It's been 11 days since my last blog post because traveling back and forth to Europe, the impact of jet lag, and virtually non-stop Vinfolio meetings in London and Bordeaux (not to mention a few nice dinners), eliminated any opportunity to write. Having returned yesterday, I thought I would share a few insights and observations that stuck with me:
- The European wine entrepreneur is alive and well. Our meetings were mostly with smaller companies (in people terms) but many had substantial revenue and most forecasted growth rates for the coming year of between 25% and 40%.
- No wonder it's expensive. "We sell all of our Domaine Romanee-Conti wine allocation directly to Japan." -- source: a large UK wine merchant. In general, fine wine seems to be finding its way to the highest global bidder.
- Chateau buy-backs? - Bordeaux chateaus routinely buy back prior vintages held in stock by UK merchants to resell (sometimes as official "ex-chateau" stock) -- source: multiple members of the UK wine trade. This occurs in part because the whole en primeur system of futures is totally focused on selling through every vintage upon release with little held back -- most producers simply can't afford to do otherwise (perhaps this will begin changing with cash from 2005 in their pockets).
- UK's tax-free wine investment gains - Capital gains from investing in wine in the UK are promoted as a tax-free investment opportunity. The underlying support for this is that wine does not normally survive for more than 50 years which classifies it as a "wasting chattel" and not subject to UK gains tax. Port doesn't qualify for tax-free treatment and clearly many fine wines shouldn't either.
- Investing in wine is far more common in the UK compared to the U.S. While the tax treatment may be one reason, the UK wine trade more actively promotes wine investment than U.S. merchants do and the average UK consumer has "grown up" with Bordeaux which has a proven history of long-term value appreciation.
- Low high-end California wine interest - California/U.S. wine is considered part of the "New World" wine category along with Australia, New Zealand, etc. (I guess it's all relative.) UK wine trade members report little interest in high-end California wine; certainly below even my low initial expectations. Perhaps it's better that way for the rest of us who know better.
