Wine Investment: Sharks, Clowns, Monkeys and the survival of the fittest.

This started off a few months ago as a small rant against a bunch of guys in the “wine investment business” who decided to get together to self-endorse. I thought at the time of a chap named Steve, who sold me a dud Audi A4 a couple of years ago. Steve’s business is recommended by “The Best of Farnham” or similar. I can’t help but think that “The Best of Farnham” was set up by Steve and a couple of mates. The car was a lemon: I spent about £500 on it before losing another £1500 chopping it in for something that actually worked.

Wine Investment. Something that a few investors have made a few quid out of – if they bought and sold at the right time, that is – and something that a few merchants, brokers and, more murkily, fraudsters have made millions from in the past ten years. And yes, I’ve made a few quid too, though the bulk of this has been through renumeration rather than inspired buys: I used to follow Les Forts de Latour because I liked it, not because I thought I’d make a few quid. Ditto Lynch-Bages, indeed ditto every wine I’ve ever made a turn on. I made my money through selling an awful lot of wine (n.b. I wasn’t the hotshot: others were doing twice what I did) and the subsequent renumeration. The 2005 Bordeaux vintage bought my Rolex, the Far East boom bought my Boxster. And, whilst I can’t put a figure on it, I’d say that the vast majority of what I sold was sold to speculators. Right place, right time for me; same story for those that were buying in the mid-noughties.

Wine merchants sell wine. The clue is in the title. And expecting a wine merchant not to sell wine is like expecting a dog not to eat a dropped sausage – it’s simply going to happen; it’s what they do. Find me a successful wine merchant who tells you that wine is a bad investment and I’ll find you a dog that doesn’t eat sausages.

But most wine merchants, indeed I’m tempted to say all wine merchants, love what they sell. I love wine, and maybe a little too much, and I’m not alone in this. And when I talk to you about wine I want you to love it as much as I do. When I talk or write about Latour I want you to feel the love, feel the power, feel the class. I want you to understand that this is special, that this transcends alcohol, transcends money.

The fraudsters are a different bunch. Armed with quotes from wine critics and lazy journalists, and well selected figures from Liv-ex and the like, flogging investment grade claret to unsuspecting investors (so unsuspecting that the vast majority have ticked a box somewhere in a marketing questionnaire indicating that they are “investors”) is pretty easy. In the mid 1990s, companies with names like Napier Stanley Hoare (just take a bank and a couple of cars or vice-versa) made a fortune duping what were ultimately rather silly customers out of their savings. The OM was fairly simple: take a very fine, well-scored, elite wine – 1996 Lafite, for example – and sell it at double the market price. In the early 2000s I took scores of calls from people who had bought (though had only chosen to do their research a couple of years later) first growth clarets from Standard Barclay Alvis and the like, and wanted to know how much they were worth. The answer generally preceded a few seconds of silence, or the occasional sob.

The world, and the wine market, has moved on. In the same way that it is harder for any merchant to be 20% or more over the odds in terms of selling prices, it’s also harder for a scamster to be 100% over the odds. Google “Lafite” and you’ll get three of the top five UK wine merchants showing up and, perhaps more importantly, wine-searcher.

But still it goes on. And on, and on. And the wine investment market is now self regulating. So all is fine then. Isn’t it?

If you want to stick some money into wine then you have three options as follows:

1) Buy some.

2) Buy some shares in a wine fund.

3) Speak to a “wine investment specialist”.

Option One

This is a fairly simple route. And there is no shortage of merchants and brokers who will be very, very happy to sell you some wine, store it for you, then sell it for you at a later date. When all goes well then you’ve made a few quid, your merchant has made a few quid (at both ends) and everybody is happy. And you might just catch the wine bug en route.

The main trouble with this route is, well, apologies here but most wine merchants are a bit thick. Which is why they’re wine merchants, not bankers. It’s why they’re in SW1 not EC1.

And you’ll also pay a chunk of money at each end: 10% at least. This is the minimum margin at which a wine merchant can realistically make money. And your salesman’s job, no matter what his or her title, is to sell you wine. Commission or not, your Private Account Manager or whathaveyou is judged by the amount of wine that they are selling.

Option Two

Equally simple in that there is no shortage of people ready to take your money from you. This is the easy bit. And a wine fund should be regulated – not by some joke outfit of ex crooks, but by the Financial Services Authority or whatever it’s called these days. And, in theory, the managers should be quite clever. But many know absolutely nothing about wine, nor see what is actually selling: to find out what’s hot or not a Fund Manager has to call a merchant. And where do you think the funds buy their wine?

Option Three

Now I could do this for you. I really could. I won’t, but I could. And I could reel off all sorts of tosh about my track record, my CV, my experience, etc, etc. I could send you some quotes from Bloomberg, the FT, the Telegraph, the Times. Even Horse & Hound, and a double-pager for the Mail on Sunday (the main motivator for which was my step-grandmother, who didn’t spot me). And I wouldn’t be lying. I might be a little selective in picking what I told you about my past, but I wouldn’t lie. I wouldn’t tell you about the calls that I got wrong (I still think 2005 La Mission is under-priced), the opportunities I missed (I thought 1996 Lafite was toppy at £2,400 a case). I wouldn’t tell you about the wines I sold right, right, at the top. And I could sell it, I could sell me. Which leads to the heart of the issue: knowledge, and personal interest.

None of us know anything about wine. Give me the three people in the wine trade who know more than anyone else and I can tell them something they don’t. And because I know a bit, and they know that I know a bit (even though they know ten times more) they’ll believe me. It is very easy to play smoke and mirrors in this game, and it’s a game where confidently-related bullshit is easily swallowed. And everyone who knows their kit also has an interest: what I mean here is that there are very, very few people who can talk to you about wine, the wine market, etc, etc, who won’t be trying to sell you something at the same time.

Some final points:

Ten or so years ago, maybe fifteen, some merchants agreed not to sell wine to the “wine investment specialists”. Or at least the dodgy ones. Or at least the ones on the list of dodgy ones.

Whether or not they did it is a different matter. And I thought that the few merchants who didn’t sign up to this “charter” were very brave. And one of them, one of my favourite men in the wine trade, told me why:

If someone calls you up, uninvited, offering to sell you something that will make you money, would you not have a few questions? And wouldn’t you ask them? Before spending thousands of pounds on twelve bottles of wine (when you’ve probably never spent much more than a fiver on a bottle yourself), wouldn’t you want to find out a bit more? Google Lafite (again). You get the property itself and three of the UK’s biggest merchants, plus an auction house, plus Tesco’s, plus wine-searcher, plus two wine trade publications. If someone calls you up offering to sell you some alchemy do you not research gold and lead? Or even ask someone? It’s not difficult.

But we don’t. It is human nature to want to believe the fairy tale.

So, while I find the attempt of a few of the “Wine Investment Specialists” to somehow self-endorse laughable (and it will fail, maybe has already), there is a part of me that simply doesn’t care. If people want to be stupid then let them be so.

And, if you believe that nine litres of grape juice is worth a few thousand quid, and that it will be worth more in a year’s time, then you really should be sure. Or at least believe in more than a story.