The Greed for Grange

So you used to be a Grange drinker? Hope you enjoyed it while it lasted.
The only thing changing faster right now than the price of Grange is the profile of who is actually drinking it. I can imagine reminiscing to young wine enthusiasts of tomorrow about how I would once sit around a dining table and actually share in a bottle of Grange from time to time. I can see their expressions: they just won’t believe.

Grange is now a global commodity. It’s bought in Australia by people who have no intention of drinking it. It’s also bought in the USA, UK and Asia by those who only want the best. At least they are more likely to pop the cork!
Grange prices have exploded over the last eighteen months. The 1990 vintage, released at $125 per bottle, now fetches $400 a bottle in the secondary markets. Similarly, you won’t buy a bottle of the 1991 vintage, supposed to retail at $140, for less than $300. It was only released a couple of months ago.

The press cops flak, so do overseas buyers, retailers and so – most of all – does Southcorp. Who actually deserves to is another point entirely. To find out what is going on, I’ve spoken to the auctioneer who sells more Grange than anyone, a major retailer with an imported wine perspective, the largest collector of Grange in the world, the largest Grange outlet in the world and to Southcorp Wines: owners, makers and distributors of Grange.

The Auctioneer – Stuart Langton

Stuart Langton owns and operates Langton’s Fine Wine Auctions, Australia’s most important wine auction house. He sells more Grange than anyone else in the world, apart from Southcorp, of course. Much of the Grange he sells goes offshore to the USA and Asia.

‘Nobody could have predicted this hysteria. I haven’t seen it happen with a wine, ever. It’s become a mill around Southcorp’s neck. On one hand it rubs off onto all the other Penfolds brands down to Koonunga Hill, but the production of Grange is completely inadequate for the market that has evolved.

‘No amount of marketing strategy could ever have achieved what has occurred. Something else has happened, organically, which I like. Grange is the right product at the right time in a world that is thirsty for it. It’s a great thing.

‘Firstly, the auction scene around the world for premium wine has boomed. Then there was the anticipation of the 1990 Grange, from a great vintage across most of the wine world. That took the demand to another level. Then we had Robert Parker’s coverage, followed by the Wine Spectator, which created the perception that Grange was the best wine in the world. Everything came together to focus on this wine.’

Langton is concerned about the recent phenomenon of new Grange speculators who scour the countryside for bottles of Grange with the sole objective of profit. While there’s little doubt that his business is currently the better off for the hysterical Grange prices, he takes a longer view.

‘What bothers me is that people are currently buying Grange who have never bought a decent bottle of wine in their lives. While they are spending around $400 for a 1990 vintage, they could still buy a great mature Grange for less. I worry that wines are bought for other reasons than for drinking.

‘Any overheated market is dangerous for everybody. There is always a correction and people get hurt. I’d prefer a steady, secure market to the scramble that exists today.’

Some commentators have compared the Grange phenomenon to that of Seppelt Para port and to the ridiculous situation in the early 1980s when fair to good vintage ports were reaching absurd prices for no other reason than the name of the racehorse on their labels.

Clear differences exist this time around. Firstly, Grange is a table wine. The great wines of the world are table wines. This fact alone should ensure its ongoing demand. Furthermore, the forces currently driving the phenomenon are foreign. It is overseas press recognition that has taken to the frenzy to this level and ultimately it will largely be foreign buyers who are able to afford to drink Grange. Given its scarcity, there should always be enough money in the USA, Europe and the tiger Asian economies to buy Grange, should it be priced out of Australian hands. Like the top French wines, however, it’s likely that the price of Grange will reach a point where it can’t go much higher.
Finally, now that it is recognised as one of the world’s elite wines, Grange should always be the most consistent, year in year out. It represents the cream of all Southcorp’s massive shiraz resources, condensed into a release between only 6,000 and 10,000 dozen, less than half the output of some of the top Bordeaux growths like Chateau Mouton-Rothschild, Chateau Lafite and Chateau Latour.

‘I’m amazed at how quickly people have adjusted to the huge price increases and in the way that perceptions of Grange has changed. People feel they can’t drink the wines they have previously bought for that purpose.

‘With the increasing Grange prices the reality is that consumers go and look for other bottles. International bidders are already chasing wines like Mount Mary, Petaluma, etc and I assume their interest will increase. It will make other premium Australian wines harder to find.

‘Eighteen months ago you could buy Hill of Grace from 1986 and 1990 – both great vintages – for $60. At our last sale the 1990 vintage went for $220.
That’s extraordinary.

