The Wine Collector

Tomorrow's Washington Post includes a story on wine investing called Buyers and Cellars (including a few quotes from me).  There's no question that investing in wine is a topic of growing interest.  The story mentions this blog and some wine investing tips which are part of a prior post (click here to read all of the tips).  The story also references wine's investment performance relative to other categories, the details of which may be found in this post from last week.

The annual Hospices de Beaune charity auction held each November is widely viewed as a leading indicator for pricing of the new vintage (2007 in this case).  If you thought Burgundy prices couldn't go much higher, brace yourselves!  Red Burgundies rose by 38% and overall prices were up 27%.  White Burgundies did not rise as much but that might be because they were up 65% in the prior year.

More details on the 147th annual auction

• 607 barrels were auctioned, down 11% from 680 barrels in 2006.
• Of the 607 barrels, 469 were red and 138 were white.
• The minimum purchase is a single barrel.
• 42 cuvees were offered: 30 red and 12 white.
• One cuvee was new in 2007: Corton Clos du Roi, Cuvee Baronne Du Bay
  
• 22 different growers cultivate 2.5 hectares each (1 hectare = about 2.5 acres) for the Hospices de Beaune domaine.  Each grower produces one or more cuvees.
• Each barrel yields 24 cases of either 750ml or magnum bottles.  The purchaser receives the bottled wine with the Hospices label.
• According to Christies (who has run the auction for the past 3 years), there were "many new clients from Asia, Australia, America, and Europe sending pre-sale orders and bidding by telephone and the Internet."
• The $6.81 million proceeds from the auction provides medical equipment for the local Beaune hospital and covers the cost of maintaining historical monuments.

Bottom line: Be prepared for price hikes on 2007 Burgundies.  From an investment point of view, high-end collectible Burgundies always seem to me to be a pretty safe bet given that consumers worldwide can't get enough and are growing in number.

Photo note: Upper right is the Hospices de Beaune and its famous roof. Below is a sample label image.

Fine wine prices rose 39% in 2007 according to the Liv-ex 100 index, second only to oil (see Decanter.com story).

Investment returns of this magnitude are high enough to get the attention of even "unintentional" wine investors.  There are a variety of reasons causing wine prices to rise (see my September post as well as Eric Asimov's December 5, 2007 story in the New York Times titled "Drink and Be Merry: Wine Prices to Rise").

Rising global demand vs. a weak U.S. dollar 

Rising global demand (especially from Asian countries) is the main factor driving wine prices higher. The weak dollar may be contributing partially to what Americans pay for wine from Europe, but the dollar has only depreciated against the Euro by 9.2% in 2007 and a total of 15.2% since January 2004.

 P.S.   If you'd like to read all my prior posts on wine investing, click here.

For the past year, Vinfolio has been working on an all new, dramatically enhanced version of VinCellar, our free online cellar management software which we estimate will launch in early 2008.  View demo.

Why we made a substantial investment

As good as the current VinCellar is, there's always room for improvement.  With feedback from our users on desired features and new Web technologies available to enhance the user experience, we decided in late 2006 to overhaul VinCellar.  Our goal is to make it the compelling choice amongst cellar management software alternatives.  Best of all, it will remain free!

New features

• Community tasting notes - You can already create personal tasting notes but you will now be able to share them in a myriad of ways including on a dedicated VinCellar website, through Facebook, and via a new format we call "Wineposts".  We'll even pay you (in the form of wine credits in our store) to submit your personal tasting notes prior to the official launch.  Learn how to participate.
• Reorganization of tasks by individual wine - The redesign enables us to pull tasks related to given wine (such as Add, Remove, Move, Sell) into a single page while preserving your ability to build lists of wines for acting upon as a group.
• Valuation data - We will continue to have all wine auction price data from the Wine Price File plus licensed retail price data  to enable you to monitor the changing value of your collection.  With VinCellar 3.0, we will be upgrading our capabilities in the retail pricing area.
• Cellar analysis tools - Our current graphical reporting capabilities will be taken to a whole new level.
• Visual browsing of your cellar using a special "label view."
• Integrated third party content and links - VinCellar already offers about 100,000 professional reviews which Vinfolio has licensed and there is more to come.  We're also building in links to other frequently used wine reference sites.
• Buying and selling made easy - You'll be able to easily know when Vinfolio has wine in stock which is relevant to your interests and also be able to sell anything from individual bottles to your entire collection through a new format of an auction mechanism we've created.  (This functionality has already been designed but will be rolled out in a second phase).
• Robust reporting, including printing in a restaurant wine list format.

