Winelovers invest in wine’s future for the sake of the wine. But there are those who also seek to make money out of it. Tim James is doubtful about the financial wisdom of investing in Cape wines as yet.

A Rothschild’s opinion on wine and investment should be worth considering. Well, according to Baron Elie de R of Château Lafite in Bordeaux, ‘from the moment when you start to think of wine as an investment and not as something to be drunk, that’s the end’. Easy to say, perhaps, for someone with both lots of money and one of the world’s great drinks on tap, but many humbler wine-lovers too can imagine a nobler and more sensually satisfying end for good wine than converting it into cash.

It is, however, demonstrably possible to do well through investing in some top wines (including Lafite), though it is not as certain a thing as is sometimes suggested, nor as easy. Dealers may flourish graphs to show wine outperforming the stock-market, for example, but might be a little forgetful when it comes to pointing out the lack of dividends and perks, and the costs of commissions, insurance, and good storage.

The basic premise the investor works from is that the wine will improve in quality as it matures over a decade or two, and become increasingly wanted by the rich but less farsighted people who did not buy it at the right time, or did not have the means to store it satisfactorily. From the initial purchase onwards there is nothing inevitable about any aspect of the process  – except that wine is ultimately a wasting asset: vinegar is not worth much. A look through the history of dealings in the wines of Bordeaux – the great favourite of dealers, auction houses, and buyers  – shows turbulent cycles of buyers’ and sellers’ markets, with as many small and large fortunes lost as won.

From the 1990s, the whole business took on a rather more speculative character, particularly with the entry of some ‘cult’ Californian and Tuscan wines, and the long term is not necessarily the only viable one for investment. Briefly, the ground rules for sensible investment in wine would seem to be: know what you are doing and learn a serviceable amount about reputations, quality and vintages; invest in the great wines of Europe, especially Bordeaux, with only an occasional flutter elsewhere; buy early after shopping around for the best price (it can vary a lot for en primeur or young Bordeaux); and hope, as usual, for a bit of luck to complement your shrewdness.

The centre of higher-level dealings in fine wine remains London, with the USA becoming  increasingly significant as an auction venue. Given this, and the costs and other problems associated with transporting and storing wine, the serious South African investor should probably be doing so overseas if possible (though at least one local firm, Wine Cellar in Cape Town, offers some wine investment services: see www.winecellar.co.za).

But what of the local option? Eyebrows lift at the very suggestion, primarily because there is no real secondary market for local wines, and little apparent basis on which one might be built in the near future. Even Australia, internationally voguish for a few decades and now gaining the vital approval of the gurus of the American market to supplement a fairly large body of rich local winebuyers, has only a few candidates for serious investment (see box).

The Cape has shown that it can produce very good wines of character and  longevity. What is not yet clear is if it can do so in useful quantity, either across labels, or for any one wine: compared with the relatively many plausible producers in Bordeaux, often of suprisingly large size, only a derisory number of bottles of the likes of, say, the Sadie Family Columella or Morgenster are produced.

A tiny supply, coupled with both sufficient quality and hype, can create a cult demand, of course, as has happened most notably with a dozen or so Californian wines. The result is a pack of feverish investors, along with  a sprinkling of winelovers, clamouring for allocations, and the possibility of resale offering quick, large profit. This hardly counts as a persisting, reasonable investment opportunity, though. The fact that wines like Columella are already expensive when released (especially by local standards) means less room to grow, of course.

More importantly, perhaps, few local wines have sufficient track records to support more than speculation, especially as most of the older good and fashionable producers like Kanonkop, Rustenburg and Meerlust have to different degrees been reinventing themselves in the past decade, alongside the rash of new and ambitious wineries still seeking to establish their credentials. Many vineyards are young and so not performing at their best; house-styles are changing or unsettled. Take Morgenster, for example, whose maiden 2000 came out last year to great critical acclaim. The 2001, which was received with comparative disappointment in many quarters, is in a markedly different style – an unsettling thing for both drinkers and those with an eye to longer-term reputations.

