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           Sydney Time

  

            

   Copyright © Ric Einstein 2009

 

 

 

 

From “Greed and Ignorance” to “Avarice and Stupidity”

In late 2006 the liquidator for Heritage Fine Wine advised stakeholder that after some of the investors had removed the stock they were entitled to, there was still over 1,000,000 bottles left in inventory.

At the end of April 2007, the liquidator advised he would liquidate 50,000 bottles through GraysOnline auctions. Those wines went on sale on Friday, and the online auction will close in one week. They have broken up the sale into two separate auctions, one for the Rare Wines, and a second for the Premium Wines.

Regular readers will be aware of my thoughts on investing in wine for speculative profit; God knows, I have written about the pitfalls and follies of doing so for about six years. Whilst it is never nice to see people lose money, in many cases those who speculate without doing their homework are looking for trouble. In the case of Heritage, all sorts of people were caught. They ranged from wine lovers who took a small punt figuring that if it went bad, they could always drink their losses so to speak. Then we have the “P.T Barnum” category of investors. Finally were the “get rich quick” merchants who will invest in anything to make a buck. In theory, not all of these people were fools, and some were regarded as “smarter than the average bear.” One such investor, and I understand a large one at that, was former Premier of the state of NSW, and well respected businessman Nick Griner.

All these people fell for the “wine is a good investment” folly. With the collapse of Heritage, and Wine Orb, by far the two largest wine investment schemes, substantial press coverage occurred in all the local newspapers and wine publications, but it appears you can’t protect people against stupidity or avarice, no matter how much bad publicity the scheme receives.

Scanning through the list of wines being sold in these sales, one can only wonder what sort of incompetent fools were responsible for buying the inventory. If they weren’t fools, they had to be crooks. There is no other possible explanation. How else could you explain having bought some of these wines for “investment” with the hope of making a profit (see below)?

According to the action details, Heritage paid $30 a bottle (and they bought a lot of them) for the Gartner Family 1999Cabernet Sauvignon yet the cellar door price was $25 a bottle, and this is just one example of them paying “stupid prices” for wine.

How about some bad wine investments; here is the pin head on the tip of the iceberg.

2003 Louee Coxs Crown Verdehelo,
2004 Amberley Estate Chenin Blanc
2000 Fox Creek Sauvignon Blanc
2004 Turkey Flat Grenache Rose
2000 Torbreck The Steading
2002 Bidgeebong Alabama Shiraz
2000 Boars Rock The Fleurieu McLaren Vale Shiraz
…. and the list goes on and on.

If you think that Heritage overpaid, and invested in some pretty ordinary wine, that’s nothing compared to the “unbelievable” prices that some people are prepared to pay for this wine. Here are just a few examples of the early bidding after three days, and there is still five days to go, so these prices may go even higher. (The figure in brackets is the last sale at Langtons Auctions.)

1 X 1997 PENFOLDS BIN 407 $89 ($27)
1 x 1999 HENSCHKE JULIUS` RIESLING A$54 ($18)
1 X 2002 MERUM SEMILLON $64 ($9)
1 X 1997 MOUNTADAM MERLOT $44 ($13)
1 x 1999 FOX CREEK WINES MERLOT $44 ($7)
1 X 1985 LINDEMANS ST GEORGE $159 ($18)
2 X 1997 WYNNS COONAWARRA ESTATE JOHN RIDDOCH $120 each ($44 each)
1 X 1994 PETER LEHMANN STONEWELL SHIRAZ $104 ($51)
1 X 1997 FOX CREEK WINES RESERVE SHIRAZ $89 ($41)
1 X 1990 PENFOLDS MAGILL ESTATE SHIRAZ $159 ($54)
1 X 1998 WYNNS COONAWARRA ESTATE MICHAEL SHIRAZ MAGNUM $209 ($120)
…. and the list goes on and on.

But, as they say in the classics, “Wait….. there’s more!” As well as having to pay the 15% buyers premium, freight has to be considered, and in this case it can be a costly exercise. Grays freight calculator is not exactly “state of the art” and in some cases, is a license for them to print money and further boost the cost of wine to an even more asinine level.

If you live in Sydney or Melbourne and purchase a full dozen lot, then the freight is a very reasonable $10 a case. However, if you purchase two six packs, it will cost you $20, which is still not that bad. But let’s say that you are the winning bidder on the 12 bottles listed above, it will cost you $10 for the first lot and $5 for each additional one. So the freight on those 12 bottles listed above would be $60! I guess if you are stupid enough to bid those prices in the first place, you won’t mind paying the outrageous freight charge too.

