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.

 

Advertisements

Winter reading: Sediment — a wine book for the rest of us

51Bgtb7y7gL._SY344_BO1,204,203,200_Despite having made my profession as a writer of various persuasions for most of the past decade, my reading list has been shamefully thin on the ground. Finding time to read seems to be more difficult and less appealing than ever, particularly when the other option is to vegetate on the sofa while watching reruns on Netflix.

This time six years ago I somehow managed to devote a worrying amount of time to reading Robert Parker’s Bordeaux cover to cover. That tome, all 1,200 or so pages of it, took a year to read at a pace that was, to be honest, as good as a few pages here and there until I’d had enough of Parker’s constant use of the phrases ‘blockbuster’ and ‘sleeper of the vintage’. Informative as it was, it was also an excellent sleep aid.

Since then I have somehow managed to read several other dry books on wine, but as the years have passed by, my ability to complete them — or even make it more than a few pages in — has diminished. I never did managed to read the entirely of the World Atlas of Wine, informative and valuable as it may be. But I do like to refer to the maps on occasion.

No matter what I read, a book needs to give me a reason to keep reading it. If it fails to grab my attention, to entertain me, to pull me into its narrative and hold me there until the final page, I can put it down and quickly forget about it. Some books I read quickly; other books will remain in limbo for several years as I dip in and out of their pages when I can be bothered to think of them. This is why I never did finish the Mayor of Casterbridge. I read Far From the Madding Crowd many years ago when I still had the patience, whereas the Mayor of Casterbridge tested my patience one too many times.

Wine books are no different from any other. They either pull me in or they push me away. I sincerely doubt I would have the patience to read another of Parker’s imposing reference books, for example. But give me something with a story to tell, a dash of wit and humour, and we’re in business.

This is the case for the only wine book I have managed to read in its entirety in the past year was Sediment: Two Gentlemen and Their Mid-Life Terroirs.

As I have also written for 12×75.com, this is a wine book that raises topics and views that are seldom seen among the wine press. It speaks to several audiences at once, from the everyday wine drinker who simply wants to know whether or not they should attempt to drink wine out of a box, to the sophisticated collector who has a sense of humour. While the book is based largely on posts that have appeared in the blog, the adaptation works because few of us have probably read all of their previous posts. There are times when a compendium is a good thing.

I devoured this book in a couple short sittings. In other words, on the seats of two discount airlines in early December. What would normally have been an uncomfortable hour and a half being flogged duty-free products and scratch cards by bedraggled flight attendants, I simply zoned them out and buried my head into the world of CJ and PK.

Sediment explores with humour and humility the minefield that is buying and drinking (and less frequently investing in) wine, whether it is bought in bulk from a co-operative in the south of France, a Germany discount retailer on the UK high street or from a merchant in St James’s Street in London.

Sediment: Two Gentlemen And Their Mid-Life Terroirs
By Charles Jennings and Paul Keers
John Blake Publishing
£12.99

Alcohol monopolies: Friend or foe?

1024px-Saq_liquor_store2

Alcohol monopolies are in the news again in Canada.

A recent piece in the Montreal Gazette has argued that it is time to end the alcohol monopoly in Quebec. Why? Because consumers are being gouged while the government-run monopoly lines its pockets.

For those of us from the Great White North, the alcohol monopoly is something that we love to hate. We love it because it’s like an old friend; familiar, always there, and always reliable. This is ignoring the fact, of course, that to at least a certain degree, prices are tightly controlled, access to product is limited and regulations are much tighter and more restrictive.

And this is what makes it a foe. Even though Canada is one country sharing a single constitution and national identity, there are strict rules about shipping wine over provincial borders. Moreover, because liquor laws vary from province to province, there is the belief that some people get a bad deal.

