Fine wine and pensions: A dangerous cocktail

wpid-dsc_0638.jpgThese are interesting times to be discussing investment advice. For those who invest in wine (without even discussing the rigours of the en primeur market), there has been nothing short of a deluge of stories about fly-by-night wine investment firms using high-pressure sales tactics on stock that never existed. For those who are simply investing for retirement, a new regulatory landscape that was introduced on 6 April has opened up incredible opportunities — and a great deal of uncertainty as well.

Right now you are probably wondering how these two topics are related. With interest rates and bond yields at low levels, investors have been clamouring for yield wherever they can find it, particularly those nearing retirement. Given how alternative investments — such as fine wine — have received a great deal of press over recent years for the returns they have achieved, it stands to reason that they have attracted many an amateur investor.

But as someone who used to be a financial journalist and today works somewhere in asset management, these are areas of investing that are best left for the experts and those who can afford them. So when I noticed that the Q&A column in the May 2015 issue of Decanter magazine featured advice on how best to supplement a pension income by using an inheritance to invest in wine, my curiosity was immediately piqued.

In this advice column, a reader asked this specific question:

I’m looking to invest in wine using an inheritance to supplement a pension — so looking at mid- to long-term returns. Should I buy Bordeaux or Burgundy, or both?

Ultimately, what someone does with their inheritance is their business. If they want to splash out on a case of Le Pin 1982 or even a whale tanker of rough-and-ready Vin de Pays, that’s their decision. But where I start to grow concerned is when that flight of fancy transforms into something more serious, such as an appeal for genuine financial advice.

Perhaps only a financial wonk such as me would pick up on the distinction between wine investment advice and pensions advice, but there we go. For safety’s sake, the mere mention of the words ‘pension’ and ‘wine investment’ must be approached with caution. In fact, anyone asked to advise on a scheme where the two could be combined is faced with a minefield. Better to retreat to safety than to risk a fatal misstep.

Sadly, this issue wasn’t addressed in Decanter’s response, in which the first two paragraphs were probably the most crucial:

Historically, fine wine has proved a lucrative investment over the long term, although it is subject to corrections like any other asset class. We’ve seen this with first-growth Bordeaux — the traditional investment staple — losing about 40% since mid-2011 while over the same period, top Burgundies gained about 10%.

My advice is to hedge your bets by diversifying, in two key ways. First, you are right to treat wine as a supplement rather than a primary investment. Wine is a useful addition to a wider portfolio thanks to its lack of correlation to more traditional asset classes, such as the stocks and bonds making up most pension funds.

The central issue I am highlighting here is that, in the highly regulated world of financial advice, fine wine is an unregulated asset class so symbolic of the wild frontier of the investment world that it has attracted disapproval from the Financial Conduct Authority. Ask your financial planner to include wine investment in your retirement funding arrangements and the answer will be simple: No. If professional advisers won’t touch it, then it’s probably a good idea that the amateur financial advisers not do it either.

This doesn’t mean wine investment is a bad thing. Nearly every wine enthusiast I know has bought at least a case or two for investment purposes over the years. But there is wine investment and then there is pensions investment. And my bone here is related specifically to the fact Decanter ignored the pensions aspect of this reader’s query and trundled straight on to the wine investment advice aspect. For my purposes, the most crucial part of Lister’s reply came in the first two paragraphs:

To her credit, Lister made clear that wine should be seen as a supplement to a portfolio rather than a primary investment. She also made sure to point out that fine wine, like any asset class, can fall in value as well as go up. But my gripe with the advice given is as follows:

  1. There was no statement at the outset that, above all, the reader should seek professional financial advice before making any major investment decision relating to inheritance and a pension (we don’t know how much money this person wants to invest, but there is some suggestion it is more than a few thousand pounds).
  2. Fine wine is touted as providing lucrative returns over the long term without any specific reference to actual performance figures.
  3. While the suggestion that fine wine has a “lack of correlation” to other asset classes is not necessarily incorrect and, indeed, there are no clear indicators for fine wine prices. There is, however, evidence to suggest wine is correlated with major global economic events, such as the 2008 global financial crisis or growth in the emerging markets. While it might not move in lock step with stocks and bonds, wine as a luxury product will be affected by the vagaries of the economy in one way or another, particularly during a recession or a decline in spending.

While Paul Lewis, host of BBC’s Moneybox, rightfully wrote that anyone can given financial advice, not just qualified financial advisers, there are times when it’s best left for the experts. I do not dispute the wine investment expertise that Decanter provided to this reader. I just believe that it should have been more careful given this person’s clear need for pensions advice.