‘Ultimately increased auction prices will help producers to increase retail prices. That will give them more money to invest in making premium wine, completing the cycle. It’s foolish to see it any other way. I’m sorry to consumers, for I have to take some blame here. But Australia’s future is selling the best wine it can make to the world.’

The Retailer – Philip Rich

Philip Rich is the Imported Wine Manager for Philip Murphy Wine and Spirits, one of Melbourne’s most successful outlets of premium wine, with several stores. Given his specialisation in imported wine, his views are especially interesting.

‘I feel sorry for those who in past liked drinking and cellaring Grange. They can’t do it any more. It’s too expensive and you can’t buy the quantities you need to cellar. Even some important businessmen are struggling for bottles today.

‘The blame lies with the myth of the wine. Penfolds aren’t blameless there. They enhance the myth and then use Grange to sell the rest of their range into places like the USA, but that’s fair enough.

‘Grange has been a commodity for a long time. It’s Australia’s only real blue chip wine investment; you can’t go wrong with it. I know one guy who borrowed $15,000 to buy 1990 Grange, which he bought from everywhere. He’s laughing now.

‘It’s still cheaper to buy Grange in Singapore and London. The commodity thing only applies in Australia at this stage. The overseas buyers are generally wine enthusiasts, not investors.

While most wine retailers sold the 1990 Grange on or around its initial price of $120, this year has seen a marked change in philosophy. With allocations of 1991 Grange smaller than ever before, most retailers have increased their retail price to at least $200, although Southcorp has only increased the wholesale price of the 1991 Grange by 10.

‘Last year the public cleaned up. This year retailers are getting some of the action. The way things are, Southcorp could charge $150 wholesale and people would still buy it.

‘”Retailers” margins are their own business, but in the meantime we have moved a lot of other wine we have found difficult to sell in the past. Premium Italian and French have become a legitimate buying option for Australians. The 1995 Bordeaux indent has gone berserk.’

The Professional Collector – Anders Josephson

With a collection of back vintages of Grange that leaves Penfolds green with envy, Anders Josephson has the definitive ‘buy now to sell later’ cellaring facility. It is no coincidence that his entry to the Australian wine market has coincided with a dramatic surge in Grange interest. He doesn’t think the public reaction to Grange is all that surprising, given the nature of the overseas publicity.

‘The consistency of Grange is what makes it so rare and so absolutely fabulous. (Its maker) John Duval says he would love to double production, but he can’t find the material to achieve this. One thing for certain is that a bad vintage of Grange would hurt the whole image of Southcorp Wines.

‘Most of the speculators buying up Grange don’t know much about the wine. They don’t love it for drinking, but for its investment only. But you must always have the combination and not be afraid to open a special bottle for an evening. The wine is there to be drunk, not only as a form of investment like the stock exchange. If somebody gets cold feet and starts to push huge volumes on the market and if the wine hasn’t been properly looked after, the prices might well turn around.’

Anders Josephson believes that overseas prices for Grange are starting to rise. He receives queries from all over the world, especially for older vintages.
‘The Asian market wants the best, but there despite the demand there, there is a lack of knowledge. Australian wines are now very strong in the American market, but the imported wines achieving incredible prices there are generally French.’

The Greatest User – Crown Casino

Melbourne’s Crown Casino is rightly or wrongly accused of being the major reason Grange prices are spiralling. It’s no surprise that the operators do not wish to divulge the quantities they buy or the prices they pay, but there’s no doubt Crown is Australia’s largest single user of Grange, by some margin.
Ishan Ratnam is Crown’s Beverage Manager, and as such he must ensure that the casino’s visitors, which include a significant number of major international gamblers, especially from Asia, are able to receive precisely the wines they wish to drink. He says that Grange is one of the most sought after of the premium wines.

‘We must have the best of what is available. We carry a lot of first growth Bordeaux and our market requires that we stock specific years. Other popular wines include Bin 707, Mount Mary, Roxburgh Chardonnay and Coldstream Hills.

‘We carry the current vintage and back vintages of Grange, sourcing from very good private cellars (Anders Josephson is one of them) and from Southcorp, with whom we have a good relationship. Popular years are 1971 and 1976. Some people try and sell us Grange at extravagant prices. Apparently some people have been saying that I have bought recent vintages of Grange for as much as $800. Would I be so stupid?’

Ishan Ratnam says that Crown Casino is not a regular player on the auction market.

