WEEKEND READ: The new Grange
Tony Keys introduces us to the latest vintage of Penfold's Grange and uncovers a curious arbitrage opportunity for collectors of Australian 'big reds'.
Tasting Grange:
Tasting any wine is not a difficult exercise; pour it from bottle to glass, pick it up, look at it, sniff it, sip it and, using an imaginative vocabulary, produce a few words on it. Its not necessarily that the words written match the wine tasted, it's about perception.
It's more about the journey than the arrival when it comes to wine - the pleasure is led by anticipation. Once swallowed, the taste sensation is no greater than any other alcoholic drink. Too much affects first the senses, then the health.
The anticipation factor of drinking a wine such as Grange is huge - the taster approaches the wine with a reverence more associated with a Papal audience. Those that sneer at such respect are in turn sneered at - their ignorance seen as confirmation that their social level is closer to dark ale and pickled onions.
Like all new releases of Grange, the 2003 sits darkly in the glass. Over a decade or three this inky blackness will fade to more subtle shades of red with hints of orange. That is the first lesson of young Grange - this 2003 is no wine to get into bed with on the first date, this is a wine that demands patience.
The 2003 is not as robust as its predecessor the 2002; it may not last three or four decades but it will still be around in two. The nose will draw many descriptions from the more flamboyant taster but in truth, at this stage the sweetness of American oak dominates; this also translates to the palate. Flavour descriptors are rather redundant, all are being squashed by the oak/acid/tannin.
The best guide is the weight of the wine - its mouth-feel and in that aspect it's notably lighter than some previous vintages. From a weather aspect, Peter Gago, Penfolds' chief winemaker, likens it to the 1983 vintage. Both came in under very hot conditions; he differentiates them by the tannin component - very harsh in the 1983 softer in the 2003.
Grange is sourced from many vineyards – the grapes in the 2003 vintage originated in the Barossa Valley, McLaren Vale, Coonawarra, and Magill Estate (Adelaide). It's a blend of Shiraz (96.5 per cent) and Cabernet Sauvignon (3.5 per cent) from Coonawarra.
As far as Grange goes, it's not the best of vintages; however as a wine it still rates 95/100.
Trading Grange
May 1 saw the release of Penfolds ‘Icon Wines'. It's a fine collection and even without tasting them it's safe to assume that within the ‘Penfolds style', the quality will be high or above. Whatever your opinion on the ethics, it is safe to assume that some of the Penfolds ‘Icon' reds will be bought for financial investment rather than future consumption and enjoyment.
The value of a wine like Penfolds Bin 95 Grange, just like Mouton Rothschild from Bordeaux or Burgundy's Romane Conti, is often hard to calculate. From a winemaking expenditure perspective using a $55 bottle of wine as an example, Grange doesn't cost ten times the price to make, thereby justifying its $550 release price.
Penfolds Grange, along with a few other wines around the world, are true icons, in reality they have moved out of the wine sphere and into the heady atmosphere of ‘luxury goods'. There is no doubting the quality - the only bad Grange I have come across have been spoilt by bad storage or bad cork.
To offer such an icon at a more affordable price would be an insult to its status and status depends on a product being unattainable. Penfolds keeps a distance when discussing retail price, saying "Global demand is the driver... retail selling price is a recommendation only and retailers have unrestricted ability to set their own pricing".
Unrestricted it may be, but it is unlikely that retailers will sell below the cost of purchase. However, there appears a strong fable that a lot of Grange is not bought at the recommended retail price. "The release prices are not what every one pays" says Andrew Caillard, Master of Wine, author, wine judge and auctioneer at Langton's Fine Wine Auctions & Exchange.
The difficulty is tracking down the mysterious prices that people are said to pay. Woolworth's-owned Dan Murphy's is the chain that claims never to be beaten on price. Penfolds says an indicative price for the new release is $550. Dan Murphy's price is $520; take into account there is a 5 percent reduction on a mixed half case, and it's possible to pick up the latest release for just under $500.
If we believe the Murphy's ‘never beaten on price' boast, then the cheapest that the 2003 Grange can be bought for in Australia is $494.
Whether an investor looking for a financial return or collector who likes to drop (label) names, the expectation is that icon wines will appreciate in value. But do they?
The previous release (2002) was on sale in Dan Murphy's for $495, less 5 percent brings it close to $470. Looking at the Langton's prices it has been as low as $340 and as high as $440. Add on buyer's commission (around 13.5 percent) and the top price is around $499. If selling, using the same commission for the vendor, it's down to receiving $380 for a wine that a year ago cost $470.
Like all auction houses, Langton's takes its commission on the final hammer price; the rate of commission varies considerably depending on whether the vendor is offering a few bottles or many cases. Caillard is defensive of the market: "The current release prices pull up auction values. It takes a while for recent releases to kick in" he says.
