Expert: Michael Doerr – The bull case for wine & whiskey | OENO Future

Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing. Whether you're an absolute beginner or approaching Warren Buffett's status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy, Ren.

Alec: [00:00:29] How you going? I'm very good, Bryce. I'm very excited for this episode. We love the fact that we're in a position where we can have experts in the studio to teach us about investment opportunities and asset classes that we haven't even thought of before. And this is going to be one of those episodes. We're talking all things wine and whisky.

Bryce: [00:00:47] It is our pleasure to welcome Michael Doerr to the studio. Michael, welcome.

Michael: [00:00:51] Thank you very much. Pleasure to be here.

Bryce: [00:00:52] So Michael is the co-founder and CEO of OENO Group, an investment firm that specialises in investing in luxury assets like wine and whisky. He's recently been awarded the number one wine investment advisor, according to the prestigious Spear's magazine. When I recently won the best global wine investment firm at the 2002 International Investor Awards, while Michael won wine investment CEO of the Year. So there is no one better to join us to speak about investing in this alternative asset class than Michael. And the good news is Ren as well. He'll be joining us at Fin Fest because when our a major sponsor. So we can't wait for that as well.

Alec: [00:01:29] So if you've listened to this episode and you got follow up questions, find Michael on the day and ask him all the hard questions. Yeah. But Michael, we love to start these interviews by asking people the story of their first investment, and we want to put a bit of a twist on it for you today. We're talking wine and whisky investments. Can you take us back? Do you remember your first wine or whisky investment?

Michael: [00:01:49] My first wine or whisky investment, I do. And actually was Australian wine.

Alec: [00:01:52] Oh, great.

Michael: [00:01:53] Two hands. And if you tried it for a bit, it's an amazing vineyard. It's an amazing wine. Not super expensive. I think it's about £50 a bottle. Very limited supply. I think they're producing something around 3 to 5000 bottles a year. It was over in the UK, so I think it must have only imported maybe a thousand bottles in England. It's a great price point, right? £50 bottle is a much larger market than, say, Penfolds Grange, which is release £1,000 bottle. You know, the amount of people drinking £50 is much, much higher than someone drinking £1,000 a bottle. So that was my first case of wine investment. Red wine?

Alec: [00:02:27] Yeah. How's it going? As an investment?

Michael: [00:02:29] Yeah. Really good. Really good. Yeah, absolutely. Yeah. Well, I hope. I hope so. Yeah. If it didn't go well. I wouldn't be sitting here if you guys that I. Yeah, but funny enough, my first investment was a pony when I was 14 years old. That's how I got into this industry. When I was 12, I worked in a stables, just sweeping floors and, you know, making horses. And I think that and learnt to ride and I bought a pony for £50 back from was 14 and then trained it for the summer, then sold it for I think £350. And then I didn't just start to replicate that model take on a very similar business model to most luxury assets. Right? You take something undervalued and you then manage it in a certain way and then you sell it on later day. I did exactly that same business model and that's what we geared me up and it got me into to wine and whisky. A lot of my collectors or buyers of horses at the time would bring me over to the house and show me this amazing wine collection of whisky collection. And then I just became obsessed with this, this concept. And that's how I got into the whisky and wine history about 20, 21 years old.

Bryce: [00:03:29] Well, it's certainly not an asset class that we've spoken a lot about on the show. We're very much focused on equities here and but as Ryan said in the intro, love understanding more about alternative investment opportunities. So convince us why wine? What's the investment case?

Michael: [00:03:44] Okay, so the unique point about wine and why I became obsessed with these two asset class is because they're they're consumable. So you look at any other asset class out there and especially luxury assets, fine are classic cars. There's always going to be. Let's say you're buying a Aston Martin DB5. Yeah. For me, one of the greatest cars ever made. But there's, say, 100, 200 in the world. There's probably always going to be 100 or 200 left in the world. Right. But we've wine, whisky. I've kind of obsessed with this concept. Well, if I could buy in young and hold that long enough till it gets to a drinkable window forever, that's five, ten years, whatever it is. As long as I find the consumer, I've got a happy investor who's made good profit, and then I've got someone who's enjoyed a bottle of whisky or a bottle of wine. My friends and family have paid a good price. Everyone's happy. So I came out of this kind of natural lifecycle that wine and whisky has, that no other asset class has. And that's what I focus a business model on. So that's why I start to build a wine, I thought to just be obsessed with this this concept of this natural lifecycle of wine and whisky. And and it's the good thing about wine and whisky is it's not I'm not really I'm not a harvest guy, you know, I'm not looking to, you know, double my money overnight. I've never like the because that also means you're risking all your money overnight, right? I look for long term safe growth and wine and whisky tends to perform, you know, one or 2% every couple of months or so. It's quite a boring investment to watch, but it's a very exciting investment to be involved in. Because you didn't learn about the vineyards and distilleries. But it's not correlated to other markets. So we saw over the PA, especially the last three years, we had Brexit in the United Kingdom, Europe. We then had COVID, and now the war of Russia affecting all of the imports and exports of fine wine, had no effect on wine or whisky market whatsoever. So even with Russia not importing and they imported roughly around a billion, billion pounds worth of wine each year from across the world, stopped overnight. And then a lot my client spokesman said, should we be worried about this? And track record would suggest that, no, you shouldn't. But of course, there's always a hesitation. Well, okay. Well, Russia's not taken in as much fine wine stock. Now, it could mean there's a surplus of our stock. It was just mopped up by China, Germany. Everyone knows about North America. North America dropped their import taxes on European wine so the American consumers start buying as much money as possible from Europe. So it had not single effects, same as COVID. Everyone was drinking. It changed the way people were consuming these products. Right.