It may have taken a certain “level of investment genius” to get involved in the Heritage scheme, but those investors have a “nincompoops level of wine buying genius” compared to some of the rocket scientist that Grays have attracted to this auction. The mind boggles!
 

 

Feel free to submit your comments!

From: Rodney B

06/12/2007 03:24:48 I agree with your comments about the wine they purchased. Absolute madness. Even if you think that wine investing is a good idea surely you would restrict yourself to 12, maybe 15 or 20 cellarable, high profile wines. Heck, they could have cornered the market on a few prestigious wines given the money they obviously had to spend making them very rare and difficult to acquire thereby pushing their price up. Maybe they could have added 2-3 new wines every year taking a punt on a up and coming winery or winemaker. Actually, that's not a bad plan, I may try that myself. Not!

I suspect they all of a sudden had more money than they expected and didn't know how what to do with it.


From: MartinE

06/12/2007 17:12:01 Hi Ric,
While the prices are a headshaker, I do not think you are right on the freight...I have bought single bottles from Grays and they repack into a case and charge as a case.

Actually they pack pretty well with individual sleeves and double thickness boxes.
cheers,
MartinE

TORB Comments: Martin, all I can do is go on the terms that are specifically spelt out on their website and their freight calculator.


From: Mark Wickman

06/12/2007 17:34:32 Huh.. Look at those prices being paid. Surely those people must be reading things wrong. Surely a call to their retailer or a simple email to Wickmans :-) will tell them that those prices are way over the top.

From: Dennis Colquitt

06/13/2007 20:11:27 If you are like me, you participate in auctions to pick up a bargain.
There are no bargains here, as you so rightly say the prices are way over the top. Of course it helps if you drip feed the total inventory on the market in consecutive sales. Missed out last time try this weeks offerings. It could go on for ever if the quantities I've heard are to be believed. Try my web site for a good deal. No 15% commission either. All cellared in climate control since release

From: RB

06/13/2007 22:09:04 Dennis, at the prices you are offering, the 15% (or more) is already built in...

From: Adam

06/19/2007 22:47:33 Anyone keep a list of final prices paid - would make for interesting reading!!

From: Geoff G

06/20/2007 18:06:42 Yes, I'd also be very interested to see final prices paid. The site does not seem to have this search function(a pretty archaic deficiency)

From: Rob

06/26/2007 05:23:31 Some of the prices seem pretty good. I bought Gartner 99 CaS Sav for less than $15 including costs. And Warrenmang for less than $15 - I rang the winery and cellar door price is $60. So I'm satisfied.

From: darren clarke

07/13/2007 10:32:00 I have a fair selection of wine and i have been gob smacked at the prices people have been paying and all i can think of is they think everything on grays is a bargain and have never even looked at any wine auction sites. Lets hope they stay at grays and we get to enjoy the true wine auctions without the loonies artificially inflating the price ranges

From: Robbert Wolters

08/09/2007 10:07:57 obviously plenty of suckers out there. some basic research isn't that difficult or time consuming. i mean it takes 1 or 2 mins max to tap the wine name into wine-searcher.com and get a rough price indication.

From: William Hobba

08/19/2007 23:06:52 As a Heritage wine investor who did a bundle I just want to comment that some of those wines you motioned as "fool buys" have been tasted blind by some highly respected wine lovers, myself included. Some are simply stunning eg Fleurieu McLaren Vale Shiraz 2000 was tasted blind against Michael Hermitage and other top shirazes and came up trumps. Yes people are being foolish with the prices for some of the wines at Grays - but I can assure you some of the wine purchased by investors were of very high quality and are now going at bargain prices.

Thanks
Bill


From: Steve S

11/03/2007 19:44:40 There are some definite non bargains. I have followed grays for a while and every so often people pay stupid prices for wine. I made a mistake once when I thought I was bidding on a case lot and it was only one bottle. Luckily several other people outbid me :) Their shipping is a joke and they may well make you pay case prices for single bottles. I agree with an earlier comment that their auction system is archaic. I have pointed out some flaws to grays which they fixed but never responded to my email. They really need a review function like at Langtons that tells you how much you are bidding per bottle before you confirm. I also recommend Mark Wickmans site.

Happy drinking all!!



Copyright © Ric Einstein 2007

 

 

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