Andrew Caillard
Langton’s Fine Wine Auctions and Exchange is the most significant secondary wine market for Penfolds Grange. Andrew Caillard, MW is a veteran specialist wine auctioneer and seasoned Grange analyst. Having just completed a very successful Penfolds Auction it seems timely to provide an updated overview of the current Grange and Penfolds market.
Why is Penfolds Grange such an important secondary market wine?
Penfolds Grange is a cornerstone of the Australian secondary (auction) market with a reputation and track record that rivals some of the great classified growths of Bordeaux and Burgundy. From around the mid 1960s, Grange could be found in most Australian wine collector’s cellars. The 1955 vintage was listed by the American wine consumer advocate Wine Spectator as one of the greatest wines of the 20th Century. It has won such accolades numerous times and is the only wine to be heritage-listed by the South Australian National Trust. The highly influential Langton’s Classification of Australian Wine acknowledges Penfolds Grange as Australia’s leading secondary wine market wine. Volume of supply and demand makes it one of the most highly traded wines at auction anywhere in the world. It has over a half century of history and price data making it the most researched and talked about Australian wine. The fame of Grange has reached far and wide. Asides from the marvellous tastings, the remarkable auction values and the controversies, it is really Grange’s aesthetic quality that makes it such an extraordinary thing. It is one of the few wines in the world which is treated like a treasured piece of Art Work – by all walks of life. If there’s ever a wine that can be called an experience – it is Grange. That is why it is followed with great interest by all observers of the Australian fine wine market.
What are the best performing investment / collectible Granges?
The Grange market increasingly falls into two categories; Rare Grange (currently 1951-1963) and Vintage Grange (1964 – present).
Rare Grange
The early experimental Granges were largely given away meaning in principle the beneficiaries have made some outstanding returns! Even the early commercialised vintages – sold into the market for a few dollars represent good investments today. It is unlikely – however – that any buyer or recipient really looked at the investment value of Grange during the 1950s and 1960s. These early supporters enjoyed Grange because it was a really interesting wine. It was not until the 1980s that Grange really made its name as a investment type wine. The rarest Granges are 1956, 1957 and 1958 – because they were made without authorisation and produced in miniscule quantities. The most valuable Granges are 1951 (the first experimental vintage) and 1952. Interestingly the 1951 was kept back as museum stock for years. It wasn’t until the mid to late 1980s that collectors were able to secure bottles. This is one of the reasons that the labels and general appearance of the bottles are often in better condition than other vintages during the 1950s. The value of the 1951 is intrinsically linked to its historic significance – it is the most important wine ever to be made in Australia as it set the direction of contemporary Australian wine making. The market for rare Grange is not as liquid as vintage Grange and therefore exposed to both volatility and malaise. It’s a highly specialized area of the secondary market. A complete collection of Grange – in pristine condition and signed by Max Schubert – the creator of Grange – once sold for just under $250,000. However most sets have sold between $140,000 and 180,000 in the last seven years. At Langton’s Penfolds Auction held in August 2007 – two sets sold for a combined total of $308,000.
Vintage Grange
Vintage Grange plays a major role in the Australian secondary wine market. It is seen as a key indicator. Indeed for many years Access Economics – a think tank - used the 1971 vintage as an economic yardstick. For many years this wine out-performed other alternative investments including race horses, taxi plates and rare coins. However all wines have a life – and 1971 has not really kept up with the overall interest rate for some years. At one stage in 2003, it enjoyed a 45 fold increase on release price.
The best performing Vintage Granges in the current market are 1986, 1990, 1991, 1998 and 1999. 2000 – while not a recognised vintage – is a millennium wine and still tracks above expectations. The 2002 is also highly regarded and should perform to a similar pattern to 1999. 30th and 40th Anniversaries also drive prices up. The 1967 is currently trading at all time highs.
What type of returns can investors expect from Grange?