Bryce: [00:06:09] I drank more in COVID.

Michael: [00:06:11] Yeah, but people start to drink better as well. You know, they start to say, well, okay, I'm going to, you know, spend some having a takeaway or whatever, not spending, you know, a lot of money on dinner, I'm going to say to have two bottles of wine at £50 each. I'm now going to buy one bottle of wine, £100. And so I actually introduce a lot more consumers into the fine wine market, the fine whisky market, which is great.

Alec: [00:06:32] So, Michael, you said you got into the wine and whisky investment business at 20 or 21. And all I could think then was I was buying a lot of wine at 20 or 21, but it certainly wasn't.

Michael: [00:06:46] Someone told me that someone said they have to night me. Arriving to Australia with a goon sat.

Alec: [00:06:53] Or do you call it green socks?

Michael: [00:06:56] I never had it before.

Alec: [00:06:58] Yeah, of course. And they said about something, hanging it on a pole and swinging it around.

Michael: [00:07:06] I'm yet to do it, that maybe after the podcast we can give it.

Alec: [00:07:09] But unfortunately. Unfortunately, we don't have a clothesline at Fin Fest, otherwise we to. Pass it around. Yeah. But yeah you said at 20 or 21 you started investing and then at some point after that you started OENO. So can you sort of tell us the story of your time in that industry? Yeah, when you started I went over and I guess what you've learnt. Yeah.

Michael: [00:07:30] So I came into the industry and I never thought I would be a CEO or a founder. You know, I was never I left school quite young, never really had that. It may never thought could be, you know, in that position, but it was I got into the industry and I saw how everyone was doing it wrong. You were either a wine merchant selling stock for consumption or selling stock to the trade, or you were this investment company. And I saw every investment company in the market, even the ones that have been run in ten or 15 years at the time that were just geared up for selling the stock and didn't really think about the consumers. And for me, the investment is still tied to consumers. Although all our collective investors are buying for financial profit, you still need to find the consumers. Otherwise you've just got this stock held by the company. If you can't find the consumer, how are you going to exit the market for your clients and no one? Even to this day, there are very few companies, if any at all, which have this business model. So I just said, you know, there's gap the market here. I don't believe anyone in the industry is doing this the right way. And so I said even though I was 20, I think 25 at the time were 24 at the time. I was like, you know, I need to build I need to build this company myself. So we then start to fund this company with a business model, with always the idea that we're going to build this for the investment collectors. But we need to also have an arm which deals with consumers and deals with trade. So that's what you see over way. Now at the moment, you see we've got all four coal companies right up the arms. You've got a winner trade, which we sell to some of the highest restaurant chains, hacker hexane group. For example, here in the UK we work with some of the biggest restaurants and hotels over there. We then have a wine house which is our merchant, almost like the window into the company where the way I saw is companies nowadays are trying to be as virtual, you know, virtual as possible. They're trying to be all online and save costs. But I wanted to be as transparent as possible because we're dealing with physical assets. I want to have a space where people can come by, see the red bottles and open them and consume them. They want to. So we've got a beautiful four storey building in in Royal Exchange, which is right in the city of London. And we got a lovely outside terrace. It's busy every night and it's lovely to go there and see because property is split 50% client owned stock of my investors and 50% of my, my own sort of company stock. So it's nice to go there in the evenings and watch someone open a bottle of Dom Perignon and you know, you're invested all that three years ago they've made, you know, 50% growth on it. And now are consumers enjoying a during a nice after after night kind of, you know, glass of champagne and you just see the circle work is a natural cycle it's lovely to say. And now we've now opened the Australian Fund, you know, that's where we work with two great partners, Max on Charles Chardonnay, who I talked to the fund and they're investors in the company. They found us somehow. And I got very close, good friends of mine now. And they said, Are you in Australia? I said Well we have a lot of Australian clients because there's, there's very few people which the investors around the world can go to. For example, you guys over here in Australia don't have wine or whisky investment companies get up, right? And if you have got them over here, you're pretty much locked into only the Australian market. Whereas because I'm in London and the reason we base ourselves in London only have our head offices in London is because it's a central hub in the world for trading wine and whisky. We can keep all the stock under bond so no VAT and tax to pay. And then we can ship out to these markets across across the globe, no problem. Whereas if you're in Australia, you've got pay the import taxes you get with the duty and then it's tough to then sell to China or sell to North America or the rest of Europe because you've got all these costs involved, whereas in London. COSTELLO We've got kind of in tie markets there and we can easily sell, sell from there. So the guys countries said, well, let's, let's, let's go for the Australian market, let's attack it with a, with a fund. And that way we can control the stock ourselves, we can manage the stock fully ourselves, we can take the headache, we control the storage or the insurance or the worry that goes behind something like wine, because there's so many questions of, well, where's it stored and what happens if a bottle breaks and how do I know the stocks there? You know, these obvious, obvious and good questions that investors have. So we take care of everything. We make sure it's stored in third party storage warehouses so not even we can touch it. We make sure it's fully insured at market price at all times because sometimes a bottle will break. It's just natural to make sure we're fully sure that market price at all times. And we make sure that the wine whisky stored in the perfect temperature, lighting, humidity, everything, because that then on the exit, all these restaurants and consumers will ask, okay, you've got this ten year old Penfolds Grange. Where's it been kept for the past ten years? How do I know it's of good quality? If we can say it's gone straight from the vineyards at Penfolds, if it was Australia straight to us in storage warehouse has been kept perfectly ever since. They go perfect you know that's going to be good stock and I'm happy to pay market price an above.

