Penfolds Grange as an investment

[markg]

Its that time of the year again and with the upcoming release of the 2007 Grange I start getting bombarded with questions about how much is this Grange bin number worth or how much is that vintage worth, so I put up a table and explanation of how the Lows and Highs are worked out.

While I was at it, I started writing a short spiel on a topic that fascinates me; Grange pricing. Damn thing took all day but its finally up.

In summary
In the mid/late 1990's, to stop retailers holding on to their allocation of Grange and flipping it on the auction market, Penfolds were forced to match their recomended retail price on release with the current auction price. Since then Penfolds have been steadily increasing the retail price until it now leads the auction price. Now it has very limited investment potential unless you can purchase it less than the current auction market value or you can locate a new secondary market to sell into.

Full text and Penfolds Grange Prices
http://www.wickman.net.au/wineauction/G ... rices.aspx

[Michael McNally]

Interesting stuff, thanks Mark.

It would be interesting to do a similar exercise with the Bin 28.

Cheers

Michael

[markg]

Interesting stuff, thanks Mark.

It would be interesting to do a similar exercise with the Bin 28.

Cheers

Michael

No problem Michael,

I will have a closer look at the figures on the bin 28 later if I get some time, although lately I've been looking at the 389 closely (what with the latest release pricing controversy etc.) and there is some interesting data.

eg.
* At auction, mature, good, proven vintages such as the 1996 and 1991 sell for around the same as the current RRP.

* If you are waiting for the current vintage (2009) to come onto the auction market, you may have a bit of a wait if last years was any indication. There was only just over 3 dozen bottles (2008) that came onto the Australian secondary market (Langtons, MW, Oddbins and Myself) between April 2011 and January 2012 at an average price of $40 per bottle.

* There is an abundance of data to show that the CURRENT (ie. in the past years) market only values the 389 at $40 - $50 way back until the 1998 vintage. In theory, by releasing the 2009 bin 389 at $75 RRP it creates a greater demand for past vintages which should in turn increase secondary market prices, although how that benefits TWE is unclear to me if nobody wants to buy the current release unless TWE plan to sell it all on the secondary market - woohoo or in China.

Plus some other stuff that I will try to put into some sort of order.

[GraemeG]

In the end, smaller volume wines with a much higher asking price than the secondary market can support invariable collapse.
I think of the Wynns flagships which became unsaleable at the $90-ish that Southcorp was then asking, and they were eventually forced to drop the price significantly just to shift stock.
Bin 389 will be an interesting case.
The 1996 was fairly widely available for $20.
To ask $75 for the 2009 represents an increase of 11% every single year (compound annual growth), during which time the CPI has never climbed above about 4.5%pa.
Clearly they're charging what they think the market will bear - and presumably they factor in the volume they have to sell as well.
I can only assume that volumes must generally be down - or else (more likely) they're sending it off to build export markets, and just screwing the locals because they can (or think they can).
Fine.
But it does explain why I haven't bought 389 this century...
cheers,
GG

[JamieBahrain]

No wine in Australia is investment quality due the ridiculous taxation.

Buy mining stocks.

[Thommo]

No wine in Australia is investment quality due the ridiculous taxation.

Buy mining stocks.

...or Radiohead tickets.

Buying wine for investment seems to have run its course the same way that all speculative schemes go, great guns until the market looses its naiivety. I guess there will still be opportunities to be found amongst smaller wine makers, but you are probably better off having a punt on the dish-lickers.

[markg]

No wine in Australia is investment quality due the ridiculous taxation.

Buy mining stocks.

Couldn't agree more... although I dont know about mining stocks.. perhaps something in Tourism.. like an airline.

[daz]

No wine in Australia is investment quality due the ridiculous taxation.

Buy mining stocks.

Couldn't agree more... although I dont know about mining stocks.. perhaps something in Tourism.. like an airline.

You missed out on Dunk Island that sold cheap after Cyclone Yasi ripped through the Cassowary Coast, destroyed Dunk and pretty much all of its island and mainland infrastructure.

[JamieBahrain]

I've been buying an icon Aussie white, I suppose that's what you could call it. But it's a good example of why I don't see any investment quality in Aussie wines. Lovedale Semillon. I buy it from London and have it shipped to Hong Kong. $17AUD per bottle.

Even my new found passion in Italian wines. I buy great Barolo/Barbaresco for one third of the cost you get hit for the same wines in Oz, yet I still realize I probably won't make money out of these wines when you factor in storage costs. Now factor in a Bordeaux bubble and forgery being rife, there is so much potential downside that can flow toward Aussie premiums.

Taxation and gauging of the domestic market are the deterrents to making a few bob out of Aussie wines.

[Panda 9D]

I hope what has happened to the top wines of France never happens to Australia. The more people that can experience good wine, the better.

[Malo-mad]

I bought some '98 Grange - when I came to auction it in 2008, it hadn't appreciated at all! Got my money back - just.

Goes to prove that wine's a drink for enjoying, not investing for the average wino like me.

Another sobering tale - a Hollywood film producer mate of mine had $500,000 worth of French stuff in a warehouse that burned down. It wasn't insured... And he's an accountant! I guess anyone can have brain freeze.

[daz]

Jamie, I suppose gauging of the market is close but I think you meant gouging?

[daz]

I bought some '98 Grange - when I came to auction it in 2008, it hadn't appreciated at all! Got my money back - just.

Goes to prove that wine's a drink for enjoying, not investing for the average wino like me.

Another sobering tale - a Hollywood film producer mate of mine had $500,000 worth of French stuff in a warehouse that burned down. It wasn't insured... And he's an accountant! I guess anyone can have brain freeze.

I wish it was colder here!