Critics Move The Markets
Some actual industry commentary.
I saw some interesting discussion between a few like-minded critics the other day, they were fretting about the perpetuation of wine investments, as well as how the landscape of wine discovery has apparently diminished in recent years.
Who else is to blame for the perpetuation of Fine Wine Investment, other than the critics that continue to push up scores, and the prestige of a few key regions and styles?
How Much is My Wine Worth?
Does it feel more rewarding to drink the wine 10 years after you bought it? Does it help knowing how much it was worth, or how much it is worth now? Is enjoyment dependent on the current market value?
The landscape of investing in wine is embedded into the mind of the enthusiast. The concept of drinking windows and the question “how long do I keep this wine?”, are consistently coupled with the inevitable question around value increase1.
“If I don’t drink this wine, will I make money out if it?” Sometimes, maybe a little bit2.
The value of wine is dependent on how much someone else might pay for it today. That’s not exclusively linked to availability, but also the reasoned appraisal of quality over time.
Who to trust with that appraisal, your mate Dave on Vivino, or an internationally published and experienced wine critic?
Critics Move the Markets
‘Critic A’ tastes a wine on release, benchmarks that against it’s vinous peers and immediately begins to move the secondary market. Over time, articles, reference tastings and reports establish winemakers and wineries on the Investment Market.
Improved scores generally represent improved returns.
Liv-Ex publish their ‘Fair Value’ analysis with aggregate scores from a select number of critics3.
“It uses regression analysis to measure the relationship between price and quality and establish the fair price of a wine based on its critic score and vintages already available in the market.”
Liv-Ex justify their secondary market trading platform, based on data such as market fluctuations and historic pricing. These price movements are derived from people talking about the wines.
Critics might argue that these prices are guides for purchase and future drinking pleasure. Investors however use this analysis to pick wines that will generate the best market returns.
Chatter drives demand.
A lot of critics make a living out of perpetuating the conversation around the quality of wines that many consumers can’t even get hold of. The elusivity narrative creates a pricing framework for other wines to sit within.
The framework is built on a small number of people having broad early access to tasting wines that most can only read about. They describe, assess quality, assign a score and move on. Publications compile profiles, ‘producers of the year’, tables and charts, taste verticals, hunt for new species of unicorn.
A Score for the Customer
Most casual consumers aren’t downloading copies of Special Reports, or studiously reading 1000’s of tasting notes.
Retailers use scores as a sales tool. The educated customer has merchants they trust, but those merchants have critics they rely on.
The few consumers that are reading these granular notes, are the ones with a strong interest in premium wines, for their investment potential or long term drinking. They want to know which wines are the best.
It’s a two-way game. Scores drive collectors to invest, as well as drinkers to splash out. There’s always someone willing to pay for the best wines, and they’ll pay the top market rate for those wines.
Long term drinking inevitably leads to price inflation, and so do the scores that quantify the longevity potential.
Wine Enthusiast ‘Wine of the Year’
When Sassicaia 2015 won Wine Enthusiast ‘Wine of the Year’ in Nov 2018, I watched the market price tick upwards like a vintage flip-clock. Then, a few weeks later, as all the available cases sold out, I watched the price slowly tick back down.
This report from Liv-Ex in February 2018 said that:
“Prices for Sassicaia are not closely correlated to critic scores.
Instead they follow the traditional pricing pattern for fine wine where vintages appreciate in price with the passing of time, as the chart above shows. In fact, there is a strong 89% correlation between price and age for recent vintages.”
But this (now edited) blog from wine exchange software developer Wineowners suggests that in November 2018, when it was announced Wine of the Year, the price leaped massively.
“A wine that gets drunk readily, is approachable at a younger age than most investment grade wines and doesn’t tend to get dumped in a downturn.
The 2015 is another exception to this generalisation, not least because last November it claimed the coveted Wine Spectator’s ‘Wine of the Year’ 2018, causing the price to do this… [Graph below]”
https://www.wineowners.com/blog/Wine-Owners-research-note-sassicaia-edit/pid/70645/
All of this for what, for who? For those that seek perfection, seek to taste ‘the best’, or, to those that wish to make the most? I don’t think you can’t have one without the other, and both rely on critics.
Those that write about wine can’t moan about the Investment Market when it’s likely they wouldn’t have much of a job without it.
Further Reading
Two sides of the same story.
“East London company that operated a wine investment scheme has been wound-up in the courts after it abused clients’ funds worth more than £1.9 million.”
From:The Insolvency Service. Published 12th April 2022
Fine wine investment scheme wound-up
Some explanation of an algorithm built around the concept of “Objective Relative Value” when it comes to bottles of wine.
“If a wine falls below the relevant benchmark figure we rule it out of our stock selection, allowing us to focus on a reduced universe of wines, and thereby reducing the risk of our recommendations depreciating in value.”
The Amphora effect – the benefits of applying quantitative analysis
Also, this video is fantastic, an explanation of the complexities of wine investment. I wonder how important Critic Scores are to their algorithm…
Anecdotally I get asked all the time about how much bottles are worth, and usually they weren’t that much to start with.
If you bought it from Sainsbury’s, then No.
Something like this: https://www.liv-ex.com/bordeaux-en-primeur-2020/
As a consumer the "how much is it worth now" is more "i'm glad I bought this ten years ago because I couldn't afford it now".