Bryce: [00:12:08] How would you describe the investment philosophy it went on. We'll get into a bit later. I guess what makes a good investment when it comes to wine and some of the factors that you look for, but what's like the guiding philosophy behind it?

Michael: [00:12:20] We we tend to. For us, it's about showing profits but making sure clients money's safe. So, again, as I said before, yes, it's important for us to show our returns for clients. And on average, we showed between 11 and 15 spot eight 7% growth each year. But it's also about where where my clients money's safe, you know, so we tend to diversify portfolios across different regions. Most of our wine or whisky companies look at one region, the guy, okay, we're only going invest in Macallan Brand to invest in Bordeaux. And for me that's crazy because any other investment philosophy is usually diversified, right? It's usually number one rule for safely investing. So we diversify our clients funds across wines from California, Napa Valley. We diversified South Australia. We have wines from Rocca, Burgundy, Champagne, Bordeaux with whisky. We look, yes, scotch. But we also look at bourbon. We look at Irish whisky, new make Japanese whisky. And that way then even if Bordeaux has a bad year or, you know, Irish has a bad year, Irish whisky, you know, you've still got access to the other markets. You know that the portfolio is not going to take a big hit and that so far has worked very well for us to kind of play it safely.

Alec: [00:13:30] So on that point around, diversification, whisky and wine, are there other alcohols that hold their value like I assume tequila? Yeah. Yeah.

Michael: [00:13:40] I've I've been approached several times about buying tequila casks and yes, it's a good investment, but it's a very niche market and it's not quite big enough for me to take it seriously and go, okay, you know, we can buy enough tequila costs for my clients and then, you know, bottle it and sell out. And it's still not I think in the next five, ten years it'll be interesting, but especially over in London or in Europe, people aren't drinking tequila properly yet. People still see it as a shop.

Alec: [00:14:06] Yeah, exactly.

Michael: [00:14:09] Well, like a scotch. You have a nice glass. You should sip it. You know, you shouldn't be. You shouldn't really shot it. But everyone likes to. You have a good tequila, you can see it, but if you have a cheap one, then you put it. You want to shot it.

Alec: [00:14:18] But what about like a gin?

Alec: [00:14:20] Because I don't know if it's the same in the UK, but the last five years in Australia gin this country.

Michael: [00:14:26] It has. Yeah but it's just, it's, you know, you can make gin so easy it doesn't really need much ageing supply. You know, these, the, these gin, gin factories that they can produce like 10 million bottles.

Alec: [00:14:37] Yeah, right. Okay.

Michael: [00:14:38] So supply and demand doesn't quite work. You can't remember that the reason why the whisky goes in value is supply and demand. If you've got a vineyard that can produce Burgundy, kind of, you say a thousand bottles, that's a thousand bottles that can only go to a global market. And then as those bottles are consumed, it's rare to find it. Price goes up. And of course as the wine from maybe the wine still maturing in the bottles, whereas something like whisky or gene tequila, it doesn't age when it's bottled only ages in the cask. So the liquid is not changing, whereas wine it will mature. In a Bordeaux, for example, a top Bordeaux needs 15, 20 years age and you know. Even Penfolds Grange. Although you guys drink Penfolds Grange relatively young in Europe, we like our wine to be aged, right? So we need that ten, 15, 20 years of maturation. So start consuming it.

Bryce: [00:15:25] Maybe a dumb question, but why has beer never had the same sort of appraisal? Well, I don't know, does it?

Alec: [00:15:32] Well, it's not so.

Michael: [00:15:34] Rare because basically.

Bryce: [00:15:35] A vineyard here could vineyard a white guy could.

Alec: [00:15:38] Produce. Oh, we've got to produce them.

Michael: [00:15:43] And there's a gap in the market. Maybe it is.

Alec: [00:15:45] But it.

Michael: [00:15:47] Wouldn't. You know, it doesn't have that, number one, it's not really seen as a prestigious drink because it seems, you know, everyone just has a pint of beer or a I alone learnt you guys have a is it Schmitty or skinny or tuna.

Alec: [00:16:01] Yeah. Sorry.

Michael: [00:16:03] Some of the publicists ask me for a schooner. I had no idea what he meant. Yeah.

Alec: [00:16:06] Yeah.

Michael: [00:16:08] But yeah, it's yeah, it doesn't, doesn't change once it's bottled or you know, and that supply and demand, you know, the reason you have a vintage of wine because every vintage is different, is affected by how much light is hit, you know, how much water, how much rain, you know, each vintage. I can give you a pretty of some bottles taste at the at the seminars at the exchange. But the vintage of say, 2015, 2016, you taste a difference and then you go back to 2005. You taste difference, you know it. Beer. If you have a Peroni here, a Peroni back in London. Yeah. It's gonna be the same. Yeah. From ten years time. It still takes the same. Sure. Yeah, yeah. So there's not really that much keep.