At one stage Grange was making between 7% and 11% per year. However in the last ten years the retail selling prices have moved up at a rapid rate making entry points higher against the general price movements at auction. However there is enough anecdotal evidence to show that investors – who are able to buy earliest, cheapest, lowest – through their wine merchant, are able to achieve modest returns.
Although it is possible to invest in wine, it should be done wisely. Most people who have done well play with the secondary wine market to subsidise their interest in fine wine. The collapse of Heritage Fine Wines and Wine Orb in Australia show that it is dangerous for ordinary investors to speculate in wine investment.
What is happening in the current Penfolds Grange auction market?
The overall secondary wine market has grown in the last five years. Prices for top quality Australian wines have oscillated but generally moved forward. The overall market reached a peak at the end of 2004 but prices for many top vintages faltered during 2005 gathering speed in 2006 and firming up in 2007. Generally prices have moved up this year. Top Grange vintages have made gains of around 10%-15% this year. Volume of bidding and market sponge has also improved. Stellar vintages are finding buyers as wine collectors concentrate on the very best.
Against this backdrop the Penfolds Grange magnum market has struggled over the last four years. Too many people aggregated stocks for investment purposes resulting in poor liquidity. Interestingly 1986 and 1990 have performed well at auction in recent years. However the value of magnums has actually fallen by around 15% over the last four years. This is against a general backdrop of rising Grange (in bottle) prices. A Grange magnum set recently achieved $23,000 at auction.
What economic and environmental conditions have affected Grange value?
Grange only became a global secondary market wine during the 1990s. While it is now regularly sold by the major wine auction houses around the world, the Australian market is still overwhelmingly dominant. During the 1960s and 1970s, prices tracked at fairly moderate increments. A strengthening fine wine market – based on an ascendant boutique Australian wine scene – allowed prices to evolve rapidly during the late 1980s. In 1987, Penfolds released the 1982 at over $50 – something of a milestone and a quantum leap on the year before. These boom years – supported by wealth generated across the Pacific Rim – saw Grange cement its place as Australia’s top secondary market wine. In 1991 ('86 vintage released) Grange headed up the inaugural Langton’s Classification of Australian Wine.
The 1990 sold into the primary markets at an enormous premium on the previous year. This hyped up but great vintage – through tight allocations and a perception of short supply – made a huge impact on the overall fine wine market. Grange prices at auction moved up and at the same time pulled up the values of other highly rated wines. Henschke Hill of Grace was the major beneficiary – with its prices moving up by 150% in a single year.
Prices faltered in the early 1990s during the Australian recession – but Grange prices held on. By the end of the 1990s market strength re-appeared. By the end of 1999 the Australian cult wine scene came into prominence – effectively creating a sluggish market for Grange for 18-24 months. The crash of the cult wine scene in early 2001 and the release of the excellent 1996 alleviated the Grange market malaise. Indeed the strength of renewed interest was stark proof that track record, enduring quality and reputation are key drivers when it comes to a wine’s performance at auction. Grange prices again spiked after the release of the celebrated 1998. A short period of short supply and high volume of bidding saw prices escalate. The speculative market, however, subsided as traders repatriated stock from the UK/US– illustrating the point that this vintage is more highly valued by the Australian market. The superb 1999 vintage – living in the shadow of the 1998 – has performed slowly for years, but in recent years has moved up significantly as buyers recognise its value. The small vintage 2000, a millennium wine and very tightly allocated – has performed beyond expectations. Neither the 2001 or the 2002 have made significant gains. Certainly pricing in the primary market has a direct link with secondary wine market movements. With the increasing world wide interest in Grange perceptions of short supply and increasing First Growth stature in the global secondary wine market, prices are likely to remain firm in the foreseeable future. Since 2002 Langton’s has been selling Grange at auction on-line. The participation rate has increased exponentially. In the 1980s an absence of a single big buyer could create marked fluctuations – not any more.
Has international recognition brought a greater status to Grange at auction?
