The economics of ageing wine

What is ageing wine worth, and who should be responsible? Robert Joseph looks at an issue that's far from simple.

Robert Joseph
Robert Joseph

If you were to learn, at its public flotation, that the board of XYZ Corporation had elected to hold a bare minimum of shares in the enterprise, how would you feel about investing in it? 

Let’s translate that into wine language. 

When Domaine or Chateau ZYZ releases its 2018 vintage with the assurance that this is a wine that is worth cellaring for at least a decade, and possibly two, might it not be reasonable to ask the owners how many bottles they have laid down themselves?

The answer, in most cases, is surprisingly few. Enough, most likely, for a few events, a bit of hospitality and some vertical tastings, but rarely much more. In other words, if a particular vintage lives up to the expectations raised for it, that’s great news for the buyers. But if it doesn’t look quite so pretty on its tenth birthday, it won’t really be the producer’s problem. 

To be fair, back in the 1960s and 1970s, producers were relieved of this responsibility by professionals whose job it was to look after wine until it was at its best. These were called merchants, and they often had cellars packed with fine old bottles; indeed in 1966, Hugh Johnson recommended avoiding businesses that failed to do so.

Then, however, came inflation and double-digit interest rates, and financial controllers whose minds were focused on cashflow and the costs of holding inventory. Today, if you didn’t lay down a case of wine from your 18-year-old’s birth year, you’ll probably have to head to Christie’s or Sotheby’s to get one.

Unsurprisingly, one consequence of passing the responsibility for maturing wine onto end users has been to encourage its early consumption, often within a few years of the harvest. Modern wine drinkers are increasingly accustomed to enjoying wine while it is still attractively fruity, and before the development of the tertiary flavours traditionally treasured by professionals as an essential part of the wine experience.

The obvious solution to this situation is for producers to hold back significant amounts of each vintage for subsequent release. López de Heredia in Rioja has historically done this, as does the Jim Barry winery in Australia with its Rieslings, but they are exceptions to the rule. And, to be blunt, although wine lovers like me are happy to pay the small 10% that Jim Barry charges for five years’ cellaring of its wines, it’s a charge that doesn’t make much financial sense, even at today’s low rates of inflation and interest.

This unattractive economic model helps to explain why so few other producers have followed this example. In a logical world, wineries would charge a lot more for the bottles they’ve carefully looked after and whose authenticity they can guarantee. 

Adding greater value to older bottles would not only improve the producers’ profitability, but also provide tangible encouragement for people to buy the wine when it’s young – and to keep it for rather longer. Which, like the board of XYZ Corp seeking to convert stockholders from short-term opportunists into long-term investors, seems like an obviously sensible strategy. 

Robert Joseph

This article first appeared in Issue 5, 2019 of Meininger's Wine Business International magazine, available in print or online by subscription

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