Wine as a food or collectablePresentation Transcript
By Jen Cho Wine as a Food or Wine as a Collectable Photo: Chateau d’Yquem, France Source: Brook, S. (2000)
Wine started off as a basic foodstuff, usually mixed with water to quench thirst. Today, wine is a traditional and daily accompaniment to meals in many countries and is as much a part of the European diet as bread and cheese.
Brokers of Bordeaux who established the famous 1855 classification of the Medoc, took as their guide the prices fetched by the different chateaux over the previous hundred or so years. The ‘great’ wines are bought more for their reputations than their quality. Their high price, in fact, becomes the reason for buying them.
The growing prominence of the ‘wine collector’ was one of the side effects of the worldwide fashionability of wine. The emergence of ‘trophy wines’ and of ‘collectability ratings’ aided the transformation of wine from a foodstuff, into a commodity for collecting and trading.
Wine as a Food
Wine began as a food item and a key part of the staple diet dating as far back as 2000BC, since the introduction of wine became an important part of the Greek culture and a key part of social living.
Spices, honey and resin were often added to improve the aroma and flavour of wine.
As wine production spread into the rest of Europe and North Africa, so did the integration of wine into different cultures.
Photo: An Italian fisherman braces himself for a long cold day in the water with a fortifying draught of wine. Source: Brook, S. (2000)
The introduction of bottles and corks from 1800AD revolutionised the industry by allowing longer maturation periods, improving quality, and allowing development of different characteristics and flavour in wines.
After the Second World War, there was a worldwide expansion in wine consumption, palates became more refined, and winemaking and viticultural practices became more sophisticated as technology advanced.
Where wine was once seen as part of a staple diet, the harmonious relationship between food and wine has become increasingly important. A return to prosperity in 1950 and 1960s led to a renewed interest in food and wine, spearheaded by cookbooks of Julia Child and James Beard in US and Elizabeth David and Robert Carrier in UK.
In the US one of the first masters of wine, Tim Hanni MW focused on primary taste sensations – sweetness, saltiness, and umami. Food and wine tastings became fashionable.
In several Mediterranean cultures, wine is more often seen on the dining table than the bar counter.
Today, alcohol consumption continues to be influenced by national culture.
Wine’s civilising influence is taken for granted by many Europeans: it has a role to play in celebration and good eating, and lubricates conversation in all kinds of social contexts.
Photo: A toast to the fruit of the vine at a family picnic. Wine forms a central part of the Mediterranean diet as it has for centuries. Source: Brook, S. (2000)
Wine as a Collectable
Wine’s popularity as a status symbol, fashion accessory, investment, and occasionally drink, spread across the world.
Wine press started to provide wine lovers with the kind of information they needed to accumulate a private cellar. Wine books sold millions of copies. As the prestige and track record of critics such as Robert Parker and publications such as Wine Spectator grew, wine became viable as an investment.
Investment in wine was a hazardous business, and many wine cellars built up in the 1980s were dispatched to the auction houses in the early 1990s after the worldwide recession. By the end of the 1990s, the Japanese were the major purchasers of Bordeaux in terms of value.
The explosion of the restaurant industry worldwide also helped to reinforce the image of fine wine, and the development of wine as a collectable.
Photo: The image of Marilyn Monroe (The Seven Year Itch, 1955) continues the tradition of glamour-by-association long cultivated by the Champenois. Source: Brook, S. (2000)
Research undertaken in Europe (Dean, R., 2002) revealed that Bordeaux, Rhone and Burgundy were named as the regions that produce the world’s finest wines.
Two types of fine wines were identified – the ‘Traditional’ and the ‘Cult’ wines.
Traditional wines generally convey a story and have a heritage and romantic imagery that together have conveyed quality over a number of years.
Cult wines are generally produced from relatively new estates in more modern ways, enjoy a high media profile, and are made in very small quantities while also respecting the soils, typicity and terroir.
Photo: Top Bordeaux wines Source: Wine Spectator 2004
Traditional wine buyer
characterized as being from an older generation
conservative in their wine knowledge and beliefs
more likely to be found in the markets of Europe and Asia rather than North America
predominantly interested in Bordeaux, but will also venture into Burgundy, Rhone, top labels in Italy, California and individual labels such as Penfolds Grange
brand and merchant loyal and most likely follow the recommendations of their merchant more than wine commentators
wine purchases are usually cellared and are drunk by the buyers in due course
New wave consumers of the fine wine market
younger, more image conscious, and more fickle
less loyal to both brands and merchants
highly responsive to wine journalist ratings especially the likes of Robert Parker
prepared to look and search exhaustively for certain wines
view heritage and reputation as being less important than traditionalists
will either buy the wine as an investment with the intention of making a profit in a few years or consume the wine shortly after purchase.
more heavily represented in North America but are increasingly being found in Europe and Asia
Traditionalists vs New Wave
The Influence of the Fine Wine Industry
The new prominence of wine sustained the activities of auction houses such as Christie’s and Sotheby’s in London who vied with each other aggressively to sell the most dazzling cellars.
Online auctions offered new forms of trading.
Businesses set up temperature controlled secure cellarage for urban wine collectors with no cellars of their own.
By the end of the 20th century, everything was in place for wine to emerge as a mature commodity – one intended to be drunk, but also capable of being aged and traded.