Then there is the service side of things. Consumers get limited access to the market (in British Columbia, consumers often can only buy a bottle or two of their favourite Bordeaux because BC Liquour Stores work to tight allocations), staff knowledge can be pretty poor in the stores and much of what is sold on the shelves can be viewed as generic dreck.

The Montreal Gazette article reads:

As Quebec’s only buyer and vendor of most alcoholic products, the Crown corporation brings in over a billion dollars to the province annually, about 1 per cent of its revenue. It’s the government’s most profitable venture, with margins over 48 per cent. As a comparison, Liquor Stores N.A. — a company that owns liquor stores in Canada and the U.S. — only had a profit margin of 1.9 per cent.

The argument, however, is not that the entire system should be privatised and the government distribution department be scrapped. Instead, it argues that the buying power of the government corporation be retained and the market opened up to private retailers.

In ending the monopoly, the SAQ would retain its duties as the sole distributor of alcohol in the province. There is a cost advantage of buying alcohol in bulk and the SAQ is one of the world’s largest buyers of wine and alcohol. This could be made to work in favour of consumers and businesses. Privately owned retail outlets would purchase their products from the state at a low cost and sell the alcohol at a price determined by supply and demand.

Such a plan could be a decent solution, but is the alcohol  monopoly necessarily a bad thing?

Ending the monopoly, sacking the employees at all the stores and opening the market to private competitors, as the Montreal Gazette piece recommends, might result in good things for consumers. But it seems to gloss over an important issue: it could put 8,000 people out of work and, very likely, result in lower wages for those who end up working in a privatised alcohol retail sector. This would need to be managed to ensure that unemployment and underemployment as a result of the process are kept to a minimum.

All of this makes me think back to a piece I wrote earlier this year about alcohol monopolies.

In it, I concluded that alcohol monopolies help to keep sales low and therefore the negative problems associated with consumption. But I also concluded that it was detrimental to consumers in terms of offering choice of product and value for money.

I used to be firmly in the ‘government alcohol monopolies are good’ camp simply because they offered a good shopping experience, seemed to have low prices and tended to maintain a clean image.

But the evidence, coupled with my experience living in the UK, has made me change my mind. These days it seems to be that the best thing…would be a free and open market for alcohol retailers.

My argument remains the same. But I’m not entirely sure the argument put forth in the Montreal Gazette piece is entirely realistic. And I’m not in favour of closing a retail system that would result in 8,000 job losses. That end of things would need to be managed carefully.

Most of all, though, I’m not sure having private retailers buy directly from the sole, state-run distributor makes any sense over the long term. One of the best things about the UK wine market is the competition in the distribution market, with small and large players striking deals with producers around the world.

In addition to the importers who handle the large brands and the prestigious estates, there is a litany of small wine merchants who travel far and wide to find undiscovered producers that have never before been available on these shores. Could a single, giant, government distribution branch achieve that? Probably not.

Big Mac vs Dead Hippie: On junk science and fine wine

Can you tell theID-100261094 difference between a £2.59 Mcdonald’s Big Mac and the £8.50 Dead Hippie burger from London’s MEAT liqour, purveyor of fine but pricey burgers?

Of course you could. One is anaemic and flat in flavour, clearly the product of mass production and cheap ingredients. The other is literally dripping in flavour, is handmade and cooked to order, and most important of all, loaded with expensive ingredients.

Few would dispute the vast differences between these burgers. So why is the opposite true when it comes to wine? The flow of news stories telling us that seasoned wine experts, from Masters of Wine and some not, who are unable to point out the cheap, £4 wine out of a group containing some of the world’s most expensive wines is practically interminable. But recently it seems that the volume of these articles has been on the increase — helped along the way, no doubt, by publications like the Daily Mail.

If you thought it was safe to progress through the summer without encountering a news article that dismissed wine tasting and wine critics as being entirely useless, well you were wrong.

