The Wine Market Boom

The economy is on the rocks. House prices are falling. The stock market is nervous. Perhaps it's time to put your money in... a vintage investment

The summer of 1811 was heaven sent for making legendary wine. The vineyards of Bordeaux were bathed in hot sunshine for week after week, followed by the sort of warm and dry autumn that winemakers pray for. Then, just as the grapes were being harvested, the night sky was illuminated by the trailing tale of Halley's Comet. Superstitious vintners took it is a sign of divine blessing and called it the "Comet Vintage".

Startling proof that the reputation of the wines of 1811 has survived the intervening 197 years intact was offered this week when one of London's most prestigious wine merchants announced it had sold a single bottle of the celebrated Sauternes dessert wine Chateau d'Yquem, from the Comet Vintage, to an American client for a record price of ￡37,900.

Such is the continuing status of the few surviving 1811 wines among vinophiles that the American critic Robert Parker accorded the Chateau d'Yquem, which had been assessed and reconditioned by the producer in 1996, the rare distinction of a perfect score of 100 on his highly influential points system for fine wines. Mr Parker described it as the "favourite sweet wine of millionaires", although if such prices continue to be fetched it is more likely to become the unique preserve of billionaires.

The bottle of 1811 Chateau d'Yquem, made from grapes grown in Bordeaux whose sugars have been concentrated by a fungus known as "noble rot", was sold to a New York-based company that builds bespoke wine cellars for wealthy customers. The collector in this case is expected to give the 1811 bottle (which, if it is ever drunk, would be worth ￡6,316 a glass or about ￡400 a sip) pride of place as a trophy in his new underground store beneath his Manhattan home.

But while the celestial prices reached by Comet Vintage are special, they are far from unique.

At a time when more conventional investments from shares to property are heading sharply south, demand for the world's most famous wines from buyers ranging from Russian oligarchs and Chinese billionaires to pension funds and corporate traders is sending their value to record highs.

Rather like Picasso sketches and Maserati cars, such illustrious names as Cheval Blanc, Haut Brion or Romaneé-Conti are being bought urgently by connoisseurs and shell-shocked corporate victims of the crisis in the world's finance houses.

In Hong Kong, one of the epicentres of the booming market in fine wine after the government abolished 40 per cent import duties in February, the price of Chateau Lafite Rothschild from the much-hyped 2005 Bordeaux vintage has risen from ￡3,300 per case of 12 bottles two years ago to its current level of ￡9,600.

The Liv-ex 100, an London-based internet "wine exchange" for 180 of the world's biggest wine traders, has seen its value rise by 34 per cent in a year and its turnover increase by 62 per cent. In the same period, the FTSE 100 index of leading shares in London has fallen by 6.9 per cent and Japan's Nikkei index has dropped by 22.4 per cent.

Much of the growth is being attributed to the success of – and subsequent publicity about – the 2005 Bordeaux wines, which have attracted hyperbole similar to that of the Comet Vintage.

Mr Parker accorded four of the six claret-producing regions his "extraordinary" category of between 96 and 100 points. The remaining two merited a mere "finest" rating for 90 to 95 points. All that for wines which were "en primeur" or still in barrels and have only begun shipping to Britain this year.

While the buyers may come from far and wide, the star products in this very select niche of the ￡60bn wine trade comes from one country only – France.

Several wine merchants confirmed that demand in China for anything bearing the label Chateau Lafite Rothschild is insatiable. One leading broker said: "It is just pure brand recognition. It almost doesn't matter what vintage the wine is as long as it carries the all important name of Lafite. They were very canny by being the first of the big claret houses to do some marketing in China and it seems the name has stuck among the newly wealthy Chinese middle class."

A significant portion of the growth in sales is the dropping of prohibitive import duties in several countries including Hong Kong, where the London wine merchant Berry Bros & Rudd sold ￡4.6m of wine in the 36 hours after the former British colony dropped its tariffs in February. Macau and China are also expected to reduce or abolish their duties in the coming months.

Asia's thirst for top vintages is also being fed, at least in part, by a rush to sell by some collectors in the United States who are feeling the pain of the credit squeeze and emptying their cellars or bonded warehouses.

The London-based rare wine merchant The Antique Wine Company recently sold a collection of Romanee-Conti sourced from an American client to a Chinese buyer and Sotheby's earlier this week sold an American collection of 136 bottles of Chateau d'Yquem with vintages ranging from 1892 to 2001 for ￡368,000 to a private European collector.

Amid such a frenzy of buying and selling wine at prices that are far out of reach to all but a tiny proportion of vinophiles, there are those who argue that the cost of these thoroughbreds of the world's vineyards has grossly exceeded their true worth. One leading wine buyer, who tours the world for top restaurants and merchants, said: "A wine is of course only worth what anyone is prepared to pay for it. But once you are in the sphere of paying upwards of ￡3,000 for a glass or a bottle of wine then it is more about kudos and bragging value than the actual taste.

"You would get a far more memorable experience with a top Rhone wine such as C?te Rotie or an Italian Brunello for just a few hundred pounds. Even something like an 1811 Chateau d'Yquem is probably about 100 years past its peak."

A further problem for the booming market is the fact that those who could once be relied to consume fine wines – and thus increase the rarity value of the bottles that remain – are facing a radical reduction in their rates of consumption.

City workers, who include the six bankers who famously ran up a ￡44,000 wine bill at Gordon Ramsay's Petrus restaurant in 2002, have been told to cut back drastically on gourmet meals.

Two of the world's largest finance houses – Deutsche Bank and Goldman Sachs – have recently issued memos to staff advising them to dine in the staff canteen or spend no more than ￡100 on a meal for two.

But even in the face of such a downturn, those who specialise in "investments of passion" such as wine insist the future remains bright. Andrew della Casa, a director of the Wine Investment Fund, which has more than ￡35m of top bottles under its control, said: "More and more people are looking at wine as an asset class, discovering it is uncorrelated to bonds and equities.

"The credit crunch may have crystallised thoughts that have been around for years, when they've been tracking the wine market. Now that they have fewer options elsewhere, they might say 'let's give it a go'."