 

Sticker shock: Worthy pinot noir for less than £20

wpid-dsc_0662.jpgFinding decent pinot noir for a decent price has become a nearly impossible quest that is akin to finding an affordable apartment in central London that isn’t simply a converted attic with a camp stove in the corner.

Pinot noir is one of those wines that can stop you in your tracks when you taste it. At its best, it is complex and profound, causing you to take more time to enjoy layer upon layer of flavour. At its worst, it can prompt your gag reflex.

Notoriously difficult to get right, pinot noir isn’t one of those wines that can be made in large volumes successfully. Thin-skinned, prone to rot and demanding care and attention throughout the growing season and in the winery, this is a wine that you don’t want to buy from Romania for £2 a bottle. And despite what some people might say, you probably don’t want anything from New Zealand’s Marlborough region for less than £10 a bottle these days either. Note that in California, the volume producers have steered clear of pinot noir for the most part. While Charles Shaw — AKA Two Buck Chuck — can pull off cheap chardonnay and cabernet sauvignon, among other varietal wines, they stopped short of jumping on the pinot noir bandwagon. That was a wise decision.

Where, then, do we find affordable, drinkable pinot noir? New Zealand’s Marlborough region is increasingly turning out impressive examples.

While Central Otago to the south and Martinborough to the north are coveted for the quality of their pinot, the price can often be a bit of a shocker. Marlborough, perhaps best known for its unique style of sauvignon blanc, has been producing pinot noir for quite some time. Even though they tend to be cheaper than those from Otago, they can be frustratingly acidic, one-dimensional and unappetising. Think Brancott, Oyster Bay and any other supermarket brand for that matter.

There are some great examples of Marlborough pinot, however. The likes of Dog Point and Cloudy Bay, and the better offerings from Seresin, all produce fine pinots but their per-bottle prices are north of £20 and are often closer to £30. Pegasus Bay, in the Canterbury region, also makes a great pinot noir, but again the price is around £25 per bottle.

The question is, can we find an enjoyable pinot noir with layers of complexity with a price somewhere between the forgettable supermarket brands and top-end juggernauts? I think we might.

For several months I have been visiting the Leadenhall Market location of Amathus Drinks and eyeing up its selection of wines from Marlborough’s Domaine Georges Michel with curiosity and suspicion. Curious, because it is a producer unknown to me. Suspicious, because little has been written about them in the UK.

Further suspicion comes from the price. The company’s mid-range pinot noir, Domaine Georges Michel La Reserve Pinot Noir 2010, is listed at £22.51 per bottle on the Amathus website, placing it firmly in the more expensive category of Kiwi pinot. But in the shop it is selling for £16.85. While not cheap for the everyday wine drinker on the street, if it’s good, it could be a steal.

On first pour, the wine is pale but not watery, with complex aromas of cherries, plums, currants, mushrooms, oak, brambly fruits and savoury, earthy notes. On the palate it has that classic smoothness of a well-made Kiwi pinot, with a dash of muscle while also having a great deal of French-influenced finesse. Plenty of cherries and fruit backed by more layers of savoury notes and smooth tannins. At five years old, this wine has benefited from some bottle age and is clearly made in a more Burgundian style but clearly has New Zealand as its origin.

For the price, this wine outclasses many that have cost twice as much (Cuvaison from California coming immediately to mind). It might be too early to suggest that it is in the same league as some of its more famous Marlborough neighbours, so let’s hope that the price stays put.

 

On junk science and my (former) dislike of Chilean wine

wpid-dsc_0592.jpgA quick glance at the science section of any major newspaper tells us two things. First, that there is no shortage of academics trying to find the answer to anything and everything in our observable universe. And second, that there seems to be a disproportionate number of scientists devoting countless hours, perhaps even years, to some of life’s least important issues.

Almost all of it is junk science with an agenda behind it, and this fact has been reported widely. It seems, for some reason, that the Telegraph is leading the pack when it comes to reports of junk science, perhaps because, in its endeavour to attract the most clicks and therefore higher ad revenues, it must print anything and everything.

It comes as no surprise that junk science about wine tasting appears frequently, hashing and then re-hashing the same tired topics. Case in point, this week’s round of wine tasting ‘science’ and ‘research’, as reported by the Telegraph and Harper’s Wine & Spirits. At the Telegraph, we read about how wines with lower alcohol are purported to have more flavour than those with higher alcohol. Sure, insofar as the alcohol isn’t masking the fruit and other aspects that make up the wine’s flavour profile.