Back in July the Mail, our favourite sensationalist newspaper and purveyor of mindless twaddle designed only to stoke rage among anyone remotely reasonable in character, proclaimed that its taste test of cheap wines from Lidl and expensive wines from top Bordeaux chateaux resulted in ‘hilarious’ results.

The article featured Oz Clarke, the expert, and two people who, shall we say, are more likely wine ‘experts’ insofar as they are expert at drinking it.

The only thing hilarious about the article, from what I could surmise, was that Oz Clarke pretty much nailed the entire tasting and yet the Daily Mail still tried to convince its readers that no one could ever tell the difference between a £4.99 Aldi Bordeaux and a £514 bottle of Chateau Haut Brion. Except Oz Clarke for the fact that Oz Clarke clearly could and in fact did.

This is a topic that gets more than its fair share of coverage, both in the anti-wine snob national press and among snooty bloggers like me. Politics has the debates over taxes and the welfare state; the wine world has the debates over natural wines and whether or not critics can do the one thing they have spent their careers doing: picking out the good ones from the bad.

Newspapers love a good headline. The Daily Mail knows this better than anyone, but it isn’t alone. The New York Times has been known to weigh in on the debate. So too the Guardian, which more often than not prefers to make absolute declarations in order to drive more traffic to its site more than it probably cares about the topic itself.

Then there is one of my favourite media outlets: NPR. It could, just like the others, spice up its stories to more sensational levels to drive traffic. But this is the house of reason and analysis we’re talking about. Sensationalism doesn’t  register in a radio network where the newsreaders sound as though they are whispering the news to you while sitting in a wing back chair by a roaring fire.

NPR also has a reputation for analysing a topic at a level much deeper than most other media outlets, so it came as no surprise that their discussion about the validity of wine tasting (Is wine-tasting junk science?) briefly veers into discussions philosophy rather than the mechanics of comparing a £5 bottle of wine with one worth £500.

The article also sums up wine tasting in a much more eloquent manner than my burger analogy above:

If you know English, then you are expert not only at discriminating significant English sounds, but you also spontaneously and reliably appreciate their meaning. Someone with no acquaintance with English can’t do any of this, even though his or her sensory organs may be in fine working order.
— Alva Noë, NPR, 8 August 2014

So is wine tasting junk science? The question I ask is, who ever said it was a science? I think the Daily Mail article provided us with all the conclusions that we need, even if it was unintentional.

We need to talk about brett

Few things are more satisfying than an earthy, rich red wine from the south of France. Those deep, dark fruit flavours. That whiff of garrigue. The hints of herbs and spices.

But…maybe not the stench of barnyard so strong that it seems as though a horse has dropped its posterior onto your nasal passages.

Blame brett.

Experienced wine drinkers will already be familiar with brettanomyces, that naturally occurring yeast that is either loved or loathed and can enhance or destroy a wine depending on its potency.

Brett can divide a room. The Aussies? They hate it and the style of wine they make down under reflects their dislike for the whiff of barnyard and sweaty horse that it adds to a wine. The French? Well they don’t mind.

At its best, a dash of brett can add a bit of tobacco, leather, bacon, smoke and so on. At its worst you wonder if the winemaker blended in a few bushels of manure from his neighbour’s grazing livestock.

DSC_0074It isn’t often that a wine’s aroma actually makes me recoil, but in the case of this bottle of Les Obriers de la Peir Terrasses de Larzac 2012,which was part of a review case that Berry Bros sent to me, the odour of manure dominated the wine and diminished anything else that was good about it.

I recall the first bottle being a little stinky, but nothing could have prepared me for the blast of cow dung lurking in this bottle’s inner recesses.

For £18.45 a bottle as listed on the BBR site, this wine isn’t exactly on the value end of things. I would expect a higher quality level, but the fact remains that something like brett can’t always be controlled. Had I bought it myself, I would have taken it back — and that’s saying a lot because most of the time I like a little barnyard in my wines. It’s precisely the reason I prefer the earthy wines of the Rhone and Languedoc to the typical laser-sharp Aussie shiraz.