The Grange market turns over between $4 and $4.5 million a year for Langton's. Caillard maintains that despite prices moving up between 10 and 15 percent, it's not a speculative market as the gains make up for a previously sluggish period. However he also admits the good old days may have passed: "You could pretty well bank on around 10-13 percent per year for a top vintage. In 1990 the 1971 vintage was achieving a return of 15 percent but this will have well and truly dwindled over the last ten years as the prices haven't moved up that fast" he says.
Caillard also discounts much of the investment hype that surrounds Grange, pointing out "Anything that deviates from mint condition i.e. levels/label condition will experience downward pressure. These can represent bargains to the canny drinker." Another tip for the canny drinker: if you're planning a trip to the UK, Waitrose supermarket is selling the 1999 Grange at 130 bottle ($270); in Tesco's the 2004 Penfolds Bin 707 can be found for 38 ($79) a bottle.
The production figures for Grange are not revealed however they are believed to be somewhere between 7000 and 10,000 cases a year, depending on vintage conditions. Taking the lower figure, that's over $20 million in sales to Penfolds' brand owner Foster's. However, in goodwill and direct PR value for the rest of the brand, its value is impossible to calculate.
Despite Grange's status often being compared to the Grand Crus of Bordeaux, it still has a way to go both in terms of price and prestige to fulfil that prophecy. Grange's domestic retail price and lively action in the auction house is not reflected globally. A lot of 6 bottles of Grange 1999 in their original wooden box (therefore in mint condition) is coming up for auction at Christies in London - the estimated price is $933 to $1141 working out to between $155 and $190 a bottle, somewhat less than if sold in Australia at $330 a bottle.
Even on domestic release its prices are well below Bordeaux first and second growths, but equate to many third growths. For those who intend to drink the wine, it represents great value; for those into the financial aspect, one idea is to buy in London and sell in Sydney.
Tony Keys writes for The Key Report and the KROW (Key Review of Wines) amongst other wine industry publications.
Tasting any wine is not a difficult exercise; pour it from bottle to glass, pick it up, look at it, sniff it, sip it and, using an imaginative vocabulary, produce a few words on it. Its not necessarily that the words written match the wine tasted, it's about perception.
It's more about the journey than the arrival when it comes to wine - the pleasure is led by anticipation. Once swallowed, the taste sensation is no greater than any other alcoholic drink. Too much affects first the senses, then the health.
The anticipation factor of drinking a wine such as Grange is huge - the taster approaches the wine with a reverence more associated with a Papal audience. Those that sneer at such respect are in turn sneered at - their ignorance seen as confirmation that their social level is closer to dark ale and pickled onions.
Like all new releases of Grange, the 2003 sits darkly in the glass. Over a decade or three this inky blackness will fade to more subtle shades of red with hints of orange. That is the first lesson of young Grange - this 2003 is no wine to get into bed with on the first date, this is a wine that demands patience.
The 2003 is not as robust as its predecessor the 2002; it may not last three or four decades but it will still be around in two. The nose will draw many descriptions from the more flamboyant taster but in truth, at this stage the sweetness of American oak dominates; this also translates to the palate. Flavour descriptors are rather redundant, all are being squashed by the oak/acid/tannin.
The best guide is the weight of the wine - its mouth-feel and in that aspect it's notably lighter than some previous vintages. From a weather aspect, Peter Gago, Penfolds' chief winemaker, likens it to the 1983 vintage. Both came in under very hot conditions; he differentiates them by the tannin component - very harsh in the 1983 softer in the 2003.
Grange is sourced from many vineyards – the grapes in the 2003 vintage originated in the Barossa Valley, McLaren Vale, Coonawarra, and Magill Estate (Adelaide). It's a blend of Shiraz (96.5 per cent) and Cabernet Sauvignon (3.5 per cent) from Coonawarra.
As far as Grange goes, it's not the best of vintages; however as a wine it still rates 95/100.
Trading Grange
May 1 saw the release of Penfolds ‘Icon Wines'. It's a fine collection and even without tasting them it's safe to assume that within the ‘Penfolds style', the quality will be high or above. Whatever your opinion on the ethics, it is safe to assume that some of the Penfolds ‘Icon' reds will be bought for financial investment rather than future consumption and enjoyment.