There's a lot more and we actively want your feedback once the beta version launches (visit our new VinCellar 3.0 topic in on our Vinfolio forums page).  As a Web-based application, we'll be rolling out updates on a continuous basis.

Bottom line:  By integrating comprehensive cellar management capabilities with community and professional content, and combining it with social networking standards such as Facebook and Vinfolio's ecommerce capabilities, you'll finally be able to satisfy your wine-related needs in one place.

Town & Country magazine's January 2008 issue titled "Luxury Redefined" has a short article on Vinfolio called A Cellar's Market describing our on-site inventorying services.  Beyond the reasons quoted by our customer in the article, here's a short post from last December titled Reasons to update/create your wine cellar inventory.

For those interested in tapping an even higher level of service, we are currently beta testing a new Personal Cellar Manager service offering in the Bay Area.  If you'd like the benefit of a dedicated wine expert to assist with all aspects of your wine collection but for only a few days a month, then give us a call (even if you live outside the Bay Area).

Wine-related online traffic in the 2007 holiday season is up 35% from 2006 versus 15% for overall e-retail traffic according to a news story this week in Wine Business Online, Online Wine Sales Flourish During Holidays. 

Additional evidence supporting growth in online wine sales

Vinfolio (which only sells wine online) experienced an even steeper increase of 45% from the prior month.  The chart below shows average weekly new user sign-ups for the last two 4-week periods.  While we are growing rapidly, that increase is much larger month-to-month growth rate than normal.

Easier interstate shipping by retailers is NOT a driver in online wine sales growth

As noted in a prior post, 92% of wine consumed by "core drinkers", only 20% of weekly (or more often) wine drinkers bought wine online in 2006.  The reasons to buy online are compelling (e.g., greater selection, better prices, and convenience) and I believe these factors are probably what's  driving 2007's increase.  But a relaxation of interstate shipping rules for retailers is certainly not a reason. 

If anything, while the 2005 Supreme Court decision Granholm vs. Heald caused improved shipping laws for wineries, they've gotten worse for retailers.  For example, Illinois voted to ban out-of-state retailer shipments after 15 years of permitting them while simultaneously permitting wineries to continue shipping.  In addition, Texas is fighting (unsuccessfully so far) to ban out-of-state retailer shipments too.

As the Executive Director of the Specialty Wine Retailers Association, Tom Wark, points out in a Wine without Borders blog post titled Michigan Judge: "Retailers covered by Supreme Court Decision":

"Since that groundbreaking Supreme Court ruling, distributors across the country, as well as some State officials, have been arguing that because the case specifically concerned wineries, the principles of non-discrimination explained in the ruling did not apply to wine merchants, just wineries.

This is like saying that because Brown v. Board of Education was a case argued on behalf of an African American girl, it is still constitutional to pass laws that discriminate against Hispanics. That’s ludicrous. So is the view that wine retailers can be discriminated against when it comes to wine shipment laws."

Bottom line: The true potential of online wine sales has not been realized and won't be until the interstate shipping laws are changed to create a level competitive playing field for retailers.  When the laws are changed, and they will be, you'll really see online wine sales boom.

Vinfolio recently launched a Facebook widget called My VinCellar which enables you to let your friends see the wines you've been drinking or adding to your collection in your free VinCellar online cellar managment software account at Vinfolio.  We're still tweaking the application but it's now ready for a broader audience.  Please post any comments, problems or suggestions on the Discussion Board of the My VinCellar Facebook page and our development team will address them.