UPDATE: A day after opening this bottle, the overpowering aroma had diminished and fell away to the background, although there were still clear barnyard notes. This wine is apparently not known to be bretty, so did I misinterpret it? It could have been something else, but it doesn’t change what I first picked up when I opened the bottle.

So what is this thing called brett and how prevalent is it? Jamie Goode did an excellent job explaining brett back in 2003. In short, it is a yeast — a unicellular fungus — that appears regularly in winemaking. It is often believed to spoil a wine, but this is the topic of hot debate.

During the winemaking process, all of the yeasts that exist in the grape juice usually get eliminated as fermentation progresses and the alcohol level rises. Normally, all these critters disappear when fermentation is complete, but if there are sugars and nutrients left over, this can open the door to our little friend brett.

Brett is a big fan of juicy, opulent red wines (like the Obriers de la Peira above) that are made with ripe grapes, have higher alcohol levels, high pH levels and low acidity. It likes to lurk in the vineyard on the grapes as well as in the winery. Good hygiene and clean winemaking equipment can go some way to holding brett at bay, but the fact that it exists on the grapes themselves means that it can pop up any time it likes. Filtration helps to hold it at bay.

At lower levels, brett is often one of the main contributors to a wine’s aromas and complexity. For example, it has a long history in Bordeaux wines, but its effects have been reduced over the years as winemaking practices have modernised and improved.

I’ll come out and say that I don’t mind a little bit of brett. But only a little. I draw the line at the point when my wine glass smells as though it’s filled with manure.

A reader offer you say? Yes, a reader offer: IWC gold medal tasting

IMAG0837

 

So the other day the IWC asked me if I would kindly spread the word about their upcoming tasting event for gold medal-winning wines and I thought, why not?

As you might recall, back in November the IWC allowed me to attend one of their judging days and I have been worried ever since not all bothered by the fact that I cocked up their results a little bit. As a consummate professional, I blamed it on the fact they made me taste interminable flights of rough-and-ready Rioja and crisp New Zealand sauvignon blanc, rather than my untrained palate.

Now you can decide yourself if I got it right (even though there’s actually no way of knowing which Riojas I judged), rather than take a chance by buying one of those award-emblazoned wines during your next trip to the supermarket.

Not wanting this to read like an advertisement or anyone to be under the impression that I take inducements, the only reason I agreed to do this is because I’ve always been treated kindly by the IWC and its PR team.

So, why not? Here are the details:

The International Wine Challenge is hosting an event that it calls A Taste of Gold on Thursday 26 June. The tasting takes place between 6pm and 9pm at Lindley Hall, The Royal Horticultural Halls, London.

This an annual event featuring IWC gold medal-winning wine and sake, and it is only for producers who have won a gold medal in the current challenge year. They are also allowed to show a selection of other IWC medal winning-wines and sakes from their portfolio, so I apologise in advance if you stumble across the occcasional bronze medal winner (as an aside, a judge once told me that giving a wine ‘commended’ or even bronze medal status is akin to telling the winemaker that it’s crap, but that’s just one person’s opinion).

Tickets for the event are normally £20 but you can get £5 off if you use the promotional code ‘GRAPENUT’. (Note the cute reference to the name of my blog.)

Full disclosure: The IWC has offered me two free tickets to this event. In the spirit of good ethics (and if I actually accept the tickets) I will donate their face value to a yet-to-be-determined charity. Feel free to recommend a charity in the comments section on this page.

And don’t worry, you won’t be stuck in a room full of socially awkward punters and the squirrely folk who run the wineries. The top brass of the IWC will be there too (Tim Atkin, Oz Clarke, Charles Metcalfe, etc).

So, if you have a bone to pick about the medal-winning wines, you’ll be able to hold the senior judges to account.

All the details are here: http://goldmedal.internationalwinechallenge.com/