course, but undoubtedly the vast majority of a buyer’s time should be spent liaising with customers, be they day-to-day retail clients or indeed big-hitting, big-spending private clients. As my colleague James Handford MW always used to tell me in my early days… “buying is just another facet of selling”. Well, in these early days, I can’t tell you the amount of stargazing and head-scratching that comment used to illicit, usually after I had spent most of the week running around at trade tastings spending very little time in the office interfacing with our private clients.

What I deciphered and eventually took away from my colleagues’ cryptic statement was that the better you are at selling, the better you will be at buying… because quite simply the more you know about what your customer wants, the better you will be able to go out there and buy the right products to fulfil their needs. But does this philosophy still ring true with collectable wines as well as investment fine wines? That’s where the fun actually starts. One of the easiest fine wine categories to sell historically has always been Bordeaux. Buy cheap at En-primeur on release and hey presto, you just can’t go wrong. Well, of course when the 2010 Bordeaux bubble burst in 2011/12 as the financial crisis really started to bite, three to four years after the initial “crash” in 2008, the reality of the Bordeaux Chateaux rip-off became ever more apparent for everyone to see. The Chateaux had literally sucked every last ounce of fat out of the market and then turned up the heat further with never-ending price increases. Something had to start burning… and in this case it was the merchant’s portfolios but mostly end consumer’s fine wine funds.

Bordeaux historically always presented itself as the best investment category because it adhered to some basic principles… high quality across the top of the brand pyramid, managed scarcity by all the top Chateaux regardless of production volume, a truly global demand including in the large Chinese and American markets, release prices that were initially affordable on release but then always rose further in due course as wines sold out or were consumed, and finally, product liquidity in the market. For any fine wine brand to truly thrive and grow in price actively, there needs to be liquidity of stock, ie available wine to buy, sell and trade so that demand and supply can naturally do their thing and dictate the movement of price. If little to no product is available on the market, liquidity is restricted and movement of price, up or down, is restricted because, after the initial sale, no further product is ever traded again in the open market.

To many small fine wine producers, “collectable” remains the buzz word but “investible” is the still the dirty word. So many of these producers quite happily sell out in one day on release never to see any significant quantity of their product ever traded once again. Collectable wine by nature is limited by its lack of availability and normally only available on release, safely purchased by wine-loving collectors on an allocation list who have an end goal of ultimately drinking the wine in question, not trading it. This romantic idea can certainly not be faulted in anyway, after all, wine is made to be consumed and enjoyed not stored in a bank vault. But where you do have greater production economies of scale, like in Bordeaux or perhaps at some premium Stellenbosch and Paarl producers, scalability is more feasible as well as more likely, resulting in the all-important secondary market transactions that can potentially drive prices ever higher through simple demand and supply.

I am fully aware that there are a lot of kill joys in the South African marketplace who will continue to decry the commoditization of our finest wines while at the same time failing to see that it is exactly this healthy supply and demand competition that keeps the market active, vibrant and most probably more profitable. What ever the product, be it a luxury 100,000+ bottle of Bordeaux first growth scoring 100 points or a perhaps a slightly more modest 40,000 bottle Stellenbosch red scoring 100, some collectable wines will inevitably become investible wines by default because so much of the initial stock released is never actually drunk as more and more consumers realise which wines are an appreciable and tradable asset. In the meantime, the niche collector market will continue to thrive by being supplied a few hundred bottles of their favourite hand labelled, hand numbered, waxed top cult wine. Something for everyone I say!

  • Greg Sherwood was born in Pretoria, South Africa, and as the son of a career diplomat, spent his first 21 years travelling the globe with his parents. With a Business Management and Marketing degree from Webster University, St. Louis, Missouri, USA, Sherwood began his working career as a commodity trader. In 2000, he decided to make more of a long-held interest in wine taking a position at Handford Wines in South Kensington, London and is today Senior Wine Buyer. He became a Master of Wine in 2007.

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  • Greg+Sherwood+MW28 April 2021

    If you take exceptional, one off 100 point scores out of the equation that obviously skewers the market… I’d say Kanonkop Paul Sauer, Sadie Family Wines (all) and either MR de Compostella, Olerasay or Vin de Constance.

  • Hotstix28 April 2021

    Greg, what would the top 3 investment wines from SA be in your opinion? I.e wines that would give the best return.

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