Published: December 2019 (3 Min Read)

At the start of Advent, those of us without extensive wine cellars might start to contemplate what delicious wines we are going to match with our sumptuous Christmas fare.

Many of you will have been receiving doormat-flattening quantities of circulars from wine merchants eager to please your palates. There are so many temptations that it is hard to decide what to choose, so I am delighted to inform you that there is some timely research from that august body “The American Association of Wine Economists”.

No, I hadn’t heard of them either. Many thanks to Torsten Bell.

Their paper is of particular interest to me because I love Tuscany and its wines. The researchers chose Tuscan red wines because they are easily comparable given the great similarities in climate and choice of grape varieties, soil and exposure to sun etc.

I think we would all recognise that the reputation of a particular denomination is an important guide for consumers when assessing individual wines. Denomination reputation is a function of average quality as revealed by the past performance of the producers. The influence of past performance increases over time, since higher average quality is an important factor in enhancing the price. Thus, a producer in a prestigious denomination benefits from a substantial mark-up.

However, this necessitates the constant monitoring of the denominations and, as all canny investors know, you should not rely upon past performance.

Consumers tend to exaggerate the quality gap between prestige denominations and others, and so the researchers observed that they also pay more than they would for an equally good wine from another denomination.

The happy conclusion is that you should obviously taste wine before buying it!

If however you are looking for a non-liquid present for a loved-one with a penchant for a drop of claret, then I have a fascinating book to suggest. “Thirsty Dragon” by Suzanne Mustacich is the fascinating story of how in the Spring of 2009 the global financial crisis caused problems for the leading winemakers in Bordeaux.

It is more like a novel than a wine book and delves into the complexities that result when an emerging economic powerhouse collides with a centuries-old establishment. Counterfeiting, smuggling, broken contracts, and the possible emergence of a new wine superpower all add intrigue to the plot. It is also a fascinating guide to the complex system of “First Growths”, “en primeur” and “négociants”, a system which may be headed for disruption.