DRC wines are some of the most profitable in the wine world, but it takes preparation and education before most wine collectors are ready to make this investment. Photo Credit: Flickr CC user Dale Cruse
Wine investor Tom Gearing has seen his fair share of nervous wine collectors trying to get into investment-grade French wine for the first time. Collectors often feel as though they need to spend thousands of dollars on the top wine estates in France in order to get decent profits from their investments, but this isn’t always the case. Gearing explains, “You can pick up some extremely good quality Second Growth Bordeaux wines, from good vintages that have got high scores from critics, from as little as $70 to $85 per bottle.” All wine collectors, especially those who are just getting started, need to think of their wine investments as a ladder, with each rung in the ladder representing a new collection level.
If you’re just getting into investing in French wine, start off slowly. Even if you have the funds to go out and buy 20 cases of DRC right now, you’ll want to first go through the process of buying and selling less valuable wines. This allows you to vet all of the best wine marketplaces to find the one that will give you the best price on your resales, and will help you find the best cellaring techniques to keep your bottles safe long-term. After all, you don’t want to buy new bottles of DRC now, only to discover that you have a major flaw in your cellar that spoils them 10 years later.
Investing in French Wine: The Basics
French wines are some of the easiest to invest in because most bottles are already ranked according to the Classification of 1855 and other official wine classifications. In Bordeaux, for instance, wines are ranked from First Growth to Fifth Growth, making it easy to see which wines are worth the most on the market. It’s important to note that a wine labeled as a Fourth Growth isn’t necessarily worse than a wine labeled as a Second Growth. The Classification gives consumers a general idea of which wine estates tend to produce the highest-quality wines overall, but quality can still vary based on season and winemaking techniques.
Collectors who want to get started on a fine French wine collection should start with Second Growth wines or an especially rare Third Growth wine. Few Third Growth wines are investment-grade, and virtually no Fourth or Fifth Growth wines are worth collecting purely for investment purposes. That’s because Fourth and Fifth Growth wines are created more in the table wine style than Second or even some Third Growths. These Fourth and Fifth Growth wines can age in a cellar in some cases, but most of the time, they’re designed for drinking young. They typically sell for less than $15 on the market, and because they’re so easy to find, most collectors aren’t interested in buying them from fellow collectors. By contrast, Second Growth and First Growth wines can sell for hundreds or thousands of dollars, and they’re more difficult to find on the market, making them very desirable for investors.
Rung One: Second Growth Bordeaux or Burgundy
The first step on your French investment-grade ladder is to invest in Second Growth wines from Bordeaux (where the wines are called “Grand Cru”) or Burgundy (where the wines are called “Premier Cru”). Young wines in this category can go for as little as $50 per bottle, and as they cellar for 10 years or more, they significantly increase in value. On average, Second Growth wines sell for half the price of First Growth wines from the same region. When you buy Second Growth wines, your profit margins will likely be lower than if you buy First Growth wines. However, Second Growth wines can help you test the waters with your investments and are the ideal introduction to buying and selling French wine on the secondary market. Your investment in these wines is small, so any mistakes that you make as a first-time seller are easier to recover from than investing in First Growths right out of the gate.
If you want to invest in Second Growth Bordeaux to start, I suggest looking into recent vintages of Leoville Las Cases. These bottles sell anywhere from $100 per bottle to $130 per bottle up-front, depending on the vintage. In highly-rated vintages, like the 2009, you can turn around and sell the bottle for as much as $500 on the secondary market only a few years later. Collectors who bought 2009 Las Cases for about $100 have made more than $400 on average for every bottle they’ve sold over the past year. Be prepared to wait at least five years to make money on this investment; buying Las Cases by the case could earn you hundreds of dollars in profits, but it takes time and patience to get to this point.
Another wine you should consider if you’re getting started with French wine investments is Second Growth Burgundy like Georges de Vogue’s Les Amoureuses. Newer vintages of this wine sell for about $750 to $800 on average, making it pricier than some other Second Growths on the market. However, the potential for market growth is also greater with this wine, which means it’s worth consideration as the first rung on your ladder. Buying relatively high-quality vintages, like the 2009, can net you as much as $1,700 on the secondary market as the wine approaches 10 years old. If you buy a good vintage at its lowest price while it’s still young, and cellar it over the next five or 10 years, you could make nearly $1,000 in pure profit, depending on the vintage and how well the wine was stored. To get the best price possible on these bottles over the next decade, consider storing them in a safe, third-party warehouse like Vinfolio.
Rung Two: First Growth Bordeaux or Burgundy
Now that you’ve perfected your sales and storage of Second Growth wines, you’re ready to move on to the top First Growth estates in France. Plan on spending significantly more up-front for these bottles than you did on the first rung of the ladder; the top-ranked First Growth estate in Bordeaux, Lafite Rothschild, costs about $1,140 per bottle, on average. If you want to buy a single case of wine, you’ll have to budget at least $14,000 per case. Other First Growth estates like Chateau Haut-Brion cost less up-front; you can expect to pay about $750 per bottle, on average, for Haut-Brion, which means you should budget for at least $9,000 per case. To make the most out of your First Growth investment, I recommend buying the best and youngest vintage of Haut-Brion that you can find. Store the wine for about five years, then resell it on the secondary market. Alternatively, you could pay more up-front for a decent vintage of young Lafite, and sell it for more than $2,000 on the secondary market only a few years later.
Armand Rousseau is a great way to get started on your First Growth Burgundy collection. Wines from this estate costs anywhere from $900 to $1,650 up-front, depending on the vintage and the varietal. If you’re lucky enough to find a young vintage at a decent price, you could net as much as $2,500 in profits about a decade later, if all goes well. When you buy by the case, your profits grow even larger; a case bought for $12,000 can easily become a case worth $30,000 or more if you play your cards right.
Rung Three: Domaine de la Romanee Conti
After you spend a few years collecting and perfecting your sales of incredible bottles from Second and First Growth estates, you’ll be ready to take on the crowning jewel of your collection: a lauded case of DRC. These bottles can easily cost tens of thousands of dollars up-front, and they’re not easy to find, even if you have the funds. Competition over fine DRC vintages is fierce, and you need to be fast and efficient if you want to make the most out of your DRC investment. Bottles of Romanee Conti often sell for about $1,000 when they’re first released, but potential profits on these bottles are some of the highest in the wine world.
For instance, in 2004, if you paid about $1,000 for a bottle of DRC, you could easily sell it for $10,500 today. Generally, when you cellar these wines in a quality cellar for the long haul, and you’re willing to put in at least 10 years before you earn your money back, you can make hundreds of thousands of dollars on DRC wine alone. Buying pre-arrivals will usually give you the best initial price on DRC cases, as long as you buy from a trusted retailer. However, like all investments, there’s some risk involved. Even after you’ve honed your sales technique with your previous wines, there’s no guarantee that your cases of DRC will result in a good ROI if the wine isn’t up to snuff. That makes careful research and good storage indispensable for any wine investor.
Whether you are starting your high-end wine collection or adding to an established portfolio, Vinfolio is your partner in buying, selling, and professional storage. Contact us today to get access to the world’s best wine.