Then, in Harper’s, we read that Naked Wines, the online retailer, claimed that consumers ‘prefer’ bigger, bolder wines with more alcohol. If consumers want flavour, then surely going for a wine with more alcohol is counter-intuitive? I can only conclude that something doesn’t add up here. I’m going to suggest it’s the science involved. No matter how deeply scientists study the process of wine tasting, no matter how often they might conclude that there is nothing behind it, they are clearly ignoring the fact that there is, and it’s entirely sensory and subjective.

Think of it this way: there are no scientific reviews that I know of that have debunked the science film reviews. Many of the most celebrated films ever made received bad reviews upon release — think Vertigo, Citizen Kane, Casablanca and my personal favourite, The Big Lebowski — but no one has claimed that this was because film reviewing is junk science. Nor does anyone say it when the reviews are overly positive.

On the topic of science and subjectivity, let me make a very bad segue and write about Chilean wine. It is no secret that I have an irrational intense dislike of Chilean wine. Mostly, I have found it to represent a vague middle ground in the wine world, a sort of indecisiveness, neither here nor there of flavour and complexity.

If, for example, a merlot from St Emilion represents restraint and a sense of place while a merlot from, say, California, has a reputation for being the opposite of restrained, then a Chilean merlot, by and large, will inevitably land somewhere in the middle. And the middle is not where anyone wants to be, for being in the middle really just means that you’re neither this nor that. It’s the beige minivan of wine, offering as much excitement as a night out at the library.

Except. Except there could be another way. And I might have found it, in all places, at Marks & Spencer. Look beyond the cashmere scarves and the navy blue blazers with those gaudy gold buttons and head straight for the wine aisle, where the selection is anything but stuffy. Indian sauvignon blanc? Georgian orange wine?  A crisp, white wine from Tikves in Macedonia? Check, check and check. On the Chilean front, the usual suspects make an appearance in the M&S aisles.

But what’s this hiding near the bottom of the shelf? A dry pedro ximenez from Chile’s Elqui Valley? Pedro ximenez is a white wine grape best known for growing in southern Spain, where it is turned into a sherry of the same name, often labelled PX for short. PX sherry is dark and sweet, the result of grapes that have been laid out to dry in the sun to intensify their sugar concentration.

With M&X Pedro Ximenez PX, things are rather different. The wine is dry and crisp, not sweet and unctuous. It reminded me more of a wine from the Maconnais region of France, not an oddball white wine made in Chile from an oddball grape. For somewhere in the region of £7, this wasn’t just an acceptable bottle of wine, this was one of the first Chilean wines I’d enjoyed in a long time (a recently tasted bottle of very expensive still wine made in a Champagne style notwithstanding).

Now, this isn’t a perfect wine by any means. Its price is in the lower half of the M&S product suite, so it isn’t necessarily profound or complex. It probably won’t cause any epiphanies any time soon. But it’s interesting and satisfying, something few Chilean wines have achieved for me in the past few years.

And there’s more. M&S also sells a reasonably priced wine made from Chile’s signature red wine grape, carmenere, and it, too, stopped me in my tracks. M&S CM Carmenere also hails from the Elqui Valley and, while slightly more expensive than the PX, represents good value. I expected it to be fruity and innocuous like a generic merlot might be, but instead it was so much more. Oak, spices, excellent fruit on the palate and a solid backbone all make for a bit of a surprise. So PX and CM. Who knew? Until recently I had avoided Chilean wine out of caution. But perhaps I was wrong all along. What I do know is that it had nothing to do with science.

Wine investment: A worrying state of affairs

IMAG0028Bear with me, the link I am about to make is tenuous. It’s often disappointing when something that you wanted to believe was true turns out to be nothing more than a sham. In the case of the Wizard of Oz, that sham was a wizard who sustained the myth of his powers using smoke and mirrors, shielding his worshippers from the reality that he was just an ordinary man from Omaha who got lost. Thanks to the power of fiction, the wizard effected a happy ending by proving to Dorothy and her friends that the answers they were seeking were always within them.

When it comes to wine investment, there has been no shortage of instances when people wanted to believe something to be true. Rudy Kurniawan is perhaps the most famous recent fraudster, but don’t forget about the case of Labouré-Roi’s fake pinot noir or even the somewhat mythical Thomas Jefferson bottles, documented in the book The Billionaire’s Vinegar.

