Drink, be merry - and make some money

Bad publicity has put many people off investing in wine. But, if you know the basics you can have fun and make a tidy sum

Anyone for fake Château Margaux and Pètrus, illegally blended Bordeaux or overpriced 1996 First Growth claret? We haven't reached the spring equinox yet and already 2002 looks like being a bumper crop for wine scandals. The Department of Trade and Industry (DTI) has wound up Liquid Acquisitions and VCA Vintners and is continuing to pursue a thicket of dodgy ex-City brokers who've duped the unwary into parting with large sums of money. Which begs the question: why on earth would anyone want to invest in wine in the first place?

Bad publicity puts people off wine investment, but it doesn't mean it's all necessarily a rip-off. It wasn't for Andrew Lloyd Webber, whose painstakingly acquired cellar netted him £3.7m when he sold part of it, at the top of the market in 1997, at Sotheby's. With good timing and advice from a trustworthy wine investment broker, buying fine wine can be a lot of fun and provide you with a decent nest egg.

To do it well, you need to know the basics, and there's not much point unless you'll also enjoy the product. Most wine consumers with an eye on an "investment" buy two cases, one for drinking, the other to finance the first. Buy the right wine at the right price and sell at the right time and you can happily cover the cost of your wine consumption. If you're prepared to swallow some of your liquid assets, you can't go too badly wrong. Opportunities for investing in wine have expanded hugely in the past two decades, thanks largely to the growth of the futures market in Bordeaux.

Most wine investment activity centres on Bordeaux because it's the biggest fine wine region in the world, producing copious quantities of fine wines. But at the same time the amounts of wine available are limited by the vineyard area and in the long-term lead to scarcity.

The Bordeaux system lends itself to speculation. Its top wines are released on to the open market before bottling and are then bought by wine merchants overseas, who offer them as futures (en primeur) to their customers.

When they're delivered, they're yours to cellar and, in due course, drink. But it's surprising how much wine is eventually recycled at a later date because most people, either deliberately or mistakenly, buy more than they can drink. This is where the secondary market kicks in.

With buyers and sellers around the world, the growing secondary market has become a flourishing breeding ground for wine auctions and brokers. Some are traditional merchants who've decided to add broking to their list of services. Others are brokers who've taken on the guise of the traditional wine merchant with wine tastings, advice, delivery and storage facilities.

Farr Vintners, whose £56 million turnover is more than the two major auction houses combined, has become the biggest in the UK since starting up in 1978.

Outside Bordeaux, the risks are greater and the rewards potentially higher, but you really have to know your stuff. Investors are eyeing up emerging areas of France like Burgundy and Rhùne, but interest is so far confined to a handful of properties in each (for instance Domaine de la Romanèe-Conti and Guigal's Cùte Rùties, La Turque, la Mouline and La Landonne). Italy, Spain and the New World too are showing blue chip potential but confined at this stage to a mere handful of top wines.

All Russian Roulette of a sort, but to avoid ending up as a DTI statistic, the simple rule, caveat emptor, is as ever still the best rule.

Getting started

* First, find out which are the best vintages and properties to invest in and at what price. Either check prices of all the top Bordeaux châteaux yourself, for instance, in an index published monthly in Decanter Magazine. Or check online though services such as winesearchers.com. Prices can also be checked online through wine broking companies.

* Treat so-called objective wine investment advice with caution. Be wary if you're told all vintages are equally lucrative prospects. The opposite is true. The weather is the most unpredictable factor in wine quality and hence value. Only vintages which bear the hallmark of greatness can be expected to hold and increase their value over the years. A handful of vintages like 1982, 1986, 1989, 1990 and 1996 offer investment prospects in varying degrees. Others like 1994 or 1997 will never appreciate enough to make them investment material.

* Just because one blue chip First Growth like 1996 Château Latour does well, don't assume others like it will. Once a price differential has been established from tastings and press reports, the gap is likely to remain. In 1989 for instance, Château Haut-Brion was the star and now sells for £4,000 a case as against the next best First Growth, Château Latour, which sells for just over half that price. 1989 Latour will not catch 1989 Haut-Brion.

* Read Robert Parker. A palate in a generation, his publication The Wine Advocate is the single greatest influence on wine investment. It's not just that he's accurate, but by scoring out of 100 (favoured in particular by Americans), his judgement influences market values. Brokers love Parker for assessing each vintage and rating every important wine in it (www.erobertparker.com).

Investments to trust

For advice on buying or selling fine wines, I recommend: Farr Vintners, 19 Sussex Street, London SW1V 4RR (020-7821 2000); Wilkinson Vintners: Unit 1, Bickerton House, 25-27 Bickerton Road, London N19 5JT (020-7272 1982); Bordeaux Index, 6th Floor, 159-173 St Johns Street, London EC1V 4QJ (020-7253 2110); Berry Bros & Rudd, 3 St James's Street, London SW1A 1EG (020-7396 9600); Justerini & Brooks, 61 St James's Street, London SW1A 1LZ (020-7484 6400); Corney & Barrow, 12 Helmet Row, London EC1V 3TD (020-7539 3200). Online: Fine & Rare Wines (www.frw.co.uk); Uvine (www.uvine.com)