Knowing When to Cellar or Sell
TO
CELLAR OR NOT TO CELLAR,
that is the question. There have been more than a couple
beverage programs I have worked with that I’ve tried to
encourage putting away a small percentage of wine to improve
their list for the future. More often than not the response
has been a financial one in the negative. So I recently
decided to investigate this a little further and look at
wine worthy of cellaring at its release price and its cost
three years later. I hoped to conclude that for retail and
restaurants there is a financial argument as well as an
incentive for prestige and better client service if they
cellar wines before being made available to
clients.
My results were
a little surprising. I consulted my Harvard MBA business
manager (aka my wife), and got a mind-numbing crash course
in how to assess the wisdom of an investment. I left that
tutorial with a means to counter the impact of inflation and
to account for the fact that there’s always something else
to invest in other than cellared wine. Because this isn’t a
Doctorial Thesis, the financial argument and research has to
be more than slightly simplified. Essentially, if the price
of a wine released in 2OO3 now costs 25% more or higher, you
should have bought it three years ago. Then I looked at two
major regions to see if it would have been a good financial
decision to cellar certain kinds of wine.
The first area
that I naturally examined was Bordeaux. Certainly one of the
most age-worthy wines, Bordeaux has an excellent integration
of sales, from En Premier to library sections available from
multiple outlets. Using the much sought after, and yes
overpriced, 2OOO vintage as a recent benchmark, the results
were quite interesting. What wasn’t surprising was that the
1st Growths, and Garagistes weren’t even available from the
distributors. The only way you could get those today is
through auction, which would certainly surpass that 25%
hurdle.
Other blue chip
names were available as of the March 2OO6 issue of beverage,
such as: L’Angelus, Palmer, the great 2nd label of
Leoville-Les-Cases; Clos du Marquis and Pavie. What was
surprising was the difference in the pricing between early
2OO3 and March of this year – namely, that there wasn’t one.
The prices from one of the main distributors of Bordeaux
here in Massachusetts were exactly the same – it didn’t even
keep up with inflation. Is this an aberration limited to
this state? Possibly, the auction prices steadily increase
for most 2OOO Bordeaux. As this article is aimed at
wholesale buying, it only reinforces the idea that you
should buy from the wholesaler. Unless you are buying 1st
Growths and cult wines, it’s more profitable to buy as
needed from the distributors.
Moving on to
California also led to some very interesting conclusions.
Most of the high-end Cabernets did sell out on release and
were not made available again until a library selection was
made from the winery itself. That offering of the library
selection was more expensive – above my 25% hurdle – than
the initial offering, especially factoring in that the
selection sometimes had less wine per case with a mix of
vintages. What was surprising was that the library
selections from some of the wineries then didn’t change in
value over the next three years. These were notable
producers that have proved that their wines do age. This is
good news to new establishments trying to create a
foundation for their program. Past vintages of California
Cabs seem to be available to be picked up and put on your
list today at the same cost (or less when you consider
inflation) as in the first library selection offering.
However, most other varietals weren’t available after
release: Pinot Noir, Syrah, Zinfandel, and Chardonnay. So if
you have a favorite cult producer of these, buying at
release in quantity is a sound strategy.
Of course, the
financial value of individual bottles is only one angle. The
old adage “Sell the Sizzle, not the Steak” applies to this
argument – to cellar or not to cellar – and it takes a savvy
owner to make a cellar sizzle. The prestige and awards that
come with an excellent beverage program, ergo the “sizzle”,
are elements that are hard to measure. How much business
does free marketing from getting a Grand Award give you? I
don’t know what the dollar value would be, but in my
experience, awards are a powerful differentiator. In this
age of increasingly informed clients, many look at wine
stores that have won “Best of Boston” or check the wine
spectator for your award level before choosing where they
spend their time and money. Having exclusive wines and deep
verticals that can only be built by buying certain wines on
release are part of a winning strategy in the awards
arena.
So, my
conclusion? It pays to cellar when: A you have the ability
to cellar top-of-the-line Bordeaux, and B you can short-term
cellar for cult producers in California that are not
Cabernet. If you are looking at Cabernet, check and see if
they have a library program. And sometimes, just sometimes,
it is better to sell the sizzle and not the
steak.
