A taste for liquid assets

By InvestSMART · 21 Mar 2012

By InvestSMART ·
21 Mar 2012

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It's ironic that some of Australia's most expensive bottles of wine are unlikely to ever be drunk. Take the half bottle of 1952 Penfolds Grange Bin 4 that sold recently for $3600 (including buyer's premium) through Theodore Bruce in Sydney. If opened it would become worthless. And, as one expert says, the drinking experience may not be worth much anyway. By now this wine would be well past its peak.

The true value of such wines is as a (literally) liquid asset.

Grange this old is a part of Australian history that investors can keep for 20 years then pass on to the kids or sell as a retirement bonus. The 1951 is even more valuable. This was the year that Penfolds' legendary winemaker Max Schubert first experimented with a small-scale production of 160 cases. These are Holy Grail items among collectors.

In 2009 a single bottle of 1951 Grange sold for $43,700 (hammer price) at a Langton's auction.

A consecutive collection of 40 bottles spanning 1951 to 1990 sold for $138,000 at the same auction. A bottle of 1956 Grange made $12,000. This is one of three "secret" vintages made by Schubert without the knowledge of Penfolds management.

Grange dominates the Australian auction scene, especially for those interested in wine as investment. It has the same cachet as Bradman memorabilia.

But Theodore Bruce wine specialist Lee Stone says that those who attend his auctions are divided between the collectors and the drinkers.

The drinkers are looking for celebrated vintages that they can store for a few years then open on special occasions.

Good choices in this category include the product of highly regarded Australian boutique wineries such as Greenock Creek, Clarendon Hills and Giaconda at Beechworth.

One with investment potential is Greenock Creek's 1998 Roennfeldt Road shiraz. Only 235 cases were produced and demand (and values) spiked in 2004 when influential American wine critic Robert Parker gave it 100 out of 100.

Bottles now sell for more than $300. One online retailer is offering them for $485.

The influence of critics is considerable and, apart from Parker, Stone recommends the opinions of Australian critics Huon Hooke, James Halliday and Jeremy Oliver. For the record Hooke, who writes for this newspaper's Good Living section, strongly disagreed with Parker's "100 out of 100" verdict.

Some imports are also in demand at auction, especially bottles of Chateau Lafite Rothschild. Stone has sold a bottle of 2003 for $1560, a 1998 for $1080 and a 2001 for $1020 (including buyer's premium). He regards these as good investments.

Theodore Bruce holds regular wine auctions at its new Sydney premises at 31 Queen Street, Beaconsfield, with the next one due in May. There seems to be growing interest in this area. Every lot sold at the previous auction in February.

Lawsons also holds exclusive wine and spirit auctions at its Annandale rooms in Sydney. And this scene is booming online.

Some wine merchants have also tapped into this growing market. In a recent ad in the Herald, Dan Murphy repeated a quote he first made in November 1976. "I have a small piece of advice to give you ... Buy up your Penfolds. Their red and white table wines are magnificent, at the very top of the winemaking skill in Australia."

Murphy followed his own advice, storing huge quantities in his own cellars and offering them to the public at the peak of maturity.

Recent releases include bottles of 1998 Penfolds Bin 389 cabernet shiraz, available online at $110 a bottle.

Stone nominates this series as one with good investment potential. Of course, not everyone agrees that any bottle of wine is worth keeping beyond its drink-by date.

"There are very few wines around the world that are good investments," says Hooke - a drinker, not a keeper. "The only really legitimate reason for keeping them is if you intend to drink it yourself."

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Frequently Asked Questions about this Article…

Is Penfolds Grange a good wine investment for everyday investors?

Penfolds Grange is often cited as a top collectible and has strong auction track records, so many investors consider it a valuable liquid asset. The article notes very high prices — for example a half bottle of 1952 Grange sold for $3,600 through Theodore Bruce in Sydney, a single 1951 bottle fetched $43,700 (hammer) at a Langton’s auction in 2009, and a 40-bottle consecutive collection (1951–1990) sold for $138,000. Keep in mind the article also highlights that very old Grange bottles may be past their drinking peak and that opening a highly collectible bottle usually destroys its value as an investment.

How do wine auctions in Australia work and where can I buy investment wine?

Australian wine auctions are run by specialist houses and are increasingly active online. The article mentions Theodore Bruce holding regular wine auctions at its Sydney rooms (31 Queen Street, Beaconsfield) and Lawsons running exclusive wine and spirit auctions in Annandale. It also notes a booming online auction scene and that every lot sold at a recent Theodore Bruce sale, underscoring demand among collectors and buyers.

Which Australian boutique wines have investment potential?

The article highlights several Australian boutique producers that appeal to investors and drinkers alike, including Greenock Creek, Clarendon Hills and Giaconda (Beechworth). A specific example is Greenock Creek’s 1998 Roennfeldt Road shiraz — only 235 cases were made and demand rose after Robert Parker awarded it 100/100 in 2004; bottles now trade for more than $300, with some retailers listing them around $485.

How much can imported fine wines like Château Lafite Rothschild sell for at auction?

Imported classics also perform strongly at auction. According to the article, Theodore Bruce’s wine specialist sold Château Lafite Rothschild bottles for prices (including buyer’s premium) such as $1,560 for a 2003, $1,080 for a 1998 and $1,020 for a 2001, illustrating that top Bordeaux remains popular with collectors and investors.

Do wine critics affect wine investment values?

Yes — critic scores can strongly influence demand and values. The article gives the Greenock Creek 1998 example where Robert Parker’s 100/100 score helped spike demand and prices. It also recommends following Australian critics Huon Hooke, James Halliday and Jeremy Oliver. The piece notes that critics can disagree (Huon Hooke disagreed with Parker’s 100/100 verdict), showing how reviews can drive market movement but are not universally accepted.

Can I buy investment-grade wine from retailers or online shops?

Yes. The article describes a growing market where wine merchants and online retailers have tapped into demand for collectible wine. Examples include recent retail releases such as 1998 Penfolds Bin 389 cabernet shiraz marketed online at about $110 a bottle, and specialist online listings offering rare bottles (for example Greenock Creek 1998 listed around $485).

What are the main risks of investing in collectible wine?

The article points out several risks for everyday investors: many very old bottles may be past their drinking peak (reducing drinking value), opening a prized bottle usually destroys its investment value, and not all wines are good long-term investments. Wine critic Huon Hooke is quoted saying there are very few wines that are genuinely good investments and that keeping bottles is only truly legitimate if you plan to drink them yourself.

How can I tell if a wine is being bought as a collector’s item or to drink?

The article explains that buyers at auctions tend to fall into two groups: collectors and drinkers. Collectors seek historically significant or rare bottles (for example early Penfolds Grange vintages) to hold or pass down, while drinkers look for celebrated vintages from reputable producers they can cellar for a few years and open on special occasions. Knowing which group you fit into will help set expectations about holding period and resale prospects.