Improving the Quality-Price Ratio (QPR)

QPR, in its simplest form, is a great concept but if you consider it even slightly, it quickly falls apart. It is clear that it's an inferior measure of wine value.

Consider an 85-point wine selling for $11 (whose QPR is 85/11 = 7.7) and an 91 point wine selling for $17 (QPR = 5.3). Does anybody really think that the $11 bottle is a 45% better value simply because it has a 45% higher QPR? Nope; in fact, the $17 bottle is likely the better value.

Clearly, something is wrong with QPR.

So I've been reading about different ideas regarding improving the QPR calculation. I borrowed one part of a solution offered by Robert Dwyer in this blog post: He notes that wine value increases exponentially as they rise through the 90-100 point range, and that makes a lot of sense to me, as the scores lie along a bell curve of distribution, so a 99 pointer is much, much rarer (and more valuable) than a 93 pointer (assuming that there is agreement on those two scores for two different wines).

I don't care for the proposed formula that Mr. Dwyer offers, but I borrowed one element from his article: I used the following factors as "weighting factors" to multiply by a wine's score:

90 points: 1.0 x (no effect on quality)
93 points: 2x
96 points: 4x
99 points: 8x

To take a couple of real-life examples: 2010 Chat Leoville Las Cases has average professional score of 98.3, so its QPR is: 98.3 x 7.3 weighting factor / $340 = 2.11.

A 2013 Lafite has average score of 93.5, so its QPR is 93.5 x 2.4 weighting factor / $480 = 0.47.

96-98 point 2013 Mouton at $360 (higher score and lower price) was hardly better, with a score of just 0.65. 

But 2013 Montrose (from a poor year, but it gets a great average score of 94 and the price is right at $90) gets the highest Bordeaux score in my 20-wine sample: 2.61. 

If you are choosing between the first two wines for investment purposes, the Leoville Las Cases (a Super Second Growth) looks like the far better choice. The Lafite might appreciate more, on a percentage basis, over time, but it has a higher starting price to overcome, so I expect its ROR to be less than the LLC, over time. We shall see.

I'm not sure if this revised method is close to accurate, but I think it's a huge improvement over regular QPR. I just used it to make a wine purchase.

What does this tell us? I think it suggests that First Growths on the market today are overpriced for the wine quality they bring. That's not shocking, but the corollary is a bit shocking: If you invest in the Super Second Growths (Pichon Lalande, Montrose, Leoville Las Cases, and a few others), you might do better over time than with the Firsts. Particularly in an off year where the prices are down but your target wine gets great scores. 

I think that, twenty years from now, people won't look at my 2013s and think, "oh, no! those are from a poor year." I think they will see the wine's age and its high scores, and buy those bottles. As I say, time will tell. Collecting Bordeaux is a Great Experiment. 

In a great year, the First Growths have CRAZY prices, and, via my revised QPR calculation, pretty lousy QPR, So I think my days of buying First Growths may be over. 

Life is all about finding, and exploiting, value. Let others overpay for wine; it is the easiest thing; any idiot can do it. Finding the best wines at the lowest cost--now there is a trick.


QPR

Scary news: Duckhorn is planting a vineyard in our precious Red Mountain (WA) AVA

In my humble opinion about this news, I hope Duckhorn doesn't screw this up. Every time I've had Duckhorn's CA wines, I've disliked them, and they are certainly not worth anywhere near their exorbitant prices. I view Duckhorn as a winery which screws over ignorant consumers with low quality and high prices, covered with an unfortunately-opaque marketing gloss. The wine world would be better off without them. So it was with not a little trepidation that I read that Duckhorn is horning in on one of America's best winegrape sites: Red Mountain AVA (near Benton City WA). It would be great if such fantastic land could be saved for winemakers and winery owners who know how to make good wine and are willing to sell it for a fair price.

Holding my breath . . .

Hail Bordeaux!

Acck.
On the heels of torrential hail damage in recent years, another mega-hailstorm has destroyed thousands of grape acres in Bordeaux.

Acck.

Bordeaux Futures - a bad deal?

This article asserts that a consumer who had bought Bordeaux futures in 2009, and sold them five years later, would have lost money. A lot of money.

While some are claiming that wine is a wasting asset and is always a bad investment, as always there are many complicating factors.

It's true that successfully investing in wine is very difficult. Here is a quick list of just some of the things that can go wrong if you try to make money by buying, holding, then someday selling fine wines:

1. You picked the wrong wines: either the market isn't interested in them later, or the wines didn't age well.
2. You chose the wrong vintage.
3. You stored the wines incorrectly.
4. The wines were stolen.
5. Your willpower is weak, and you drank the wines.
6. You couldn't find the right buyer or the right forum for resale.
7. You got divorced and your spouse took the wines.
8, Your friends or kids drank the wines.
9. You finally made money when you sold your wines, but you could have made more money if you had invested in something else.
10. The wines you bought were counterfeit.
11. The buyer you chose was a crook.
12. The wines were damaged when they were sent to you.
13. While in storage, some bottles were broken, or their labels were stained by other bottles that leaked.
14. You didn't hold the wines long enough.

However, if you choose the right wines (and First-Growth Bordeaux from a great year is always a good choice), and if you have superb storage and willpower, and can wait long enough, I still think that collectible wine is a worthwhile investment. Those bottles can improve for decades, and they become rarer over time as their brethren are consumed; this can provide a happy confluence of factors leading to higher prices for your wines.

Highest corkage fee in the world

Well, SOMEONE has to have the highest corkage fee in the world. It may as well be the French Laundry in Napa CA.

For only $150 they will extract the cork from your bottle of wine. Hell, I don't even let the restaurant pour the wine--it's just the tax we pay to be allowed the privilege of bringing our own wine to the restaurant.

Most restaurants pour only "baby" wines--they rob the cradle by buying and pouring wines that aren't even ready to drink yet. By the wine could have matured, it was already opened and poured for somebody. This is perhaps the greatest disappointment of the American Restaurant Experience. A few restaurants, such as Bern's Steakhouse in Tampa FL, have extensive wine cellars (OK, at Bern's it can't be underground, so it's a series of refrigerated warehouses), but those are more and more the exception.

It remains the best and cheapest way to have great wines for your dinner, to buy your own wine, age it for years in your own cellar, and take your bottle to the restaurant and pay a corkage fee. Why waste your money paying double or triple the wine's value, for a wine so young that you'll regret drinking it? Take your own bottle instead!

And never never never let the restaurant pour your bottle at your table. Tell them, right at the uncorking, that you will be handling the pouring. This is because the server doesn't know who wants how much wine, and indiscriminate pouring by the server will waste your wine into glasses where it won't be drunk.

Hooray for Olympic Provisions!

We had a stellar meal again there. With a fantastic wine. 2006 Cayuse En Chamberlain Syrah. The wine's bouquet faded after ten minutes, but at the outset it was amazing: forest floor, flowers, mushrooms, some pepper and lots of meat fat. What a nose! The wine was big and purply on the palate. Delicious. Had it with the French Board (wow) and a nettle pesto pasta. Amazing!

Check this out: A map showing areas of the world that will lose, and gain, the ability to grow quality winegrapes

This map shows scientists' best guess of the effects of climate change upon the world's winegrape regions.

Note that Tri Cities, Red Mountain, and Walla Walla will see loss of vineyard acreage due to the increasing heat. Ditto for the areas south of the Great Lakes. The Willamette Valley gains the ability to grow more kinds of winegrapes. Bordeaux and Napa are huge losers, as are much of Italy and Spain. This is why growers in Champagne are planting in southern England. Yes, southern England. It's a game-changer, folks.

The article is here.