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A Guide to Investing in California

Lucy Shaw, Contributing Writer

1 September 2023

While wine is produced in all 50 US states, California is the engine room of the industry, with the Golden State accounting for 85% of America’s wine production.

Propelling California to global fame in the 1960s was the indomitable figure of Robert Mondavi – the godfather of California wine – who, through dogged determination, boundless energy and a clear vision, was almost single-handedly responsible for putting quality California wines on the map.

Founding his namesake winery in 1966, Mondavi sought to show, through the use of cold fermentation, stainless steel tanks and French oak barrels, that California was capable of producing wines that could rival the best from France; a brazen idea that was emphatically proved a decade later at the Judgement of Paris tasting in 1976, when a pair of California wines from the 1973 vintage – Château Montelena Chardonnay and Stag’s Leap Cabernet Sauvignon – famously beat the likes of Domaine Leflaive Les Pucelles Puligny-Montrachet and Château Mouton Rothschild in a blind tasting put on by Steven Suprrier – then a young English wine merchant living in Pairs – which helped to cement Napa Valley’s global reputation as a fine wine force to be reckoned with.

A brief history…

Vines were first brought to California in the 17th century by Franciscan missionaries. Two centuries later, construction began on a research centre that would become the legendary Davis campus at the University of California, where the great and good of the Golden State’s wine industry have honed their craft.

Vitis Vinifera grapes made their debut in Napa in 1840, and the opening of Charles Krug in 1861 and Inglenook in 1879 drew further attention to the region, but the double whammy of phylloxera and Prohibition had a devastating effect on the California wine industry in the 1920s, when vineyards were ravaged with the vine pest, leading them to be grubbed up and replaced with arable land. It wasn’t until the arrival of Robert Mondavi in the 1960s that the region’s fortunes were revived, and California’s modern winemaking era began in earnest.

Bordeaux Index Robert Mondavi
Robert Mondavi

A tale of many terroirs

California is divided into four regions: the North Coast, Central Coast, Central Valley and the South Coast. With over 900 miles of coastline from San Diego in the south to Crescent City on the northern border with Oregon – including 600 miles of land under vine – California boasts a complex array of latitudes, altitudes, aspects, soil types and microclimates, leading to a diverse mix of wine styles across the state.

The region is home to a number of revered estates making tiny volumes of world-class wines that sell for significant sums both on release and in the secondary market. Part of their appeal lies in the fact that – unlike Bordeaux – California Cabernet can be both approachable in youth, due to its plush, fruit-forward nature and velvety tannins, but also has the ability to age gracefully and improve over time. This early appeal means that the wines often get snapped up on or shortly after release, creating a supply squeeze that reaches fever pitch when the wines hit their optimum drinking windows a few decades down the line.

Bordeaux Index California Fine Wine
The wine regions of California

Napa Valley

The undisputed king of the California wine scene is the Napa Valley, in the north of the state, where Cabernet Sauvignon reigns supreme. Playing key supporting acts in its blends are Cabernet Franc and Merlot, while Chardonnay and Sauvignon Blanc rule the roost when it comes to the whites.

Home to big guns such as Opus One, Harlan and Dominus – more of which later – Napa boasts thousands of producers who make wine from a diverse array of terroirs, including ancient marine deposits and volcanic material, leading to a kaleidoscope of different styles.

Napa springs are cool, while its summers are hot and dry, but the vines benefit from cooling Pacific Ocean breezes that help to even out grape ripening, while fog from San Francisco’s Bay area locks in moisture in the air, stopping the grapes from drying out.

Sonoma County

West of Napa towards the Pacific Ocean, over the Mayacamas Mountains, lies the Sonoma Valley, an hour north of San Francisco, whose vast and varied terrain is home to some of the state’s finest Chardonnay and Pinot Noir.

Boasting 17 American Viticultural Areas (AVAs) stretching across 20 miles, Sonoma is largely divided into the Russian River Valley and Sonoma Coast, where climate and soils are perfect for cultivation of Chardonnay and Pinot. Those from the inland Russian River Valley tend to be richer and riper in style, while the expressions hailing from Sonoma Coast – where it can take until November for grapes to reach full ripeness – are more elegant and restrained.

Pioneering producers – the magnificent seven…

Screaming Eagle

Spearheading the cult California Cabernet movement is Screaming Eagle, whose small production wines are among the most sought after and collectible in the world. Founded in 1986, it wasn’t until 1992 that its debut vintage was released to the surprise acclaim of 99 points from American wine critic Robert Parker, who dubbed it “one of the greatest young Cabernets” he’d ever tasted. Parker’s praise helped to seal Screaming Eagle’s reputation, leading to a rapid rise to fame and soaring prices to match. With vineyards located on the eastern side of the valley at the foot of the Vaca Mountains, the estate boasts complex soils and impressive old vines that combine to create a singular Cabernet experience.

Bordeaux Index Screaming Eagle
Screaming Eagle

Harlan Estate

Located off the beaten track, the family-run Harlan Estate overlooks the hills of western Oakville. Its amphitheatre-shaped vineyard is divided into a collection of steep hillside plots planted primarily with Cabernet Sauvignon. Since its foundation in 1984, the Harlan family have overseen over a third of a century of rigorous selection and development that has crystallised into one of the world’s most iconic and collectible wines with impressive ageing potential. The Harlan story is one of maverick foresight and a relentless dedication to quality. As a result, allocations are tight and distribution is strictly controlled.

