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11.28.2008

Now is a Very Good Time to Buy Wine

If I had some extra cash laying around right now, in addition to plowing it into the stock market, I'd likely be out there buying investment grade wine, as well as wine from my favorite expensive producers.

If you're a consumer of news about the wine industry, then you understand what is going on in the wine retailing and wine auction world at the moment. On the chance that Vinography might be one of your sole sources of contact with the wine world, let me bring you up to speed: the wine market is doing what the Dow Jones Industrial Average just did for the last three months.

While the wine industry has trailed the general market malaise and the dive has not been as precipitous, things are tough right now in the world of wine. And the more expensive the wine, the tougher things are.

Champagne sales had already dropped by 25% in September and according to some sources, holiday sales are are expected to be half of what they were last year. Retail sales of high end wines are plummeting, and the wine auctions where collectors unload (and snap up) some of the world's finest wines are seeing record numbers of lots go unsold or sell for far below their estimates.

In short, just like the stock market right now. It is a serious buyer's market. I don't know a single wine retailer worth their salt that isn't in serious sale mode at the moment -- with heavy discounting going on from the bottom of their inventory to the top. In hard economic times where it's sensible to have a good cushion of cash in the bank, the last thing anyone wants to do is have too much capital tied up in inventory.

Just by way of a single example, a friend of mine forwarded me a newsletter from a New York wine store that showed the 1997 Harlan Estate Proprietary Red wine (a 100 pointer from one of CA's most stellar vintages) being offered at a discount of nearly $800. While not half-off, that's getting pretty close, and a remarkable steal for a wine that could easily be held for two years and sold for well over the pre-discount price.

And the final bonus: the strengthening dollar. Which means that apart from the sales, the cost of most imported wine has fallen considerably from the heights it was at merely 6 months ago. Direct imports are selling for a 20 to 30 percent discount off of those highs.

So if I had $10,000 laying around, I'd be likely plowing it into top Burgundies, Bordeaux First Growths, Barolos, and Napa cult Cabernets with the idea that I'd drink some in 5 or 10 years, and in 18, the rest would pay for my daughter's first year of college.

NOTE: It's a sad, sad thing that I even have to think about it, but I must make clear that the article above doesn't constitute investment advice in any way, shape, or form. I'm not a professional, and if you buy wine based on what I say and lose your hard earned savings, then you should just open the damn bottles and drown your sorrows because it won't be my fault.

Comments (18)

11.28.08 at 11:25 PM

Interesting issue, which the American Association of Wine Economists studied recently, to understand which products are going to be more affected. I did some further work on the working paper (http://inumeridelvino.it/2008/11/sulla-relazione-tra-domanda-di-vino-prezzi-e-andamento-economico-studio-usa-2008.html#comment-1140). The bottom line is that top white wines are going to be the most affected by the crisis.
I can well understand your feeling about buying cheaper some top wines... the problem is that the number of people who is keen to think like that is decresing, either because they lost their job or their home, or just because they think it is time to be more cautious.
I work as an analyst in the Italian stock market: as usual you buy when prices grow and you sell when prices fall...

ciao!

bacca

swoods wrote:
11.29.08 at 5:58 AM

Just like the stock market most of these prices are merely correcting downward to where they should be anyway. Especially the "cult cabs."

1WineDude wrote:
11.29.08 at 7:35 AM

Great to know that such bargains can be had, especially since I know so many people who love to receive wine as gifts.

Like me.

By the way, Alder, my birthday is on March 17th. Just sayin... ;-)

Dr. Horowitz wrote:
11.29.08 at 8:15 AM

When I can buy 100 point wine on layaway I'm all in!

11.29.08 at 1:22 PM

Now is a very good time to buy wine, but instead of buying up lots of cult cab or first growth bordeaux, i would suggest to everyone that this is the perfect time to search out some lower priced unknown varietals. The big guys will weather the storm, but how about throwing some support to the Marcillacs, the Coteaux du Loires, and the Movias of the world. There are hundreds of value priced, funky, well crafted wines if you look, and right now is the perfect time to search them out.

- Cory

Dirty wrote:
11.29.08 at 2:43 PM

Just back from a wine hunt. Almost everything I bought were closeouts at least 50% off. Not only that, but back vintages- 90 Ausleses, 97 Spatleses, 94 Savennieres-- But in contrast to what you said about Champagne, no bottles of Champagne were discounted. I actually went out to buy fizz, but walked out without a single bottle.

Alder wrote:
11.29.08 at 5:17 PM

Cory: I agree with you, that a lot of smaller winemakers need our support now more than ever.

Dylan wrote:
11.30.08 at 6:08 PM

With gas prices being as low as they are, and wine doing the same, I have no qualms with purchasing wine or driving to the store to do so. It is a great time to buy, but I also agree with Cory. Support some of the smaller guys, rough times are ahead for them.

dhonig wrote:
11.30.08 at 10:07 PM

Are prices really depressed, meaning they will rise again, or has a bubble burst, meaning "irrational exuberance" has passed, and prices are now where they can be expected to stabilize? Given the insane prices of not just the 2005s, which might have justified them, but the 2006s, which certainly did not, I would have to go with "bubble."

Alder wrote:
11.30.08 at 10:13 PM

Dhonig,

Well, 05 Bordeaux and Burgundy prices were ridiculous, so perhaps those are simply back at sane levels, and don't exactly qualify as good buys.

Chris Robinson wrote:
12.01.08 at 10:34 AM

Its now official, even first growth Bordeaux prices from 2000 and 2005 are down 30-35% in recent auctions. Only DRC held up because it is more of a collectible than a wine anyone actually drinks (and some claim there is more at aucion than was ever made!!!). The surprising thing is many other "lesser" Bordeaux's showed only minor price drops. Does this suggest an over-priced market in the last 3-5 years? You betcha!!

Chris Giammona wrote:
12.01.08 at 2:56 PM

I attended a wine charity auction about 10 days ago in Orange County, CA and you would not know that we are in a recession. The prices for top wines was very strong. A 1982 Mouton-Rothschild sold for $1,500-$1,600.

Alder wrote:
12.01.08 at 3:02 PM

Chris,

Thanks for the comments. While charity auctions are never a good place to judge what's happening to wine prices (the prices paid bear only passing relation to the market value of the wine) the interest in bidding certainly would be expected to reflect the current economic climate. Good to know that people were excited.

Joe wrote:
12.03.08 at 6:18 PM

God bless - these are not sales - next year will be the sales. in fact, buy some now and I will buy it from you a year from now. $800 off and not yet half price? Seriously, what was the release price on that - that is the price I would be looking for.

Jack Everitt wrote:
12.06.08 at 7:08 PM

It's getting worse:

http://dat.erobertparker.com/bboard/showthread.php?t=188208

and my own auction buying exp. from 2 weeks ago resulted in being able to buy everything below low estimate.

Danny wrote:
12.07.08 at 5:48 PM

Wine as an investment is in trouble, the ease of counterfeiting is just now being exposed. The difficulty in that market is just beginning, I would not buy as an investment, but I sure buy a lot to drink one day.

Michael wrote:
12.14.08 at 1:01 PM

The counterfeiting is being exposed but there are a lot of measures being taken to protect bottles from these crimes. RFID tags are becoming the best way to track bottles through the shipment process. There will always be people trying to con others, and there will always be people trying to prevent the cons. I would say invest in the wines you want to.. now IS a good time to buy and probably will be the best time in 75 years.

Anonymous wrote:
03.19.09 at 6:52 AM

This is the time to buy some 1st growth wines. Just know how to take care of it. Imagine how much it would be in 3 to 5 years.

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