How to Invest in Wine

photography by Vittis from Lithuania

Every man instinctively attempts to secure a financial backbone. Now there can be varying views on this matter. On one hand it’s “save for a rainy day!” or maybe your purpose is to just “make it rain!” on a Friday night.

It’s something we talk about often on ploomy—investing your money. But investing your money in wine? Yes, for those of you who don’t know there is such a practice and it is called buying futures or en primeur.

En Primeur or “Wine Futures”, is a method of purchasing wines early while a vintage is still in a barrel, offering the customer the opportunity to invest in a particular wine before it is bottled. Payment is made at an early stage, a year or 18 months prior to the official release of a vintage. [via Wikipedia]

Buying futures is definitely like playing the stock market. You may think you have a sure thing, but one thing can go wrong and suddenly your purchase isn’t as impressive as you thought it would be.

The original reason to buy futures was to get your order in early on wines that were high in demand. Then in 1961, Bordeaux had one of the greatest vintages in history and the wines ended up costing more on release date than people had paid for in their futures and it has done nothing but increase in value. Since then everyone has had visions of getting in early on the next great vintage. Some people have been lucky enough to build a substantial collection of wines that are considerably great in value and quality. I’ve met certain people whose collections are worth somewhere in the six digit range. And that’s considered only a last resort for something to fall back on.

Go Deeper: click on the chart for a larger version

courtesy of Wikipedia

Not all of us can afford to buy top flight First Growth futures, quadruple our investment and retire to Monaco. For us regular folk, here are a couple of things we can do to help our cause.

Find a retailer you can trust

No, I don’t mean Safeway, Jewel-Osco, ShopRite or Whole Foods. Yes, you can buy your groceries there, but I strongly suggest going to a wine shop to get your wine (especially for something like futures). If they happen to deal with futures often, even better. Get to the know the staff and become a regular customer. They’ll get you the best deal they can find, let you in on secrets others might not know, and sell you things they might not sell to others.

Stick with French

Bordeaux in particular. It has a long history in dealing with futures and the product can last forever. Either way you usually get a product that has increased in quality or value. California has tried it’s hands on selling futures, but it hasn’t had the same success as Bordeaux has. Many west coast wineries are hot for a minute, then have a bad year, and never recover.

Read your periodicals

As much as wineries hate to admit it their product’s popularity is often determined by select publications. Winemakers can say a particular year is great, but the rating given by certain critics is what determines the popularity of that vintage and affects that price. The latest craze is the 2005 vintage. For example, the 2005 Chateau Petrus is $4,500 a bottle en primeur. Now depending on the rating that comes out for it (tabbed from 95-100 points), your wine could be worth $3,000 (95 points) or as much as $9,000 (100 points). Talk about a gamble. Read up on what wineries are doing, and how weather affects the upcoming vintage. Some critics get to taste vintages way in advance and can judge a fair estimate of how good a wine will be.

Buy from the source

If you happen to live near a great wine area, go straight to the source. Become a direct customer of a winery you really like and cut out the middlemen. They always give their members the best access to their products and offer deals to them first before the general public.

Buying in futures is definitely something that has to be done with sensibility. But take it with an optimistic point of view. If your investment doesn’t turn out how you thought it would, it’s not a total loss—you have a wonderful wine to drink!