Bryce: [00:16:46] No gap in the market.

Alec: [00:16:46] Now you go to the market to try and want to give it to you guys.

Alec: [00:16:51] So I'm fascinated by this idea of a depreciating supply because I never really thought of that. When you talking about the Top End wines, you know, the I was about to start listing examples and I realised I didn't really know any examples. But you know, you, Penfolds Grange or whatever it is, or even more premium than top up people, like what percentage of them are actually being drunk? Like I would assume my assumption coming into this is that they just sit in store.

Michael: [00:17:18] No, no, no. Never know. They've been consumed. The whole market is based off consumers. Yeah. And okay, you say £5,000 is expensive bottle of wine to consume. But how many multi-millionaires billionaires earlier on the planet that happy to consume this every day? Yeah. A friend of mine was in the Maldives. Charles was. Tell me a story. That was Charles or Max 1080 story there in the Maldives a couple years back. And a guy came to the restaurant and this is a random atoll in the Maldives and just bought six seats. They really is one of the rarest wines on the planet. It's probably about £26,000 a bottle. And he's had 60 dinner. Well, you know, so these guys and girls that do make serious money, yeah, there's a huge market for it. They consume it and they're not even going to be a billionaire or worth, you know, 200 million before if you got a big income, you've got the house, you got the car, you've got everything else. What you wanna spend your money on, you sit down to dinner, you have a good glass of wine, and then naturally you have a better glass of wine and then you have a better bottle of wine. And then yet, you know, and it always builds up and builds up. So, you know, it's screaming. Ego is a very famous video of Napa Valley. They produce something like 3000 bottles a year and you have to be on a waiting list to get it. And the waiting list is like 100,000 people long. So they're just like, I've got the thousand bottles is gone and they just let you know which ones to take. And if you don't take it, you're off a list. So people would just queue up to get this and spend half hours and pounds a bottle. Secondary market, £70.

Alec: [00:18:41] That's what we need. We need a brewery with a waiting list.

Alec: [00:18:43] Yes, trade secrets.

Bryce: [00:18:46] But as an investment adviser, if you're looking at it from an investment point of view, if someone walks in and says, I want those six bottle of wines or that the winner building in London, I want the six to consume. There's obviously an investor on the other end of that transaction. When do you draw the line between, hang on, hang on, those six bottles could be worth another £26,000 in five years. Verse, this guy wants to consume it.

Michael: [00:19:08] Yeah, it's it's actually down to the investor. So although we managed the stock for all of our investors, it's down to them. They may because some people don't want to hold their money for 20 years. They might just say, listen, I'm happy to hold for three or four years. And if a consumer comes along, you know, and offered me a good price, are happy to sell out and buy another vintage. If you hold wine too long, you will get. So when a wines release bought out, for example, all the experts will taste is wine on release of 20 they say 2020 vintage a tasting and say I believe this wine is going to be in its consumable peak, 2035 to 2045, a ten year window. So you want to try and aim. Okay. I know if I can sell it over that that window, I'll probably get, you know, the top price for it as it goes past that window. It doesn't just suddenly go off, but it starts to come down a bit and produce for the next ten, 15, 20 years. It's still drinkable, but it's coming down. The price will come down. It's getting too old now and then. It will get so old that it's undrinkable, you know. But there are some you know, there's some legendary even vintages in Grange, 1950s and 1940s are still drinkable now. Well, you know, so they can have an incredible lifespan by going outside my vest. As long as you can hold the stock, the better it is. But if an investor, if a consumer comes to you and purchased stock with you and you've made, you know, 40% on in three, three years, take it. You know, we just buy another by another asset. We're just moving to the next vintage.

Alec: [00:20:34] I'm just thinking, if I was an investor and I had like a $100,000 bottle of wine or whatever it was, I would be so tempted not to sell it because I would want I wouldn't want someone else to drink it. Yeah, I held it for 20 years.

Alec: [00:20:45] I want a drink. Oh, yeah.

Michael: [00:20:47] I would say to all my investors when they come on board, you know, you're buying this stock to make financial profit, right? Treat it like any other investment. Now, if you want to start collecting, want to consume, that's a different conversation or have a different on the company. But treat this like any other investment. Because the old way of of wine investing, which I hated, was, well, you buy three. First of all, only buy what you like, because then if you don't make any money, you can drink it. What a terrible ethos for any investment. You know, there's no investment. The world you go into and go, Well, I hope you'll make money, but maybe not, but at least I can live in the flat. Or at least, you know, I can hang my share certificate in the wall. You know, you treat this like an investment. Okay? I am investing 100,000. I expect to get 200,000 out the next ten years. Simple as that. Doesn't matter what one is where the experts were selected for you. Treat it like any other investment. You're there to make money.

Bryce: [00:21:33] Yeah. So Alec and I were standing in a bottle shop wondering what makes a good investment and what are some of the characters?

Alec: [00:21:40] Probably the first thing is it's not in the bottle shop. You never know. That's perfectly fine. Find.

Bryce: [00:21:46] What are some of the key factors that you look for in a bottle of wine when you're when you're speaking to clients?

