By Jen ChoBy Jen Cho

Wine as a FoodWine as a Foodor or

Wine as a CollectableWine as a Collectable

Photo: Chateau d’Yquem, FranceSource: Brook, S. (2000)

IntroductionIntroductionWine started off as a basic foodstuff, usually mixed with water to quench thirst. 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 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.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, 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 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 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.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 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 worldwide fashionability of wine. The emergence of ‘trophy wines’ and of ‘collectability ratings’ aided the transformation of wine from a foodstuff, into a ‘collectability ratings’ aided the transformation of wine from a foodstuff, into a commodity for collecting and trading. commodity for collecting and trading.

Wine as a FoodWine as a FoodWine 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 As wine production spread into the rest of Europe and North the rest of Europe and North Africa, so did the integration of Africa, so did the integration of wine into different cultures.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 The introduction of bottles and corks from 1800AD revolutionised the industry by allowing longer maturation periods, improving quality, and allowing development of allowing longer maturation periods, improving quality, and allowing development of different characteristics and flavour in wines. different characteristics and flavour in wines.

After the Second World War, there was a worldwide expansion in wine consumption, After the Second World War, there was a worldwide expansion in wine consumption, palates became more refined, and winemaking and viticultural practices became palates became more refined, and winemaking and viticultural practices became more sophisticated as technology advanced.more sophisticated as technology advanced.

Where wine was once seen as part of a staple diet, the harmonious relationship 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 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 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 cookbooks of Julia Child and James Beard in US and Elizabeth David and Robert Carrier in UK. Carrier in UK.

In the US one of the first masters of wine, Tim Hanni MW focused on primary taste 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 sensations – sweetness, saltiness, and umami. Food and wine tastings became fashionable. fashionable.

In several Mediterranean In several Mediterranean cultures, wine is more often cultures, wine is more often seen on the dining table than seen on the dining table than the bar counter.the bar counter.

Today, alcohol consumption Today, alcohol consumption continues to be influenced by continues to be influenced by national culture. national culture.

Wine’s civilising influence is Wine’s civilising influence is taken for granted by many taken for granted by many Europeans: it has a role to Europeans: it has a role to play in celebration and good play in celebration and good eating, and lubricates eating, and lubricates conversation in all kinds of conversation in all kinds of social contexts. 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 CollectableWine as a CollectableWine’s popularity as a status symbol, fashion accessory, investment, and Wine’s popularity as a status symbol, fashion accessory, investment, and occasionally drink, spread across the world. occasionally drink, spread across the world.

Wine press started to provide wine lovers with the kind of information they needed to 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 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 track record of critics such as Robert Parker and publications such as Wine Spectator grew, wine became viable as an investment.grew, wine became viable as an investment.

Investment in wine was a hazardous business, and many wine cellars built up in the 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 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 recession. By the end of the 1990s, the Japanese were the major purchasers of Bordeaux in terms of value. Bordeaux in terms of value.

The explosion of the restaurant industry worldwide also helped to reinforce the image The explosion of the restaurant industry worldwide also helped to reinforce the image of fine wine, and the development of wine as a collectable.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 Research undertaken in Europe (Dean, R., 2002) revealed that (Dean, R., 2002) revealed that Bordeaux, Rhone and Burgundy Bordeaux, Rhone and Burgundy were named as the regions that were named as the regions that produce the world’s finest wines.produce the world’s finest wines.

Two types of fine wines were Two types of fine wines were identified – the ‘Traditional’ and identified – the ‘Traditional’ and the ‘Cult’ wines.the ‘Cult’ wines.

Traditional wines generally Traditional wines generally convey a story and have a convey a story and have a heritage and romantic imagery heritage and romantic imagery that together have conveyed that together have conveyed quality over a number of years.quality over a number of years.

Cult wines are generally Cult wines are generally produced from relatively new produced from relatively new estates in more modern ways, estates in more modern ways, enjoy a high media profile, and enjoy a high media profile, and are made in very small are made in very small quantities while also respecting quantities while also respecting the soils, typicity and terroir. the soils, typicity and terroir.