The value of a wine like Penfolds Bin 95 Grange, just like Mouton Rothschild from Bordeaux or Burgundy's Romane Conti, is often hard to calculate. From a winemaking expenditure perspective using a $55 bottle of wine as an example, Grange doesn't cost ten times the price to make, thereby justifying its $550 release price.
| Penfolds Icon Wines |  | |
| 2006 Penfolds Reserve Bin 06A | Adelaide Hills Chardonnay | $90 |
| 2005 Penfolds Yattarna Bin 144 | Chardonnay | $130 |
| 2004 Penfolds St. Henri | Shiraz | $90 |
| 2005 Penfolds Magill Estate | Shiraz | $100 |
| 2005 Penfolds RWT | Barossa Valley Shiraz | $160 |
| 2005 Penfolds Bin 707 | Cabernet Sauvignon | $175 |
| 2003 Penfolds Grange | Shiraz | $550 |
Penfolds Grange, along with a few other wines around the world, are true icons, in reality they have moved out of the wine sphere and into the heady atmosphere of ‘luxury goods'. There is no doubting the quality - the only bad Grange I have come across have been spoilt by bad storage or bad cork.
To offer such an icon at a more affordable price would be an insult to its status and status depends on a product being unattainable. Penfolds keeps a distance when discussing retail price, saying "Global demand is the driver... retail selling price is a recommendation only and retailers have unrestricted ability to set their own pricing".
Unrestricted it may be, but it is unlikely that retailers will sell below the cost of purchase. However, there appears a strong fable that a lot of Grange is not bought at the recommended retail price. "The release prices are not what every one pays" says Andrew Caillard, Master of Wine, author, wine judge and auctioneer at Langton's Fine Wine Auctions & Exchange.
The difficulty is tracking down the mysterious prices that people are said to pay. Woolworth's-owned Dan Murphy's is the chain that claims never to be beaten on price. Penfolds says an indicative price for the new release is $550. Dan Murphy's price is $520; take into account there is a 5 percent reduction on a mixed half case, and it's possible to pick up the latest release for just under $500.
| Today's market | | | |
| Vintage | Penfolds | Dan Murphy's | Langton's Auction |
| Grange 2003 | 550 | 520 | Not applicable |
| Grange 2002 | 500 | 495 | Last 2008 price $403 range $340 to $440 |
| Grange 2001 | 450 | 450 | Last 2008 price $316 range $300 to $380 |
| Grange 2000 | N/A | 399 | Last 2008 price $395 range $350 to $440 |
| Grange 1999 | N/A | N/A | Last 2008 price $330 range $300 to $420 |
If we believe the Murphy's ‘never beaten on price' boast, then the cheapest that the 2003 Grange can be bought for in Australia is $494.
Whether an investor looking for a financial return or collector who likes to drop (label) names, the expectation is that icon wines will appreciate in value. But do they?
The previous release (2002) was on sale in Dan Murphy's for $495, less 5 percent brings it close to $470. Looking at the Langton's prices it has been as low as $340 and as high as $440. Add on buyer's commission (around 13.5 percent) and the top price is around $499. If selling, using the same commission for the vendor, it's down to receiving $380 for a wine that a year ago cost $470.
Like all auction houses, Langton's takes its commission on the final hammer price; the rate of commission varies considerably depending on whether the vendor is offering a few bottles or many cases. Caillard is defensive of the market: "The current release prices pull up auction values. It takes a while for recent releases to kick in" he says.
The Grange market turns over between $4 and $4.5 million a year for Langton's. Caillard maintains that despite prices moving up between 10 and 15 percent, it's not a speculative market as the gains make up for a previously sluggish period. However he also admits the good old days may have passed: "You could pretty well bank on around 10-13 percent per year for a top vintage. In 1990 the 1971 vintage was achieving a return of 15 percent but this will have well and truly dwindled over the last ten years as the prices haven't moved up that fast" he says.
Caillard also discounts much of the investment hype that surrounds Grange, pointing out "Anything that deviates from mint condition i.e. levels/label condition will experience downward pressure. These can represent bargains to the canny drinker." Another tip for the canny drinker: if you're planning a trip to the UK, Waitrose supermarket is selling the 1999 Grange at 130 bottle ($270); in Tesco's the 2004 Penfolds Bin 707 can be found for 38 ($79) a bottle.
The production figures for Grange are not revealed however they are believed to be somewhere between 7000 and 10,000 cases a year, depending on vintage conditions. Taking the lower figure, that's over $20 million in sales to Penfolds' brand owner Foster's. However, in goodwill and direct PR value for the rest of the brand, its value is impossible to calculate.
Despite Grange's status often being compared to the Grand Crus of Bordeaux, it still has a way to go both in terms of price and prestige to fulfil that prophecy. Grange's domestic retail price and lively action in the auction house is not reflected globally. A lot of 6 bottles of Grange 1999 in their original wooden box (therefore in mint condition) is coming up for auction at Christies in London - the estimated price is $933 to $1141 working out to between $155 and $190 a bottle, somewhat less than if sold in Australia at $330 a bottle.
Even on domestic release its prices are well below Bordeaux first and second growths, but equate to many third growths. For those who intend to drink the wine, it represents great value; for those into the financial aspect, one idea is to buy in London and sell in Sydney.
Tony Keys writes for The Key Report and the KROW (Key Review of Wines) amongst other wine industry publications.
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