Michael: [00:21:50] Okay. So we're we've got an amazing wine team which write most of their portfolios and select the wines. But we have to look for, first of all, brand recognition. You know, are they known? Are they known all over the planet? Penfolds Grange. Again, you'll find one here. You're going to find that in Brisbane. And you're going to find in Singapore. You're going to find it in Sao Paolo. You can find it a lot of you'll find it every major city in the world. Right. And the reason for that is, let's say, for example, Pavel Grange is only consumed. It's only known in Australia if you guys go into recession and suddenly there's less people consuming that wine, suddenly then the investments are going to drop. But if you've got going to recession now, Pavel Grange will keep that up and value it because Chinese drink in North America is drinking. You know, South America's drinking it, Europe drinking it. So there's still consumers across the planet. So first we look at that for a safety point of view. Again, Russia is a prime example, as I mentioned earlier, you know, they don't consume it, but it does make a difference. The markets around the world are. So it must have a global recognition global brand. Right. Must have limited supply. So even grains, they they produce a lot of bottles. But it must have a limited supply. It must be we must know that they can't produce, you know, millions and millions of bottles each year, because then you're waiting a very long time for that stock to be consumed. And by next year, there's another million bottles out there. And the year after that, we make sure that there's a there's a small supply and a very strong demand. And then third point is just a basics, a track record. We need to look back at the past 50 years of vintages and how have they performed to the market? Have they been going up in value each and every single year? If not, why is that happened? So those three factors usually keep us keep us safe.

Alec: [00:23:21] It feels like it would be really hard for new winemakers to break in on that, like the three criteria that you know around brand and then also around having a track record. It's like if Bryce and I tried to start a vineyard tomorrow, it's like, how do.

Alec: [00:23:34] You how do you do that now? You wouldn't need a.

Bryce: [00:23:37] Holiday to get a hundred.

Alec: [00:23:39] Yeah. Is it Hallyday the his.

Bryce: [00:23:42] I think it is. He's an Australian or he's he's just like this revered wine connoisseur guy who always just brings out a book and writes wines. And your wine is like a 96 out of 100. He just automatically looks.

Alec: [00:23:55] Like a michelin guide.

Michael: [00:23:56] Yeah, they give points of 100 points and say it's a great one and all. And we don't tend to look at scores that much.

Alec: [00:24:02] Okay.

Michael: [00:24:03] It's a good it's a good idea, but we don't tend to because sometimes, you know, the critics will score 100 points. So it's the essays. It's a perfect wine. It's great wine prices will shoot up and clients can make money. But, you know, a lot these wines need ageing and maybe not many people consuming those wines for a long time, whereas the there the vintages that maybe score 90 to 93 points still bloody good wines from great vineyards, but they're cheaper. So actually the market for consumer is much bigger, they're ready to consume faster. So you see the price increase fast in the wood on the 100 points Graham Wines by point, the great investments for some performer for a short term, some of the.

Alec: [00:24:39] Long term ROI and.

Alec: [00:24:41] Bunch of different assets.

Alec: [00:24:42] Yeah, yeah.

Alec: [00:24:43] One thing you know, Bryce said you standing in the bottle shop and I made the joke that you're probably not finding that investment in the bottle shop. But, you know, you said at the start your first wine investment was a £50 bottle. Yeah. So I guess you probably could pick up some investments off of Dom Perignon. Well, Dom Perignon to an investment grade wine.

Michael: [00:25:01] Have you guys have you guys drunk. Dom Perignon before.

Alec: [00:25:04] Yeah. You have. The champagne. Yeah. Yes.

Michael: [00:25:06] People have had at least one glass dom pair on some point in the life celebration, right. Yeah. No, nobody realises it got. It's often price. So usually when the stock's released in the market and I go through this a couple of my presentations because so many people know the brand and they think, Oh, well, who's going to drink? This one is like you have drunk on wine before you have drunk investment by one point you don't realise. But they release the stock in the market in 2008, which was released about three years ago, was released in the market around 1200 pound for a case. Right. If you think about it, we've done pairing on that released with the stock. It's already matured. Yes, they released the Great Back 3 to 2000, 18,019. We're already very mature, ready to consume. It's purchased by all the restaurants, all consumers, all merchants, by myself or my investors. And champagnes had to be uncorked and consumed. And then over the next two or three years, there's no right in the market. Okay? It's a great vintage. I then release my client stock back into the market to the trade. And the price went up about 136% in three years was yeah. And sold to the client and then you sell to the trade, you sell to other merchants who maybe only had ten cases and I sold out and I go, actually a lot of my clients would love I. Right. Tom Brown Yeah. A buyer of.

Bryce: [00:26:14] You and you think you can't get it in a in a bottle shop.

Alec: [00:26:17] Well you can.

Bryce: [00:26:19] I remember three or four years ago, Dan Murphy's in Double Bay and this year I've just looked at them as well. Dan Murphy's down in Melbourne, both sold a set of Penfolds Grange for $400,000.

Alec: [00:26:31] Yeah, well.

Bryce: [00:26:32] To a retailer. Yeah, just. Just your average guy walking in, getting $400,000.

Michael: [00:26:37] Somebody thought Thirsty had a barbecue and said.

Alec: [00:26:41] Yeah, well, I think.

Bryce: [00:26:42] The 400,000 in Melbourne is a wine collector, but the 300,000 at Double Bay a few years ago when I still working at Woollies, they said it was for their Christmas.