Photo: Top Bordeaux winesSource: Wine Spectator 2004

Traditional wine buyer Traditional wine buyer – characterized as being from an older generationcharacterized as being from an older generation– conservative in their wine knowledge and beliefs conservative in their wine knowledge and beliefs – more likely to be found in the markets of Europe and Asia rather than North Americamore 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 predominantly interested in Bordeaux, but will also venture into Burgundy, Rhone, top labels

in Italy, California and individual labels such as Penfolds Grange in Italy, California and individual labels such as Penfolds Grange – brand and merchant loyal and most likely follow the recommendations of their merchant brand and merchant loyal and most likely follow the recommendations of their merchant

more than wine commentatorsmore than wine commentators– wine purchases are usually cellared and are drunk by the buyers in due coursewine purchases are usually cellared and are drunk by the buyers in due course

New wave consumers of the fine wine marketNew wave consumers of the fine wine market– younger, more image conscious, and more fickle younger, more image conscious, and more fickle – less loyal to both brands and merchants less loyal to both brands and merchants – highly responsive to wine journalist ratings especially the likes of Robert Parkerhighly responsive to wine journalist ratings especially the likes of Robert Parker– prepared to look and search exhaustively for certain winesprepared to look and search exhaustively for certain wines– view heritage and reputation as being less important than traditionalistsview 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 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. or consume the wine shortly after purchase. – more heavily represented in North America but are increasingly being found in Europe and more heavily represented in North America but are increasingly being found in Europe and

AsiaAsia

Traditionalists vs New WaveTraditionalists vs New Wave

The Influence of the The Influence of the Fine Wine IndustryFine Wine Industry

The new prominence of wine The new prominence of wine sustained the activities of auction sustained the activities of auction houses such as Christie’s and houses such as Christie’s and Sotheby’s in London who vied Sotheby’s in London who vied with each other aggressively to with each other aggressively to sell the most dazzling cellars. sell the most dazzling cellars.

Online auctions offered new Online auctions offered new forms of trading. forms of trading.

Businesses set up temperature Businesses set up temperature controlled secure cellarage for controlled secure cellarage for urban wine collectors with no urban wine collectors with no cellars of their own. cellars of their own.

By the end of the 20th century, everything was in place for wine to emerge as a mature 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.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 bidderSource: Brook, S. (2000)

Until the 20th century, there was no data source providing worldwide price Until the 20th century, there was no data source providing worldwide price movements in the wine auction market.movements in the wine auction market.

The Wine Spectator Auction Index was developed in 1994, and is a tool that 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 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 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.initial base index of 100 in 1994, the index is now at 256 as of the first half of 2009.

Source: http://www.winespectator.com/collecting

In 1999, the London International Vintners Exchange (Liv-ex), a global on-line 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 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 provides a trading and settlement platform for fine wine merchants, and is an invaluable barometer of brand, as well as demand and prices.invaluable barometer of brand, as well as demand and prices.

The increased globalization of the fine wine market has facilitated the growth of The increased globalization of the fine wine market has facilitated the growth of online bidding.online bidding.

The explosion of wine auctions has fundamentally changed how collectors The explosion of wine auctions has fundamentally changed how collectors manage their cellars, and the more recent proliferation of online bidding has manage their cellars, and the more recent proliferation of online bidding has further accelerated the process. further accelerated the process.

Auctions provide the broadest and most flexible marketplace. Auctions provide the broadest and most flexible marketplace. – By offering mature wines, auctions provide the opportunity to assemble a cellar of By offering mature wines, auctions provide the opportunity to assemble a cellar of

considerable depth in a short period of time. considerable depth in a short period of time.

– By offering a broad array of wines, they allow wine lovers whose tastes have changed By offering a broad array of wines, they allow wine lovers whose tastes have changed to reshape and prune their cellars to match. to reshape and prune their cellars to match.

