Nerds to nippers - Tech execs collect fine wine

LOS ANGELES (Reuters) -- Not content with quaffing champagne to celebrate their newfound wealth, technology millionaires are investing in the latest hot trend: "cult wine."

Cult wine is what aficionados call highly elusive, extremely expensive wine. Silicon Valley Internet entrepreneurs are becoming passionate collectors, for both business and pleasure.

Young technology executives have built big cellars and some are even starting their own vineyards in California.

"Four out of the top bidders in Napa Valley auction this year were former or present Silicon Valley executives," Fritz Hatton, principal wine auctioneer for Christie's, said.

"About 50 percent of the people from the West Coast investing in wine are affiliated with technology," said Steven Smith, wine scout with Napa-based Bounty Hunter, a worldwide retailer of wine.

"They have a fair amount of money and there are many consultants who can be hired for their expertise," Steve Beckmen, winemaker of Beckmen Vineyards in Santa Ynez, California, said.

Some of the new millionaires have turned collectors, investing and holding wines they might drink or resell in the future and are spending heavily to get the right bottle.

For example, a 6-liter bottle of Screaming Eagle Cabernet Sauvignon 1992, one of only two bottles of the tiny California winery's first vintage, brought $500,000 from a former hi-tech executive at the 20th annual Napa Valley Wine Auction.

Celebrating the good life

Executives like the lifestyle associated with wine, Hatton said. "Collecting rare wine and association with those who are collecting it is a way to celebrate the good life."

Experts call the 1990s a great vintage decade and this, combined with a booming economy, has increased the sales of high-end wine more than 50 percent in the last four years.

"Investing in wines has caught on, but it is not something that the average wine drinker is doing," Vick Motto, partner with Motto Kryla and Fisher wine business consultants, said. "It is a hobby. Investing in wine can be fun and people enjoy it. It is much more interesting to study wine than to study stocks."

Motto said an investor can make almost five times the initial investment in five to 10 years. "It is just like a stock. You hold it for a few years and you can get most of its value in five to 10 years."

Or you can lose money by overpaying or misjudging a wine's potential, he added.

Interest in wine has increased thanks to California's emergence as a world-class producer, Motto said. Overall wine sales have increased in the last seven years and California is responsible for three of every four bottles sold in the United States.

Small lots of cult wine produced by California wineries are sold by mailing list at a lower price. The list is long and usually the wine is sold out.

Investors who are lucky enough to get them can resell them later at an auction, called the secondary market, for a profit.

In the "California Only" wine auction by Zachys-Christie's in June in Los Angeles, nine bottles of 1941 Inglenook Cabernet Sauvignon were sold for $58,600. The wine was previously sold by the winery in 1979 for just over $100 per bottle.

The other expensive wines sold at the auction were a full case of rare 1994 Colgin Cabernet for $16,100, Screaming Eagle Cabernet 1994 for $1,225 per bottle and Screaming Eagle Cabernet 1993 for $1,150 per bottle.

Wine sales depend on how well the NASDAQ does, Smith said, adding that luxury items such as wine are first to be cut when the market is down. "Right now the economy is at a huge peak. People have a lot of money to spend. When it goes down, they will use it (the wine) to drink their sorrows away."

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