Alec: [00:27:00] So Michael, we were looking through your presentation for Fin first and a number caught my eye. There's a $3 billion market for fraudulent wines. Which in some it surprised me, but it probably shouldn't have, you know, like any investment industry with us this much money, there's going to be fraud. And I guess that's where you and your team play a key role in making sure the wine is, you know, true to label. Can you tell us about this? I guess this market. Fraud and you know price I standing the bottle shop how do we avoid getting buying those frauds.

Michael: [00:27:34] Was tough for you guys in the bottle shops you stand a chance you hope that the bottle shop have done their due diligence and know who they're buying from. So we try as much as possible. Go director source. We go to the vineyard. Then we know the stocks come from the vineyard straight to us in storage. Okay, fine. But some stocks so rare you have to buy on the secondary market. So we have to make sure that we we set up a part of the company where actually the only wine merchant wine investment company on the planet, which has an anti-fraud department in-house. Oh, well. And so each bottle that comes in on the secondary market goes for a 68 point check. And we check through the cork capsule, we go for the label. There's this special technique, everything. One of them special techniques to take a look at the label, make sure that it is the correct labels, not just a printed random label. So the vineyards will put something secret hidden inside each label of a special light, whatever to check. So it goes through this whole this whole list of things to check that stocks. Correct. And then it gets a sticker from us like the secret hologram sticker. So it's approved and it's verified by us. And then we we make sure that we cover that. So even if we got it wrong, we let one slip for the net. We say to our clients, Even if you found out in ten years this was a fake bottle, we'll cover it market price, because clients look to us, you know, they're not the experts. They come to us, we're the experts. So we have to stand up for what we believe in and put money where my office and go, okay, this is what we do, so I'm going to guarantee it for you. So we guarantee you all of our stock that we sell to clients. Oh, time.

Bryce: [00:28:55] So outside of an in-house fraud team, if, you know, if it's as easy as going to Dan Murphy's to get a set of Grange, what do you offer to to clients otherwise?

Michael: [00:29:05] Yeah, I think the reason that my company exists is because this market you can't do by yourself. It used to be that, you know, very wealthy individuals would have a collection at home and then they would they would go to sell it. And I'd make my coffee and I go, wow, you know, these wines are quite fun value, but as an individual, where are you going to sell the stock? Okay. Auctions is your only chance, right? And auctions charge a big premium. And most people now go to auctions to get discount on on wine and whisky, not to pay market price. An above auctions where you go to Christie's Sotheby's was on points where you go to buy stock under market price also. So it comes down to the storage, you know, it comes down to provenance. If you've held you've got profile at home, you've held the stock, you can't go to a restaurant and say, listen, I've got this great. It could be the rarest collection in the world. You can't go to a restaurant to say, would you buy the stock for me? They don't know who you are. How have you kept the stock? Have you kept an X the window next to a radiator? You know, there's all these questions to to ask and I relate it back to if you're collecting art gave you that's how you collect only Warhols you can go on eBay and find an Andy Warhol for sale at half the price. Would you risk buying the Andy Warhol for your collection? Absolutely not. Chances are God. I swear it's been is even real. So for us, it's about making sure our clients are fully safe and offering them the trade arm to excel at the market so they can go straight to the the restaurants and the hotels and sell the stock and then having the consumer arm as well, the merchant shops, they can go direct to consumer because that's where going to see the biggest, biggest price chunk is DART to consumers. Right. That's when you pay the highest, highest price. If you go to, let's say Dan Murphy's took your stock on, then it will pay you market price for it because then how are they going to make their money? They're going to offer you 40% below market so they can make their margin. Right? They have overheads. So it is a market where you need to go through, you know, a merchant company like ours because it's just there are it's a minefield. There are ways it can go wrong. Plus, how do you know how long to store it? When do I sell out? How do I get offers for it? There's all these things. Part of it, you know, that that that you know that an individual individual can't do on their own. And that's where people have gone wrong in the past. They've tried to do by themselves. And it's just not one of those markets to do in your own home.

Alec: [00:31:09] I guess the other question that comes to mind, so in the investing world, there's often, you know, talk about gold and do you invest in gold, the asset or the miners behind gold when it comes to like wine or whisky? How do you think about investing in the wine or the whisky compared to the vineyards or the distillers?

Michael: [00:31:27] Yeah, most vineyards don't actually make a huge profit, if you think about it, you know, because if you look at land in, let's say, Napa Valley, you buy a vineyard for 50 million, you know, 100 million. And then the overhead costs of having the superstar winemaker there, then all the bottles and you only producing 5000 bottles or whatever it is, it's really not a business that you make a ton of money in themselves. You tend to find now that most vineyards are owned by super wealthy individuals and it's a passion hobby, like owning a football football club or something like that. Right. You know, it's a.

Michael: [00:32:03] But but you make more money and it's more interesting to just buy into the stock and a lot safer.

Bryce: [00:32:08] So, Michael, we are fascinated by the idea of what matters and what doesn't matter in particular industries. You know, in retail we talk about same store sales, sales per square foot when it comes to putting our investor hat on and thinking about investing in wine and other sort of metrics that we should be focusing on or sort of factors that we should be thinking about. Or conversely, what doesn't matter when it comes to what is said about the wine industry?