1990 Grange’s exposure as Wine Spectator’s wine of the year (the first 'outsider' wine) certainly propelled sentiment. The mid-1990s was a highly successful period for Penfolds with extraordinary media focus – no doubt adding some sparkle to the market. It was also a time of great vertical tastings and when traders – such as Anders Josephson – emerged as important market influencers. The Asian market also came to prominence – particularly Singapore and Hong Kong. These buyers had a profound effect on the secondary wine market changing the pattern of buying and the way of cataloguing fine wine. Anything that deviated off pristine condition – including minor scuffs on labels or capsules – was simply ignored. Once considered idiosyncratic this expectation has become standard across all markets and is a contributing factor to the increasingly high quality of personal and public wine storage.
Robert Parker’s influence in Asia is generally strong. He has been a champion of single vineyard Shirazes and became a lightening rod for the cult wine scene. He has tasted all of the Granges and even gave the 1976 100 points. Parkers influence on the Grange market itself is marginal. The wine is steeped in folklore and has a life of its own. Australians are very proud of Grange – many of the buyers are ordinary people who may not even be aware of Robert Parker. On the other hand 99 points for the 1998 Grange no doubt generated interest. But Australian taxi drivers probably had more influence!
What part did Grange play in the rise and fall of the Cult wine scene?
Grange is the only Australian wine in the market place – with the possible exception of Henschke Hill of Grace – which can really claim icon status. It has certainly prepared much of the groundwork for ultra-fine Australian wine. But it should be seen as distinct from the recent phenomena of cult wine. Consistency, aging potential and pedigree has earned it its own club of one.
The cult wine scene, emerging in late-1999, with interest in Three Rivers, Torbreck, Wild Duck Creek 'Duck Muck' and other virtually unknown wines skewed the market. The volume of supply was pathetic but the prices were extraordinary. Three Rivers regularly achieved (and still does) over $1200 a bottle. Grange stood still – but after the crash in which many cult wine prices fell by up to 60% - Grange prices started moving forward - showing its 'blue-chip' qualities.
It should be pointed out that some cult wines have become contemporary classics. Clarendon Hills Astralis, Chris Ringland Shiraz, Kay Brothers Block 6 and Noon Reserve Shiraz are all including in Langton’s Classification of Australian Wine published in 2005.
How much does condition and provenance affect the price of Grange?
Penfolds – through its Red Wine Clinic programme – has made provenance a major issue at auction. Anything that deviates from pristine condition is now subject to downward price pressure.
The Penfolds Red Wine Clinic programme effectively means that wines with poor levels etc are purchased at a discount. Previous cellaring conditions are an issue – but not as great as some people would like to think. Indeed I believe quite strongly that the wine trade in Australia (and the UK) uses the issue of provenance as a weapon of doubt – a way of casting influence with their clientele. My experience with the clinics has shown that wine bottles that appear in good condition are generally ok. Anything with level problems or leaking capsules or even damaged/mouldy labels – can all suggest questionable provenance/ past cellaring conditions. These wines are always catalogued accordingly and generally achieve the prices they deserve
A successfully cliniced bottle – topped up, re-capsuled and back-labelled with a clinic label and winemakers signature - will generally provide extra confidence to buyers. In Australia the concept of topping up is well received. Indeed the Penfolds Red Wine Clinic has become a part of the fine wine landscape in Australia. Generally re-corked wines from the 1970s and 1980s do not attract a premium. In theory prices are restored to par value. However rare Grange and experimental wine from the 1950s and increasingly the 1960s have become extremely expensive. On Monday night a bottle of 1951 Grange – in almost mint condition - went for $51,000, a near auction record. The sale also demonstrated the increasing assurance value of the Penfolds Red Wine Clinics. Buyers – seeking the best provenance possible – paid premium prices for “cliniced” bottles in mint condition – especially for experimental wines and older vintages. These included the exceedingly rare 1962 Bin 60A ($3106) and 1961 Bin 58 Cabernet ($1210) – both classics of their time. A bottle of “cliniced” 1961 Grange achieved a record price of $1900 – exceeding its last high by 100%.