Bordeaux Index Harlan Estate
Harlan Estate

Opus One

Leading the pack when it comes to its importance at Bordeaux Index is Opus One, a project born of the fruit of a collaboration between two wine heavyweights: Baron Philippe de Rothschild and Robert Mondavi, who joined forced in 1979 to create the Oakville estate in order to showcase the heights that California Cabernet can achieve in the right hands. A must-have in any serious Napa Valley collector’s cellar, Opus combines the best of the Old and New World, benefitting from European elegance and Napa’s technical know-how. Its second wine, Overture, is made from fruit that doesn’t quite make the cut for the grand vin.

Bordeaux Index Opus One
Opus One

Dominus Estate

Any estate backed by Petrus is going to be a big hitter and Dominus doesn't disappoint. Founded in Yountville in 1983 by Petrus’ proprietor Christian Moueix, the site of Dominus – then called ‘Napanook’ – was responsible for some of the greatest wines to be made in California during the 1940s and 1950s. Having studied in California, the young Moueix had a hankering to make wine on the West Coast, and quickly sought about elevating this exceptional but under-developed terroir into one of the great wines of the Golden State and indeed the world. A wine from Napa terroir with a Bordeaux spirit, Dominus is made in high enough volumes to have the market set prices through the active trading of it.

Bordeaux Index Dominus Estate
Dominus Estate

Colgin Cellars

Founded in 1992, Colgin’s vineyards are among the finest hillside plots in the Napa Valley; the oldest of which is Tychson Hill. The vineyard was owned Josephine Tychson in the late 19th century – the first woman to build a winery in Napa – which was removed during Prohibition and rediscovered by founder Ann Colgin in the mid-1990s. Known for producing small quantities of Bordeaux-style blends and single-varietal wines with meticulous craftsmanship, in 2005 Robert Parker named Colgin one of the greatest wine estates in the world.

Bordeaux Index Colgin Cellars
The vineyards of Colgin Cellars

Ridge

Ploughing a quieter furrow than Napa’s big guns, under the stewardship of winemaker Paul Draper, Ridge has grown its reputation in the fine wine market and is now considered to be among the greatest estates in California, with top drop Monte Bello viewed as a California first growth. Located high in the Santa Cruz Mountains south of San Francisco – California’s coolest Cabernet area – the Monte Bello vineyards lie just 15 miles from the Pacific at elevations of 1,300 to 2,700 feet above sea level, and boast complex limestone sub-soils, forming reds of intense purity, power and finesse with staggering ageing potential that have caught the eye of collectors, leading to steady price rises in recent years.

Bordeaux Index Ridge
Ridge Monte Bello Estate

Sine Qua Non

The outlier of California’s fine wine scene is Sine Qua Non, which plays by its own rulebook. Founded by motorbike fanatic Manfred Krankl in the early ‘90s, the estate shines a light on Rhône varieties from Santa Barbara, which are among the most sought after and collectible wines from the US, not least due to their quirky labels painted by Krankl, whose rebellious spirit has won him a legion of fans. Working mainly with Syrah and Grenache, the wines are made in tiny amounts, with each carrying a unique name and one-off label, adding to their collector appeal. 100-point Wine Advocate vintages sell for serious premiums.

Bordeaux Index Sine Qua Non
Sine Qua Non wines

Notable vintages for investment

Opus One leads the charge by some margin when it comes to sales at Bordeaux Index, accounting for the lion’s share of California activity over the last five years. Screaming Eagle, Dominus and Harlan are hot on its heels, with a combined 10-15% share of sales. California’s performance at Bordeaux Index has been one of steady growth in recent years, with 1994 among the top-performing vintages, delivering returns of 40-120% for Opus One, Harlan and Dominus over the five years to 2023, and 30-70% over a 24-month horizon.

Younger vintages such as 2015, 2017 and the lauded 2018 have also put in a strong performance of late, delivering two-year gains of 20-35% to 2023. When it comes to critical acclaim, the 2018 vintage is one of the most highly regarded in recent history, with James Suckling declaring it “one of the best I have ever tasted”, and Lisa Perrotti-Brown MW predicting that the wines will undergo “a mind-blowing transformation over the next 30 years”.

Approachable now, with supple tannins and beguiling richness, Opus One, Dominus and Screaming Eagle 2018 garnered a slew of perfect or near-perfect scores, with the 2018 vintage of Opus considered to be one of the finest the estate has ever produced. With wildfires rampaging through Napa in 2020, yields were down significantly and big name estates including Opus One and Colgin decided not to bottle any wine in order to maintain their meticulous standards. Hopefully dramatic ruptures of this nature will be few and far between, but it seems highly likely that production on a medium-to-long-term basis is on a downward trend.

Bordeaux Index Opus One
Opus One 2018

California’s investment appeal

Home to sought-after labels with a proven track record of price appreciation on the secondary market, the top wines from the Golden State are able to stand shoulder to shoulder with the best of Bordeaux when it comes to their investment appeal. Often made in tiny quantities with forensic attention to detail, California’s top wines have garnered a loyal following of fans, not least the industry’s leading critics, whose consistently high scores have added to their investment credentials. This feverish demand coupled with limited availability have dramatically, if inconsistently, driven up prices of the top estates on the secondary market.

Having traditionally only been available domestically via wine clubs with long waiting lists or strictly allocated cellar door sales, the presence of California’s top wines on the international market has mushroomed in recent years, as a new generation of winemakers seeks to grow their reputations beyond their homeland. A number of Napa and Sonoma’s top names, including Opus One, Phelps, Vérité and Inglenook, have broadened their distribution via their presence on La Place de Bordeaux, allowing them to share a sales channel with the likes of the Lafite and Mouton, and benefit from the prestigious platform’s international clout. Time will tell whether this approach is the best fit but it certainly speaks to how they see themselves in the global pecking order.

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