Michael: [00:32:35] Yeah, the good thing about the wine and whisky industry is that it's not correlated to other markets. So, you know, again over Brexit, when the pound plummeted and the footsie market dropped, whatever, nothing happened. I think wine actually went up 2% that month, you know, because it's a global market. So most people are worried about their, their industry in their country that hey, you know, the property market's dropped or the stock market's dropped. It doesn't make a difference because everyone over in North America is doing great and they're buying a ton of stock. And so I wouldn't be too worried about other other markets out there. And most people use this investment as a hedge against high risk parts of the portfolio. They have, you know, 1 to 5% of their portfolio in wine and whisky. And it's a safe asset that's not correlates other markets. But interestingly enough, global warming seven affects now because you got think about the yields some these vineyards can make we know for a fact that burgundy for example their yields are down about 80% to about 80% of what they could be. So, you know, okay, this vineyard produces 4000 bottles a year and already supply demand is working in our favour. But over the next four years, they're going to be releasing 3000 bottles. That's going to be work even more in a favour. But it also means I'm going to bite a lot of the older stock because consumers of that particular brand can't get enough of the new stocks and bonds and the older stock to help you then buy all the stock and as much of the new stock as possible. And in other fires in Australia, there's not much, you know, I think 2021 has been amazing, amazing year for Australia. So we know that their stocks can be great, but the fires had a bit of a big effect. Napa Valley, the fires had a huge effect over there. And again, you've got now less of the of the actual asset coming into the market and the demand is just soaring. Strong, strong. So again, the prices are just, you know, last year alone we saw the champagne increase about 40% in one year alone. Well I think it's everyone came out of COVID in celebrating drunk.

Alec: [00:34:28] Yeah, yeah, yeah.

Michael: [00:34:29] So Burgundy went up about 26% last year alone just so I mean, you know it's it's crazy.

Alec: [00:34:33] Speaking of champagne, one thing that you told us before we started recording that I think is worth sharing with the audience was around how actually the wine regions shift as the earth moves. Yeah.

Michael: [00:34:44] Yeah, yeah. Exactly. So coming to that part, so over in England, it's, it's, it's, it's as we call it, sparkling wine, English, sparkling wine, comfort champagne. But that's a huge business now. And the soil that was once under France and under champagne, obviously, as the earth's crust moves, it's now being pushed underneath the chart channel and come in underneath southern part of England. So the concept is, well, actually we can grow the same vines in the same sort of that champagne that we can produce. Just as good stock as champagne has. So, you know, the world is moving in the dynamics. I mean, that won't have effect for another 5000 years. 200 years. But it's interesting to say, okay, well, some of these vineyards have a thousand year plan. Colorado State, very famous. Napa Valley has a thousand year plant. Wow. You know, and I.

Alec: [00:35:30] I remember listening to a podcast maybe five years ago and they were talking about Australian winemakers and how they were sort of on the forefront of climate modelling because they were trying to figure out like where the next good wine regions of Australia will be with climate change. And you know, with this forecast, where going to grow with this forecast, where it'll be good to grow, it would all it made me think was it would be tough being a winemaker like so little margin.

Michael: [00:35:55] Yeah. And you're thinking now well was this the last good year you know, was if my average year was this and now I'm not get as much sunlight or rain or I'm getting an early frost the grapes aren't ripening well enough you know, is my now best year, my average year, one of my low years that used to be back in the 1980s. So that's interesting to think about as well. And a lot actually, most of the vineyards, the guys that have groups of vineyards are looking overseas. They're looking in Chile. They're looking even in India as an interesting place, maybe in the next kind of 50 years for for vineyards, everyone's now just not being focussed on. France is the only place that does good wine. We've expanded so much, you know, Australia makes them the best wines in the world. Spain like some best ones in the world, you know, North America, all these all countries can make incredible wine and we're not so pigheaded consumers anymore to just focus on one region, which is great.

Bryce: [00:36:47] Well, Michael, it's been a really enjoyable conversation. We do have a few questions to get through to close it out. But you are joining us and our major sponsor of Fin Fest this Saturday, the 15th down at Barangaroo. We're super keen. The weather gods are playing in our favour. It looks like it's going to be a beautiful day. Finally, you'll see some sun in Sydney.

Michael: [00:37:04] Goodness it is.

Bryce: [00:37:06] It is undercover though. So don't stress. If it's not, Michael will actually be doing two prises one on wine and one on whisky. And they also have the winner trading floor dome, which will have some tastings for some of the beautiful wines that you've been talking about as well. So plenty happening. If you don't have a ticket, make sure you grab one. There are a handful left this Saturday, 15th of October. Cannot wait. It's going to be an awesome day. So let's close it out. Ren.

Alec: [00:37:31] Yeah, now we like to finish with the same final three questions. We've put a winner twist on all of them to make a wine and whisky focus. But before we do, I want to ask one extra one. Do you have a white whale when it comes to wine or whisky? A bottle of something that you just haven't been able to get your hands on, that you dream of being able to get for yourself or for your investors.

Michael: [00:37:52] I'll tell you the one I have got and the one I couldn't get. Yeah, I really acquired the world's first space aged wine.

Alec: [00:37:58] I got.

Michael: [00:37:59] They sent a case of wine up to space to be age for 14, 30 days. I only released one bottle, so we bought it for $1,000,000.

Alec: [00:38:04] Wow.

