Pinot Noir, Sanviovese and Tempranillo

It is 2:39 on Saturday afternoon 19th May and I am hosting only the second wine club of the year in two and a half hours. I have swept and mopped the floor, cleaned the balcony and bought the food, yet still I have not chosen my wine which is a worry.

As we are almost in winter again, we decided that it would be a good idea to try some reds. Generally reds that are common in Australia are Pinot Noir, Merlot, Cabernet Sauvignon and Shiraz, however more and more often interesting varieties are appearing in our bottle shops and on wine lists. In an attempt to help my fellow winos meet the daunting challenge of facing a wall full of words one can't pronounce at the bottle shop, we decided to do something different this time. Each Wine Club member will choose a bottle of either Pinot Noir, Sangiovese or Tempranillo. With each bottle each member must also do a little research and bring a plate that matches the food. I am super excited about this one as I think that we are really going to learn something from each other.

Now you may already know that Pinot Noir is originally from the French region of Burgundy and has been in grown in Australia for many years now. The typical regions that are particularly good for Pinot Noir are Tasmania or in Southern Victoria as the climate is cool and allows for a long growing season. In New Zealand the place to get a Pinot from is Central Otago. 

Sangiovese and Tempranillo are newer additions to the Australian palate, however equally as exciting and both offering a great experience. Tonight though, I am sharing a Tempranillo - so I had better get researching so not to disappoint my guests.

Tempranillo is a Spanish grape that is blended in many Spanish wines especially reds from the Rioja region. Tempranillo is to Spain, what Shiraz is to Australia and what Bordeaux is to France. It is the most prized red wine and is at home in a variety of climates.

It is primarily found in the cooler climate of Rioja in the North Central Spain, slightly further south in Ribera del Duero and more and more often it is found crossing oceans in a world wide boom. As a thick skinned black grape it is relatively durable and grows best in cool climates at high altitudes. This type of environment allows the variety to obtain acidity and elegance.

Tempranillo is similar to Shiraz in some circumstances as the thickness of the skin of the grape also requires heat  to acquire a level of fruity ripeness. These conditions therefore lend the variety to a mediterranean climate. This variety shows versatility for growing conditions and therefore means that many different styles of Tempranillo can be made simply depending on the Terroir.

Tonight I bought a Spanish Tempranillo from Rioja so the club can taste what a typical Spanish variety tastes like. My friend at my local bottle shop 'The Oak Barrel' was particularly helpful in picking out this particular wine. The bottle cost $21.95 and has a pretty groovy label. I am serving it with Spanish tapas of chorizo, fried haloumi and stuffed bell peppers. I will let you know that the verdict is. 

Until then, have a glass for me. Alex Mac

A Taste for Investment

There are a number of characteristics of wine as an asset class that make it perform differently from other alternative assets, which makes it an interesting topic to explore. As I have mentioned in previous blogs, the investment grade wines that offer the most consistent returns are those from the French region of Bordeaux. The reason for the superiority of the Bordeaux wines dates back to 1855 when Napoleon requested a classification be drawn up detailing the all of the best wines in France.

The Expoisition Universalle de Paris classified the red wines of Medoc and the wines of Sauternes as quality products. The 1855 classification came to dominate Bordeaux wine and now remains with us to this day. There is no regular review of the list and today there remain 61 chateaux listed, all in Medoc except for Haut-Brion which is the sole Graves estate.

The region is broken down into five categories:

1. Medoc Premiers Crus Classes (Class A) – First Growths
2. Medoc Deuxiemes Crus Classes (Class B) – Second Growth
3. Medoc Deuxiemes Crus Classes (Class C) – Third Growths    
4.  Medoc Deuxiemes Crus Classes (Class D) – Fourth Growths
5. Medoc Deuxiemes Crus Classes (Class E) – Fifth Growths

In 1855, classifying 61 wineries as ‘quality’ probably would have covered a significant proportion of the wines available in France. However, 157 years later we have a global population of 6,840,507,003 (World Bank 2010) and 26,216,967 tonnes of wine being produced by the top ten wine producing countries in the world (Food and Argiculture Organisation, 2012). All of a sudden it appears that the 61 humble Chateaux in Bordeaux may not be able to produce enough wine to keep up with the demand. It is this simple supply and demand phenomenon that causes many wines to be destined to an inflationary future.

Peter Lunzer, CEO and CIO of Lunzer Wine Investment recalls that “During the past 30 years I have been involved in the wine industry, it has become evident that one factor which regularly caused wine prices to rise was limited supply against a backdrop of sustained demand”.  He says that from an investment perspective Lunzer Wine Investments have always steered their clients toward the famed five famous Chateaux in the Premier Crus classification, and also the 2^nd, 3^rd, 4^th and 5^th growths. Although diminishing in prestige numerically, the most interesting thing about investment grade wine is that as the best wines of the best vintages become scarcer, prices rise in value.

The rising middle class in China will affect this scenario greatly, with an estimated $1.3Bn middle class consumers predicted by 2030 (Forbes, 2011). While many investors take the business of wine seriously and get their hands on cases of premium wine ‘en primeur’ (before they have been harvested and bottled), there are many more who want simply one or two bottles to represent their status in society. In 1855 this would not have really been a problem, however today with our growing population, the pool of desired stock seems to be getting smaller and smaller every day.

Despite all this talk of the doom of supply of the historical greats, Peter Lunzar says that investors can still make money, you just have to be smart. For a consistent pathway with steady growth he suggests a generous helping of 2^nd – 5^th Growths, with a carefully selected pinch of right bank wines (St Emilion and Pomerol). As a novice wine investor myself I asked him to explain this is greater detail to which he replied “There are many wines costing $200 today which we believe will be $400 in five years time. However, if they cost $3000 today, will there be someone willing to pay $6000 for them in the future? While there will always be rare gems who fetch a ravishing price, they will be few and far between. Why run the risk when you can make consistent returns from wines which start at $200 and sail well past $400.”

Investing in wine today, compared to previous decades or centuries, we can see a greater correlation being established between the returns and major economic themes. Wine, however remains the only commodity with an inverse supply curve – the further you get from the harvest, the less wine there is available for the market. This is a particularly good reason to argue that wines will continue to create great investment returns.

Until next time, have a glass for me. Alex Mac.