News

Reprinted from U.S. News & World Report, Executive Edition

May 23, 2005

More Than a Snort

By Leonard Wiener

A bottle of 1982 Chateau Lafite-Rothschild can bring ecstasy, and not just by drinking the premier Bordeaux from France's Pauillac region. For those who paid $41 a bottle when it was offered in 1983, there's another intoxicating thrill. The wine now sells at some dealers for as much as $995.

With more Americans willing to pay top dollar for world-class wines, and speculators stoking the fire, prices are climbing. The average price of prime wines sold at auction has more than doubled sine 1995, and many are doing even better, says Peter Meltzer, auction analyst at Wine Spectator.

This is a world where $100 and up per bottle is not uncommon. It may be a choice of wine or a car. Two cases of '61 Haut-Brion were auctioned last year at a cork-popping $41,125 each.

Though feverish price moves of recent years have calmed a bit, high-end French brands and hard-to-get cult wines from small California vineyards remain hot. But despite sometimes stellar returns, investors don't drive the market, those in the industry say. "Most of the clients we deal with are buying because they have a passion for wine," says Jerry Zech of WineBid.com, a Napa, Calif., firm that runs Internet auctions.

Some enthusiasts nevertheless indirectly invest in wine by buying young classics that are affordable now but may not be after they have fully matured, which could be 10 to 20 years out. They are in effect opting to drink their investment gains.

That doesn't mean collectors never cash in. “They may sell if the value goes way up, but they often use the money to buy other wine,” says Chris Adams, executive vice president of New York dealer Sherry-Lehmann.

George Zicarelli, a CBS videotape editor in New York, says he's happy to make money and savor fine wine along the way. In addition to other holdings, he poured $65,000 into 17 cases of carefully chosen Burgundy, Bordeaux and champagne in the early ‘90s and sold the lot in 1999 for $260,000. “My timing was lucky,” he says, though he could have done better by hanging on to this Romanee-Conti, a Burgundy that wine lovers worship.

Bid on a bottle. Buying at retail is the main way to collect wine, and serious buyers should consider a dealer who offers futures, whereby customers get a discount by ordering wine before it is bottled. But auctions in New York, Chicago, and California and on the Internet are growing. Zachys, a dealer in Scarsdale, N.Y., auctions off wine owned by individuals and others at Manhattan's posh Daniel restaurant, where a $50 buffet adds flair. While the best and most expensive wines are often featured at auctions, the events are also a good source of reasonably priced premium wines to drink now, advises Wine Spectator's Meltzer.

Helping buyers be better informed are Internet sites that provide comprehensive wine ratings and prices. Wine-Searcher.com says its database covers prices and availability at over 5,000 U.S. and foreign shops.

There can be disappointment. An admired Opus One cabernet from California that averaged $259 at auction in early 2000 dropped to $159 in late 2004, reports Wine Spectator. And the revered Bordeaux of 2000 that is still aging has been sluggish, with some prices falling. Analysts say collector and speculative fervor drove prices up too far too fast.

A wine's character isn't always in step with its price. Wall Street Journal critics Dorothy Gaiter and John Brecher recently reviewed 15 vintages of Chateau Gruaud Larose Bordeaux, and among their least favorites was an '82 that rose to $250 from an initial $15. They preferred a 1999 at $38 – great to drink now and worthy to age.

Fine wine can be demanding. When it is stored long term, temperature and humidity must be controlled in a home wine unit or in a commercial facility. License laws make it technically a no-no to sell your wine to somebody else. There may be minimum lots to sell at an auction and a fee on both seller and buyer. Prices can vary widely, and despite the best opinion you can't be sure of unopened wine's condition. But when the planets are aligned, the drink of Bacchus can be godlike.

Succulent prices. Buyers are bidding up collectible wines. An 1847 Chateau d'Yquem Sauternes was auctioned off last year for $71,675. And index of auction prices has more than doubled since 1995.