Does the winemaker’s signature make a difference in price?
There is generally a premium paid for old bottles of Penfolds wines with the signature of Max Schubert – the creator of Grange. Indeed they add extra rarity value to Grange collections. It is difficult to tell you exactly what the premium is because the rare Grange market is so specialised and prices vary widely. It is about 10-20% extra within the life of an auction itself. Signatures of Don Ditter, John Duval, and current Penfolds Chief Winemaker Peter Gago generally only get premiums at charity auctions!
If Grange is the 'world's most consistent wine' - then why do vintage prices vary so much?
There was a time when the secondary market played little attention to the vagaries of vintage. Australia almost always had benign years, the wines were relatively cheap and expectations were generally low. However, this has all changed hugely in the last forty years. Recognition of vintages has become a very important feature of fine wine. While Grange is a multi-vineyard – often multi-regional wine – it is still reflects the conditions of vintage. The overall winemaking philosophy allows for consistency of style and quality, but vintage conditions will bring a stamp of its own. There is not such a thing as bad grange – but they are all different to each other. The light and shade across vintages is as palpable as any other series of great wines. The market appreciates this and also the historic idiosyncracies of Grange. For instance 1972 is considered as a dud year – although it was one of the top performing wines at the last ROP tasting. Grange was bottled in both South Australia and New South Wales until the 1970s – so there must be some form of bottle variation – not necessarily qualitative or quantifiable as the clinics have never revealed a meaningful difference. Buyer sentiment is always driven by the perception of quality, reputation and short supply. There is possibly a market phenomenon which won’t allow more than a few stellar vintages in a ten year period.
Does Penfolds Grange always achieve the highest prices at auction?
Penfolds Grange – across vintages – has a very commanding price position. The highly prized single vineyard wine Henschke Hill of Grace Shiraz regularly achieves over $400 – especially for top vintages. It generally surfs in the wake of Grange prices and is the beneficiary of the pull push effect. That is every time Grange prices move up, Hill of Grace prices follow and vice versa. Rockford Basket Press Shiraz rarely achieves more than $250 although it is enjoying strong upward price movements at the moment. Rare vintages of Penfolds Bin 707 Cabernet Sauvignon can achieve over $400 ( ie 1964). Moss Wood Cabernet Sauvignon, Cullen Diane Madeline Cabernet Merlot, Wendouree Shiraz and Mount Mary Quintet track between $120 and $200. Bass Phillip Reserve Pinot is so utterly rare it can drag up to just under $300. As you can see Penfolds Grange is the only wine in the Exceptional category that achieves the same sort of prices as First Growth Bordeaux or Grand Cru Burgundy.
A number of new classified entrants – originally propelled on to the market by the cult wine scene – achieve remarkable prices. The very small production (two barrels), highly concentrated and profound Chris Ringland/ Three Rivers Shiraz can attract prices in excess of $1400 a bottle. The highly prized 1996 vintage went for around that price this year – back to the boom times!. Prices generally fall within $440- $950 a bottle. Clarendon Hills Astralis will go for around $280- 440. Noon Reserve Shiraz follows a similar pattern. Wild Duck Creek Duck Muck Shiraz is something a touch more quirky but can make over $1000 for some vintages. As you can see the fine Australian wine market – when compared to the top growths of Bordeaux, Burgundy etc – represent superb value especially considering the brilliant quality of the wines.
Andrew Caillard, MW
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Caillard Archive
The Story of Penfolds Grange
2012 En Primeur: Right Bank Tasting Notes
2012 En Primeur: Left Bank Tasting Notes
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Classification V - Introduction
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2011 A review of Coonawarra
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A history and description of famous 20th Century Australian wines -1973 Wolf Blass Bilyara Black
Classification V - Questions & Answers
A history and description of famous 20th Century Australian wines - 1973 Moss Wood Cabernet Sauvigno
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A history and description of famous 20th Century Australian wines- Penfolds Grange 1971
Bordeaux 2009 Top Picks from the Great Solar Vintage
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