Michael: [00:38:05] It's a serious, two serious asset. Yeah. And it comes. It comes with a meteorite corkscrew and so on and so forth. But the one I couldn't get was one of the bottles of champagne that was in the Titanic.

Bryce: [00:38:16] Oh, wow. That's got one.

Michael: [00:38:17] Yeah, there's there's a handful. They've got sort of two collectors. And every now and again, one bottle comes, emerges, and then we have to check. Is it really that bottle I was offered the other day, a collection of Armagnac from supposedly went into Battle of Napoleon? But it's virtually impossible to guarantee that it actually happened. Right? So it looks like it did, but I couldn't guarantee it. So it would never be something that we would take on and sell to another investor. It would be some that we would maybe buy for ourselves, for clients to enjoy and see. Yeah, because we can never guarantee the stock but yeah. Champagne on Titanic we've been trying to get and it's just something, it's the way I haven't quite managed.

Alec: [00:38:52] Wow. Well, I'm thinking now is where to drink it. But yeah, that's.

Michael: [00:38:57] A museum piece, right? In terms of space wine, it's a museum piece will never be consumed. Yeah. And it's something we're trying to build the world's greatest, rarest wine and whisky collection. And that's what we that's what the end goal is, really. And so that is. That would be perfect. Edition.

Alec: [00:39:12] All I'm thinking is one on the Titanic who was like, we should take a case of champagne like it was.

Michael: [00:39:19] On the Titanic. It was all the wealthy were.

Michael: [00:39:22] Rushing off the boat. No, that wasn't it. We saw the dome sunk. With the Titanic. I think it is. It was a murray. It sunk with the Titanic. No way. And then when I dive down and check it out, they found a case or a couple of cases of bottles that still froze and kind of stayed intact.

Michael: [00:39:37] That's amazing. Yeah. Yeah.

Alec: [00:39:38] Okay, we'll keep chasing that one. You know?

Michael: [00:39:41] Yeah, yeah, yeah.

Alec: [00:39:44] Well, with that, we'll move on to the three questions that we like to end the interview with. And the first one is about books. And so for people who have had their interest piqued by, you know, this wine and whisky conversation, are there any must read books or maybe other resources that can help them learn more about this asset class?

Michael: [00:40:02] Sadly enough, the last book written on this was probably done about ten years ago, and it's very dated. It focuses on Bordeaux. So I'm at I'm actually in the process of writing my book I at the them.

Alec: [00:40:12] So the answer is watch this space.

Michael: [00:40:14] And they should be ready somewhere next year. But we a y'know has as a wonderful, quite a big guide on investing in wine and whisky, and that should answer all the questions. Anyone that doesn't want actually directly speak to us to go online and download one of the guides. There should be something on the website to download our guide that should answer all major questions that investors have.

Alec: [00:40:36] Yeah. Nice. Perfect. Next question and maybe I'll jump the gun with the white whale question, but what's the best bottle of wine you've ever come across.

Michael: [00:40:45] That I've ever consumed?

Alec: [00:40:46] Yeah.

Michael: [00:40:47] We did a so we've got a great reputation in the market for, for doing crazy wine tastings. We don't want to be another boring company that does the same wine tasting every year in London, for example, or in any major city in Europe. There's 15 wine tastings a day somewhere, right? So we just tend to do crazy wine tastings with the rarest wines in the world. And we were in Venice over the film festival a few years back, and we did some in front of all Italian. We're one of these companies in Italy now for we do. And so we wanted to put the best of Italy against the best of the rest of the world. And there was a Chateau Margaux 1990, which is you have to guys the first Grove is one of those famous vineyards over in Bordeaux. And 1990 is a legendary vintage. And it was just seeing it. It was incredible. Yeah, it was amazing.

Alec: [00:41:28] How much would that go for on the market?

Michael: [00:41:30] 2 to £3000 of Bordeaux, something like that. So it's not crazy. Crazy expensive. Yeah. It would have been released up probably £50 hundred pound a bottle, you know, back in 95, 96.

Alec: [00:41:42] And so.

Bryce: [00:41:43] £3,000 is still a fair chunk for a.

Alec: [00:41:46] Little more expensive than anything I. Have ever drank and maybe will ever dry. But Michael, final question. If you think back to your younger self, maybe buying the pony at 14 or, you know, buying those early bottles of wine, what advice would you give to your younger self.

Michael: [00:42:04] To not try and fix everything in one day? I used to be incredibly obsessed with, you know, especially when we first are the company are just we've got so much to do. And I should just say every day I'm gonna do as much as I can. And they tend to find that you did everything half heartedly or you put 50% into it, right? Because you were trying to get a million things done. Now, I take the view of as long as I can change one thing a day and do it perfectly, you then look back in a year, two years, and you go, Wow, what a, what a difference I've made. Yeah. So to not stress itself out so much and try to do everything at once.

Bryce: [00:42:35] Good advice. Yeah, yeah, I love that. So Michael, absolute pleasure chatting today. We learnt so much about an industry that we haven't spoken a lot about on the show. My mouth is salivating. Not beer, though. Not for you. I live. We do really appreciate your time and good luck with the launch of the fund. And if anyone's listening and will be at Fine Fest this weekend, Michael and the team will be available to answer all the questions you have. Taste some of the beautiful wines, listen to some of the prices. So thank you very much.

Michael: [00:43:07] Appreciate it. Thanks, guys.

Alec: [00:43:07] Thanks, Michael.