Wine has a sweeter taste

Dido Sandler on why Bordeaux is better than Scotch

Andrew Lloyd Webber found himself pounds 3.7m richer this week after hundreds of oenophiles bid way over the odds for his hoard of rare and expensive wines. Strangely, the bidding war reached the peaks it did because potential buyers were attracted by the association of these fine wines with the famous Lloyd Webber name.

In many instances, the 18,000 bottles sold in the auction this week were seen as investments rather than just something to be drunk and enjoyed. For those tempted to follow suit and establish their own investments in wines and liquors, a word of warning.

The Securities and Investment Board (SIB), the City's most senior watchdog, recently issued a warning about investment schemes which buy champagne or whisky following a clampdown by the Department of Trade and Industry on companies claiming to offer high investment returns on booze.

Such schemes are largely unregulated, which means that investors will not be covered by the financial industry's safety net, the Investors Compensation Scheme.

The DTI has closed down two whisky investment companies and one marketing champagne as an investment since December. It is now trying to wind up a further champagne company. One of the whisky investment outfits, James Devereaux Ltd, closed down owing investors pounds 1.3m in lost deposits. DTI enquiries revealed that many people paid for casks of newly distilled and semi-mature whisky which they never received.

Napier Spirit Company Ltd and Berkeley Champagne Supplies Ltd were wound up because they made false claims about the potential return and marketability of unmatured whiskies and champagne respectively.

But Campbell Evans, media relations manager of the Scotch Whisky Association, says there are still six similar whisky investment companies doing business.

According to Mr Evans, these companies claim to offer a growth rate of up to 18 per cent although the only certainty about owning a cask of Scotch is that it will lose roughly 2 per cent of the contents through evaporation each year. Further, he says, there is no market for private investors to resell their whisky when they wish to liquidate their investment.

As for champagne, only a handful of prestige vintage cuvees from famous makers such as Bollinger, Krug and Dom Perignon may actually appreciate in value, and may be sold on, at Christies or Sotheby's. Champagne producers' cellars are now crammed with more than 1 billion bottles and it is highly unlikely there will be a shortage on 31 December 1999.

For those serious about putting money into booze, tipples with the best record of appreciation are almost exclusively fine red Bordeaux and burgundy wines.

Jamie Graham, wine broking manager at wine merchants Berry Brothers & Rudd, says recent spectacular growth in the market for top Bordeaux may herald the arrival of more speculative buying. Berry Brothers never recommends buying this purely as an investment.

In auctions at Sotheby's the great vintage of 1982 Chateau Petrus, from the Pomerol area of Bordeaux, fetched pounds 2,200 per case in 1990/91. By 1995/96 this rose to pounds 5,800. Currently punters are paying pounds 9,600. A good vintage Mouton Rothschild, which went for pounds 750 in 1990/91, now sells at pounds 4,200.

Mr Graham says the average rise for first and second growth Bordeaux (that is, from the top vineyards) since March last year was 30 to 40 per cent.

Serena Sutcliffe, head of Sotheby's international wine department, believes the next few years will see prices go higher, unless there is some global problem like the Gulf War.

Interest from non-traditional markets in the Far East, especially Hong Kong, Singapore and Taiwan, has boosted the market. Further, as wine gets older it gets drunk, quantities diminish, and the bottles that remain become more valuable.

To make your investment worthwhile Mr Graham suggests investors should be prepared to spend a minimum of pounds 5,000 and buy a reasonable trading quantity, which is anything above five cases, because commissions are payable to brokers who arrange sales from 10 per cent downwards depending on how many cases are sold.

One good thing about wines is that if your investment does collapse and you end up with huge losses, you will be able to drown your sorrows in the nicest possible way.

Dido Sandler works for `Financial Adviser'