Within all the unpredictable fluctuations of market forces, fashion is also a key factor with wine value. It is a particularly fickle one in an immature wine industry like the Cape’s, where it is not always connected with continuing quality. Veenwouden is a case in point. Highly sought-after a few years back, with its release price rising opportunistically and astronomically each year, its critical reputation has probably waned of late, reflected most evidently in the deservedly modest rating given its 2001 wines by the Platter guide. Retailers now report a less-than-sluggish demand for a wine that used to sell out rapidly.

Will Veenwouden manage to re-climb the starry heights? Kanonkop’s Paul Sauer blend has for long been one of the few blue chips; will it keep its cachet now that Beyers Truter is no longer its winemaker? Vergelegen is producing some excellent and fashionably-styled wines which are gathering international plaudits – but any reference to Vergelegen seems inevitably acompanied by mention of winemaker André van Rensburg. If André decided next year that his future lay in full-time surfing or dispensing investment advice, would the Vergelegen sexiness remain as forceful? Questions about the significance of changes in style and winemaker are not, it should be noted, the sort of factor on which Château Lafite’s reputation as a sure thing is based.

How is the investor to make his or her decisons when established reputation and a consistent record are not available? Knowledge and understanding of wine and wine markets become even more important, with the need to evaulate not only wine quality but also trends in taste, and generally the likelihood of future tradeability.

If serious local investment is not a real option, and hopeful speculation not a sensible one, judicious farsightedness remains useful: possibly financially, and certainly in terms of pleasure. Of the more prestigious Cape wines, which are the surest bet for fine drinking – and on that basis the best bet for resale – in ten or 20 years?

Wine’s first duty is to be red, suggested Harry Waugh, and investors have mostly taken this to heart, although Bordeaux’s sweet Sauternes (particularly Yquem) evades the requirement. Interestingly, probably the one Cape wine which is both fashionable, locally and internationally, and a proven longer-term prospect is Klein Constantia’s fine Vin de Constance dessert wine. Here, though, is an example of a case where some know-ledge and judgement must inform a decision. New plantings are going to mean a substantial increase soon in the amount made of Vin de Constance: good news for those who drink it, but will the pitch of quality be maintained, and will increased volume improve or diminish the wine’s investment potential?

Of the reds, I have already mentioned a few old favourites and  a few new wines received with acclamation and probably destined for happy maturation. Kanonkop Paul Sauer remains plausible; a few top Vergelegen wines would undoubtedly be on most critics’ list – perhaps including the white blend; Thelema has proved itself of durable value, and even quite classic  compared with such candidates as Rustenberg’s top reds. Venerable Meerlust is an interesting case. The near-icon status of Rubicon has managed to remain untarnished, even though some critics have questioned its quality in some more recent vintages. Now Meerlust has a new winemaker, which will hopefully confirm hopes that Rubicon is starting to recover the quality to match its status.

Rust en Vrede’s Estate Wine would be a likely candidate for speculative investment, especially given that astute marketing in America is helping it achieve a good reputation there. The same applies to the Ernie Els blend at present also made by R&V; perhaps the name will retain lustre longer as that of a wine than that of a golfer.... Amongst other labels to consider would be De Trafford and certainly Boekenhoutskloof – which has a substantial reputation (and fairly high ratings from Robert Parker) though a less showy profile. And keep a look out for the first releases from GT Ferreira’s To-kara: a lot of expertise, ambition and money has gone into this property and should be rewarded by quality,  chic status (and very high prices).

In these and other cases, try to get the wines at the best possible price, usually directly ex-farm – be wary, I suggest, of the irrational prices paid for tiny special bottlings at the Cape Winemakers’ Guild Auction. Unless you’re going for a quick re-sale (which might well be the most profitable option, depending on the market, of course), remember the vital importance of good storage.

Then, in ten years, these wines should offer excellent drinking, which is what investment and the excitement of invoking the future is about for wine’s true lovers. In some instances a bit of profit might well be possible, at least enough to finance some new purchases (the ideal of a self-sustaining cellar is the motive behind a significant part of the traditional secondary market in Britain). And after two decades? Ah, there’s the rub. While the top wines of Bordeaux 2000 will be comfortably mature in 2020 and highly desirable, there is as yet little reason to suppose that Cape 2000 will have much left in it then – it might do, but reckoning on it now is mere speculation.