Photo: Here at Sotheby’s in London, bottles of 100-year-old sherry are ‘hammered’ down to the highest bidder Source: Brook, S. (2000)
Until the 20th century, there was no data source providing worldwide price movements in the wine auction market.
The Wine Spectator Auction Index was developed in 1994, and is a tool that effectively tracks price movements of the auction market as a whole by using a representative selection of the wines most frequently sold at auction. Rising from an initial base index of 100 in 1994, the index is now at 256 as of the first half of 2009.
In 1999, the London International Vintners Exchange (Liv-ex), a global on-line exchange was founded comprising of more than 200 wine trade members. It provides a trading and settlement platform for fine wine merchants, and is an invaluable barometer of brand, as well as demand and prices.
The increased globalization of the fine wine market has facilitated the growth of online bidding.
The explosion of wine auctions has fundamentally changed how collectors manage their cellars, and the more recent proliferation of online bidding has further accelerated the process.
Auctions provide the broadest and most flexible marketplace.
By offering mature wines, auctions provide the opportunity to assemble a cellar of considerable depth in a short period of time.
By offering a broad array of wines, they allow wine lovers whose tastes have changed to reshape and prune their cellars to match.
By providing a secondary market, auctions also make it possible for collectors to divest themselves of earlier acquisitions at fair market price and to try new wines.
Since 2008, it has been possible for investors to speculate on changes in fine wine prices without having to take delivery of any wine, let alone pay storage charges or worry about provenance. ODL Markets is offering investors the chance to place spread bets on the future value of the Liv-ex 100 Index.
More recently, Intrade Ltd have created the world's first publicly traded futures contracts written on the fine wine market.
Significantly, this move will also give merchants, funds and investors an opportunity to hedge their exposure to the underlying market.
Challenges for the Wine Industry
Traditional fine wine consumers are going to be less interested in New World icon and ultra-premium wines. This will have a direct impact on the choice of an appropriate distributor, agent and media channels chosen to promote the wine.
Regional identity is key to attracting fine wine consumers by differentiating product and competing effectively with other wine producing nations in the fine wine market.
The fine wine market is small, fickle and in danger of being overcrowded, underlining the importance of a brand’s positioning and communication of its core message and values to these fine wine consumers.
Photo: French winery Petrus Source: Dean, R. (2002)
The reliance on journalist ratings is not a sustainable marketing strategy, and can only attract the most fickle of new wave consumers. While it is an important component of the marketing strategy it is unlikely to succeed on its own.
To highlight the quality of the brand, emphasis should be placed on heritage, tradition and packaging.
The new wave fine wine consumer is viewing many New World regions as being on par with top European wine regions. For complacent Old World producers, their traditional client base of an older generation is being replaced, and these new wave consumers are driving change as they are becoming more media savvy, look for alternative ways of sourcing their fine wines, and are less likely to be brand and merchant loyal.
Authenticity of wine quality for consumers.
At an auction, you are dependent upon the accuracy and integrity of a firm’s published reports of condition and provenance.
For example, it was alleged that Christie’s London auction house staff ignored evidence of fake wines and that a German engraver had carved Jefferson’s initials on bottles of Bordeaux.
New authentication and tracking systems could help wineries and collectors keep counterfeit bottles out of the market.
Legitimate auction house web sites.
Many sites are unsupervised, leaving potential buyers to rely on their own devices.
Others are fronts for retail operations offering in-house inventory at inflated markups.
Photo: One of Bill Koch’s Jefferson’s Bordeauxs which he claims are all fakes. Source: http://www.winespectator.com/webfeature/show/id/42436
Wine has evolved over the centuries from a basic foodstuff to a tradable commodity.
Although it still is a large part of everyday culture and diet in many countries, the explosion of wine’s popularity through media, wine journalists and the restaurant industry has seen it’s rise as a status symbol and wine as a collectable item.
Historically, the Old World regions of Bordeaux, Burgundy and Rhone have dominated the top investment wines of the world. However, the rise in ‘Cult’ wines from North America and other New World countries soon emerged.
The increased globalization of the fine wine market has facilitated the growth of online trading worldwide.
This poses challenges for the industry in terms of distribution channels, strong branding and regional identity, authentication and legitimate websites.
Brook, S. (2000). A century of wine . London: Mitchell Beazley.
Dean, R. (2002). The Changing World of the International Fine Wine Market. The Australian and New Zealand Wine Industry Journal , 17 (3).
Domine, A. (2001). Wine . Germany: Konemann Verlagsgesellschaft mbH.
Hellman, P. & Frank, M. (2010) Christie’s is Counterfeit Crusaders Biggest Target. Retrieved August 10, 2010, from http://www.winespectator.com/webfeature/show/id/42436
Johnson, H. (1985). The world atlas of wine (3th ed.). London: Mitchell Beazley.
Meltzer, Peter D. (2000, September 15). Secrets of Wine Collection. Wine Spectator , 43-83.
Stimpfig, J. (2008). Wine Investment. Retrieved July 28, 2010, from http://www.decanter.com/specials/104729.html
Weed, A. (2008). Fighting Faux Wine. Retrieved August 10, 2010, from http://www.winespectator.com/webfeature/show/id/Fighting-Faux-Wine_4454
Collecting Q&A. Retrieved July 28, 2010, from http://www.winespectator.com/category/index/id/38