We need not travel too far to find cases of wine fraud. A daily visit to Jim Budd’s blog keeps us up to date with just about every instance of nefarious activity in the wine investment world, some elaborate and some not.

The latest story that caught my eye was that of opportunists attempting to capitalise on clients of the now-defunct wine investment company European Fine Wines. EFW was a company that many of us wanted to believe was the real deal and free from the troubles associated with other collapsed wine investment firms, but deep down there were plenty of suspicions floating around. This all came to fruition in 2014, when EFW’s phone lines went unanswered and the staff had reportedly been ‘sacked’.

Indeed, once the company went under, it left behind a trail of unhappy former clients and dubious practices. Sadly, they did so right under our noses. On three occasions in 2012 and 2013 it held tasting events where, looking back, it seemed to wish upon itself all the scrutiny and suspicion it could muster. I wrote about the first of these tastings back in May 2012, where the wines lined up on the table consisted of Haut Brion, Cheval Blanc, Yquem and more from the 1998 Bordeaux vintage. The event was peppered with clients and journalists alike, but any scrutiny that was in the air was drowned out by a fog of first growths.

Later that year, the company held a Christmas tasting. The first growths were fewer in number, but the volume of financial journalists attending was uncanny. If they had something to hide, they were doing an unbelievable job of hiding it out in the open.

It was at this tasting that an unhappy client’s story of cold-calling and potential mis-selling (unverified), began to raise my suspicions. What he told me was all too familiar. A slick sales person from EFW  cold called him and sold him a story about the thick profits that could be made by investing in wine and how EFW would handle everything for him. The person on the phone was pushy and persuasive, of course, and managed to part the client and his money with ease. And because this person knew nothing about wine, especially not Bordeaux, EFW sold him second-tier wines from lesser vintages at prices that were very likely unfavourable.

The unhappy customer was angry but realistic. He figured he had been duped, but thankfully didn’t lose a fortune. When he received an invitation to the Christmas tasting, he attended because he wanted to see for himself if the company was legitimate. I gave him my card and told him that if he wanted further help with his situation, I could recommend a few avenues for him to follow. He never did get in touch.

A year later, another tasting invitation landed in my inbox. It was near the end of 2013 and this time there were no journalists present and the wines were all lower-tier. The atmosphere was also much frostier than usual. Something had clearly changed at EFW.  Six months later, the company would be gone. Rather than follow the path of successful and trusted brokerages, companies like EFW seem designed to make quick profits by taking advantage of naive clients by promising fast profits. The problem is that if there is money to be made in wine, it doesn’t come quickly.

In a recent interview with the Telegraph’s Victoria Moore, famed American wine critic Robert Parker said that there is no way to make a quick buck out of wine, adding:

Speculation is one of the ugly down-sides to Bordeaux. I think these speculators have finally, especially the Chinese and some other wealthy people, recognised you can’t make money on them. Now if you’re buying it to sit on it for 10 to 15 years ….but speculators are looking to turn things over.

Truer words were never spoken. We all know the adage; if it seems too good to be true…

Not a drop worth drinking part II: The customer is always right

ID-1009400Harry Gordon Selfridge was famous for his eponymous department store, which transformed the humble act of shopping from an undesirable but necessary evil, to the unnecessary act of frivolity that is the engine of Oxford Street today. Perhaps.

Mr Selfridge has also been credited, along with Marshall Field, for coining — or perhaps just popularising — the phrase ‘the customer is always right.’ In the quest to secure as many sales, and therefore as much profit, as possible, the belief was that no matter what the customer said or did (perhaps short of theft), they were always right. Or for those who go to Burger King, they can always have it their way.

Taken to its logical conclusion, this mantra would be the undoing of retail. And perhaps, in a way, it has. Retailers these days give people what they want, not simply what they need. Why else do we have Primark selling cut-price clothing and household goods? Never mind where or how their products are made, and what it does to the environment.

As axioms go, this is as true for clothing as it is for wine. In their quest to satisfy their customers whims, supermarkets are stocking their shelves with whatever is cheap and sells well. Is it what the customer needs? No. Is it what the customer wants? Yes, but only insofar as they want something that is a) cheap, b) familiar and c) uncomplicated. The everyday person wants an everyday wine, so why make it challenging by stocking the shelves with Georgian saperavi or Greek assyrtiko? Only the nerdiest of the nerds will buy that.

