April 24, 2008


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Gaming wine futures
Will there be a bull or a bear market for wine?
By Tim Protzman letters@hippopress.com

With the rise in food and commodity prices, can wine be far behind? Maybe.

When you shop for food or wine it’s good to have a few bellwethers. I knew right away something was up when Big Daisy White Bread went from $.79 to $1.09. It’s only 30 cents, but it represents a 39 percent increase in the price. This is called inflation.

I have a few bellwethers in the Liquor Store. Usually Yellow Tail ($5.99) or Grey Goose ($24.99) or Goats Do Roam ($8.99). If these are above average in the shop you frequent then most of the stuff will have an extra mark-up too.

The thing about wine is — and this will tick off those who take their wine very seriously — it’s not a staple, it’s a luxury. And when the price of necessities rise, the middle class, the real American consumer, cuts back. With less demand the supply will increase and the price will stabilize. At least in theory. My theory is that the price will stagnate, as more people cut back on their wine purchases. This is good news. With fewer people buying wine there’ll be more choices. But this is not good news for restaurants. They have to store the wine for a while before they sell it, especially wine by the bottle, and the markup per bottle is already significant. So if they’re moving less wine, the markup would include the lost profit on the unsold wine, which means each bottle would have to have an extra profit margin to make up the loss in volume.

I bring this up not because I’m angry, but because you can score some bargains if you know how to haggle. And, no, I don’t think we’re looking at the End of Days, just an inflationary period. I have this theory I call “Follow the Money.” If the stock market is down or not generating enough return on investment, money moves into real estate. When real estate tanks, it moves into commodities like petroleum or corn. When times are really good luxury items like paintings, antiques, gold watches and fine wine appreciate in value. And when times are bleak, money moves into gold. It’s probably a good thing that gold hasn’t risen over $1,000 per ounce for an extended period of time, because that would signal rough weather ahead. Having lived through two gas shortages, a coffee shortage, a beef shortage, a sugar hyper inflation shortage and the end of Chilean Sea Bass, I think I’ll be alright during the current rice and butter shortage. And part of me believes these shortages or rumors of shortages are created by the investors themselves. Wouldn’t you do the same?

If I owned a large hedge fund and I placed a large investment of capital in a company that makes, let’s say, Pine Tree air fresheners for cars, I’d say things like, “I tried to get one of those Pine Tree air fresheners for the McLaren, but they were fresh out!”

Sometimes the rumor of scarcity creates the need to obtain, which in turn creates actual scarcity.

The same thing happens with wine. People buy futures for an upcoming vintage. The vintage turns out to be good and they create a buzz around it. The futures increase in value because the price of the finished product increases based on the demand. The wine is released and people rush to the stores to get not one, not two, but three bottles. Suddenly there’s a shortage. Who profits? The person who bought the now $149.99 bottle of wine before it was created at $38 per bottle. Their investment has delivered them a 394 percent profit.

Here are some non-scarce wines that have various returns on their investment, although some stores may limit you to one bottle only per customer, which only makes you want to come back to get more, perhaps in disguise so the clerk won’t remember you and buy more.
• 2006 Monte Degli Angeli Monferrato Pinot Noir ($8.99). Monferrato is a sub region of Italy’s Piemonte region. The wine was pleasant but not anything you want to hoard, because the only things I’d swap to get this wine would be a battery-operated shoe buffer, a coupon for a buy-one-get-one-free Filet O’ Fish or used imitation Crocs footwear. The 2004 Barolo $22.99 was equally disappointing.
• 2005 Bearboat Russian River Pinot Noir ($11.99). Read great things about this one in another wine column. The wine had a violet bouquet and a faint chocolate taste. The fruit was nice, but the tannins were still rambunctious.
• 1998 Moet & Chandon Vintage Millésime Rose ($63.99). Millésime means vintage year. Toasty with ginger and yeast and cherry soda and citrus flavors tumbling around in your mouth vying for attention.
• 2007 Domaine de la Chanade Rose ($9.99). Had this stunner at a tasting. The grapes are Loin de L’Oeil, an obscure white whose name translates into “far from the eye” and pinot noir. Spicy and thirst-quenching with a sparkling quality.

All Points Grape Bulletin: Want to try an unusual white varietal? Try Asyrtiko, from Greece. It’s a light, fresh, tangy white with a nice backbone and lots of melon, lemon and watercress flavor notes.

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