– By providing a secondary market, auctions also make it possible for collectors to divest 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.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 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 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 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. 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 More recently, Intrade Ltd have created the world's first publicly traded futures contracts written on the fine wine market. contracts written on the fine wine market.

Significantly, this move will also give merchants, funds and investors an Significantly, this move will also give merchants, funds and investors an opportunity to hedge their exposure to the underlying market.opportunity to hedge their exposure to the underlying market.

Challenges for the Wine IndustryChallenges for the Wine IndustryTraditional fine wine consumers are going to Traditional fine wine consumers are going to be less interested in New World icon and be less interested in New World icon and ultra-premium wines. This will have a direct ultra-premium wines. This will have a direct impact on the choice of an appropriate impact on the choice of an appropriate distributor, agent and media channels chosen distributor, agent and media channels chosen to promote the wine.to promote the wine.

Regional identity is key to attracting fine wine Regional identity is key to attracting fine wine consumers by differentiating product and consumers by differentiating product and competing effectively with other wine competing effectively with other wine producing nations in the fine wine market.producing nations in the fine wine market.

The fine wine market is small, fickle and in The fine wine market is small, fickle and in danger of being overcrowded, underlining the danger of being overcrowded, underlining the importance of a brand’s positioning and importance of a brand’s positioning and communication of its core message and communication of its core message and values to these fine wine consumers.values to these fine wine consumers.

Photo: French winery PetrusSource: Dean, R. (2002)

The reliance on journalist ratings is not a sustainable marketing strategy, and can 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 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.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 To highlight the quality of the brand, emphasis should be placed on heritage, tradition and packaging.and packaging.

The new wave fine wine consumer is viewing many New World regions as being on 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 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 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 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 alternative ways of sourcing their fine wines, and are less likely to be brand and merchant loyal. merchant loyal.

Authenticity of wine quality for consumers. Authenticity of wine quality for consumers. – At an auction, you are dependent upon the At an auction, you are dependent upon the

accuracy and integrity of a firm’s published reports accuracy and integrity of a firm’s published reports of condition and provenance. of condition and provenance.

– For example, it was alleged that Christie’s London For example, it was alleged that Christie’s London auction house staff ignored evidence of fake wines auction house staff ignored evidence of fake wines and that a German engraver had carved and that a German engraver had carved Jefferson’s initials on bottles of Bordeaux. Jefferson’s initials on bottles of Bordeaux.

New authentication and tracking systems could New authentication and tracking systems could help wineries and collectors keep counterfeit help wineries and collectors keep counterfeit bottles out of the market. bottles out of the market.

Legitimate auction house web sites. Legitimate auction house web sites. – Many sites are unsupervised, leaving potential Many sites are unsupervised, leaving potential

buyers to rely on their own devices. buyers to rely on their own devices.

– Others are fronts for retail operations offering in-Others are fronts for retail operations offering in-house inventory at inflated markups.house inventory at inflated markups.

Photo: One of Bill Koch’s Jefferson’s Bordeauxs which he Photo: One of Bill Koch’s Jefferson’s Bordeauxs which he claims are all fakes.claims are all fakes.

Source: Source: http://www.winespectator.com/webfeature/show/id/42436http://www.winespectator.com/webfeature/show/id/42436

ConclusionConclusion

Wine has evolved over the centuries from a basic foodstuff to a tradable commodity.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 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 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. 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 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 dominated the top investment wines of the world. However, the rise in ‘Cult’ wines from North America and other New World countries soon emerged.from North America and other New World countries soon emerged.

The increased globalization of the fine wine market has facilitated the growth of online The increased globalization of the fine wine market has facilitated the growth of online trading worldwide.trading worldwide.

This poses challenges for the industry in terms of distribution channels, strong This poses challenges for the industry in terms of distribution channels, strong branding and regional identity, authentication and legitimate websites.branding and regional identity, authentication and legitimate websites.

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