If avoiding confusion were the objective, our supermarkets wouldn’t provide excessive choice at all. And yet, this isn’t the case at all. During a recent shopping trip as part of my quest to find a cheap and drinkable muscadet, it was in a tiny Sainsbury’s outlet in the London’s financial district where I was presented with a confusing site. While its small wine fridge at first seemed to contain one of all the usual suspects (one Chablis, one Sancerre, one Soave and so on), this was not the case for our old friend pinot grigio.

For there was not just one, but seven of the devils lined up all in a row, each one as uninspiring and insipid as the next. Logic would dictate that if Sainsbury’s sees fit to sell just one Chablis, one Sancerre and one Soave, then one pinot grigio ought to do as well. But it seems that, in an effort to pile it high and sell it cheap the customer who is always right, loading the shelves with pinot grigio is giving them what they want.

As Lettie Teague wrote in the Wall Street Journal, pinot grigio seems to defy logic:

Watery. Insipid. Neutral. Boring. Few wines underwhelm as thoroughly as pinot grigio. Yet it’s a consistent best seller—retailers tell me that they can’t keep the stuff in stock.

This is not simply a problem at Sainsbury’s, to be fair. And it’s not simply a problem in the UK either. At a vast supermarket of a wine store in western Canada, there stood an entire shelving unit loaded with pinot grigio, each bottle no more compelling than the others. When I asked why they needed to sell some 40 different variations of pino grigio, the shop assistant slumped her shoulders and gave a quiet, frank response: people buy a lot of it, so they stock a lot of it.

Not that pinot grigio is all bad. In the right hands, made with good grapes and with care and attention, it can become a wine of character. As Peter Grogan once wrote in the Telegraph,

Bad winemakers will make bad wine regardless of the grape varieties they’re growing. Poor old pinot grigio, being an obliging and productive old fruit, has fallen in with some rather undesirable types.

Undesirable indeed. Sainsbury’s take note.

Not a drop worth drinking

wpid-dsc_0565.jpgIt is often said that wine drinkers these days are spoiled with choice, but surely the people who say such things have never ventured into a typical supermarket. The shelves may be heaving with wine, but how much of it do you actually want to drink?

Worse, still, if you have your mind set on buying something specific. Not esoteric, mind you. Just…specific. No problem if you are seeking pinot grigio, a generic bottle of Rioja or a a generic Kiwi sauvignon blanc. But think twice if you set off with anything particular in mind.

This was all brought into sharp focus this week as I set off on a shopping trip to buy one type of wine from as many retailers as possible. The wine in question? Muscadet.

Now, Muscadet has never really been considered a fashionable wine. Not like Chablis, which is synonymous with the 1980s. Nor pinot noir, which more or less had a starring role in a film. But with more and more wine drinkers, critics and sommeliers seeking greater value for money and food-friendliness, you’d be forgiven for thinking Muscadet would be among those in high demand.

Certainly, I am not alone in my thinking that the wine retailers would be awash with stuff. Rather than spend good money on premier cru Chablis, the masses would rather opt for a better value Muscadet sur lie, I concluded. And so it was on this basis that I set off in search of fine examples of this wine that would form the basis of a blind tasting for an upcoming blog. There would be one each from some major high street retailers, as well as from independent merchants. The premise behind the experiment? To see if what the big name Goliaths sell can come close to matching the quality of the small and nimble Davids.

The shopping trip started off with success. The nearest independent, Amathus in Leadenhall Market, came through with a bottle of Domaine du Haut-Banchereau Muscadet Sevre et Maine Sur Lie 2013 for £7.95.

This would set the price target. Can the big retailers deliver a better wine for the same price? Well. The concept was sound. The shopping trip was not.

The Tesco local to my office near the Bank of England had only the cheapest form of Muscadet available, from its lowly “Simply” range for £4.49. This would not suffice.

It was even worse at the Waitrose around the corner. Plenty of pinot grigio, sauvignon blanc and Californian rosé. But no Muscadet.

And what of Sainsbury’s? Well, Sainsbury’s was no better.

To their credit, when I tweeted about the City of London’s Muscadet drought, both Tesco and Sainsbury’s did their utmost to find out where it was hiding. Waitrose was unusually silent on the issue, but this is probably because their time is being monopolised by complaints about mouldy cherry tomatoes and conference pears from the middle classes.

So, after round one of the great Muscadet challenge but before a single bottle has been opened, the score is independent merchants 1, major retailers 0.