The Supplier – Southcorp Wines

No matter what Southcorp does about its distribution of Grange it will make more enemies. It’s in a classic no-win situation. Brad Camer is Brand Manager for Penfolds. He’s an affable bloke in one of the hottest of hot seats in Australian wine.

‘We know consumers aren’t exactly happy about the price of Grange. No matter where they buy it, they think it’s our fault. But for every consumer not willing to pay the price, there are another ten who would.

‘Retailers don’t get allocated much Grange and see it as an opportunity to make margins. Their allocation is based on how much they grow with us in the semi-premium and premium white wine category. It’s not linked to one product or a particular brand, but the growth of our portfolio. If people grow in this category, they get a bigger slice of the cake, but not necessarily more bottles to sell.’

To say that Southcorp’s attitude towards their distribution of Grange is controversial is a major under-statement. But, given the history of Grange allocations to retailers who have supported the company in the way they have specified, they say there’s not much else they can do. If they decide to place the reducing volume of Grange available in Australia to top restaurants and fine wine specialists, Southcorp believes that (i) it would be placing their relationship with volume retailers at risk and (ii) they would achieve little, if any overall sales benefit since premium outlets really just wish to pick the eyes from their large portfolio.

Southcorp pays special attention to sales of Tollana, Hungerford Hill and Rouge Homme when determining Grange allocations.

You can’t argue with this logic, although it means that Grange is largely sold in the last places you’d expect to sell premium wine and that Grange is therefore largely separated from the bulk of the premium wine market.

‘We’re in business for the long term and try to reward people that are loyal to Southcorp. Should we support a person who buys a product that we could sell anywhere around the world, or should we support those who would give other wines that need support a focus? We will always upset people, but we do play straight down the middle. There is no ambiguity over what a retailer has to do over the next 12 months to get more Grange.

‘We have looked at other ways to sell Grange – en primeur and at auction – but not everyone is going to be a winner when there’s not enough to go around. What does disappoint us is that much of this wine won’t see the back of the palate. Max Schubert would say it has gone out of control.’
Those are the important sides to the story. For the time being I can confidently assert that it will be some years before Grange ever gets cheaper and that I wouldn’t want Brad Camer’s job right now for all the Grange in China.

A Dateline with Dollars – How Grange Made it $$$
1950 Max Schubert takes a study trip to Europe.
1951 Schubert’s experimental vintage, the first Grange.
1956 Penfolds introduces each Grange ever made, including the infant 1956, to the wine trade, receiving universal condemnation. Schubert is later told to stop making it.
1955-59 Schubert makes the ‘hidden Granges’ without Penfolds’ knowledge.
1960 The vintages 1951-55 are re-evaluated by same panel as in 1956 to enormous acclaim. Schubert re-commissioned to make Grange, officially. 1953 price: 17/6. 1955: 15/-.
1962 Penfolds re-enters show circuit after 47 years absence; 1955 Grange winning first of its 51 gold medals. Retail price: 21/6.
1966 1960 Grange: $1.75.
1976 1970 Grange: $11.25. 1960 vintage: $25 (increase over 1300 in 10 years).
1986 1955 Grange: $190 (increase of 460 pa). Later than year: $300; signed bottles (by Schubert) : $460.
1990 First Penfolds Red Wine clinics.
1995 1990 Grange released, initially at $125. Magnums later fetch $1500 in Sydney retail outlets. August: Robert Parker says Grange has replaced Chateau Petrus as ‘the world’s most exotic and concentrated wine’. December: 1990 Grange is the Wine Spectator’s Wine of the Year. Set of Grange collects $41,300 including charges.
1996 1991 released around $140. Price shoots to over $300 within weeks. 1990 vintage: $400 (increase of over 300 pa). Unsigned anonymous Grange set collects $38,940 including charges, while immaculate set in presentation cabinet signed by Max Schubert collects $82,600 including charges.
1997 ???
Some figures from Max Schubert, Winemaker, by Huon Hooke.

The 1991 Grange – Is it worth $400?
Penfolds only made 6,200 dozen bottles of 1991 Grange,
less than the usual 8,000 -10,000 dozen. 30 has been sold overseas; the remaining 70 in Australia. Southcorp has none left for sale.

It is a good Grange, but not a great one. It is not as sophisticated a wine as the 1990, being a little porty and noticeably volatile. Very ripe, with seasoned American oak influence it has densely packed fruit, a smooth texture and very fine tannins.

I have scored it in masked tastings on two occasions: once at 17.7 and once at 16.0, when its volatility was especially evident.
It is certainly a long-term wine.

Who is winning and losing with Grange?
Winners:
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