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Wine Auction Sales In Sharp Climb, Rebound From Recent Economic Turmoil

May 18, 2011

Less than three years after economic turmoil caused the world wine auction market to stumble, sales have surged dramatically, according to a new report in the June 15 issue of Wine Spectator magazine. Due in part to the Internet, which has helped democratize consumer participation, and to a booming economy in wine-hungry Asia, worldwide auction sales hit $408 million in 2010, compared with the previous year’s $233 million. Prices for blue-chip wines are up sharply. The Wine Spectator Auction Index increased by 15% over one year, surpassing its 2007 record high.

That growth has spurred the entry of new auction houses. “When we first looked at wine auctions two years ago, it was a $250 million global market,” says Greg Roberts, president of Spectrum International, a Fortune 500 company that deals in collectibles. “I remember saying to people, that’s a huge market for only five or six players. I figured that if we could get 10% of that, it would be a good business.”

Spectrum, which held its first live auction in 2009, forged an aggressive strategy to attract and reward big consignors. It fronts to the seller 50% of the reserve price set for the wine (the usually confidential price below which they won’t sell the wine) and promises to pay the full amount within 30 days of the auction, even if it hasn’t been paid by the buyer. In its first year out, Spectrum managed to sell $15 million worth of wine, or 4% of the global market.

Another newcomer is San Francisco-based WineGavel. Launched last year, it expects to double sales to $2.6 million in 2011. Heritage Auctions, the world’s third-largest full-service auction house, held its first live wine auction in Beverly Hills in April, bringing in $1.6 million. Heritage auction director Frank Martell has attracted buyers with promises to offset some shipping costs post-sale and include reserve prices in the catalog.

The top five auction houses in 2010—Acker Merrall & Condit, Zachys, Sotheby’s, Christie’s and Hart Davis Hart—took in a combined $354 million last year, representing 87% of the world market. Auction houses have upped their game by taking sales to where the buyers are: Asia. Nearly all the major houses have outposts in Hong Kong, which last year displaced New York as the global wine auction center, just as New York displaced London in 1995.

Among the top growths, Château Lafite is in a league of its own. One in five dollars spent in the auction market last year was on a bottle of Château Lafite, with 57% of that being sold in Hong Kong. Still, there’s more to Hong Kong than blue-chip Bordeaux. Late in 2009, Martine Saunier, owner of California importer Martine’s Wines, decided to sell a cache of Burgundies from the legendary Henri Jayer. At an Acker auction in Hong Kong in January 2010, those 69 lots brought in $1.17 million—more than double their estimate.

Chicago-based Hart Davis Hart is the only major U.S. wine auctioneer to resist the lure of Hong Kong. “We don’t want to split the buying base,” says HDH president Ben Nelson. But HDH actively pursues Asian business, working to lure Asian buyers to its U.S. sales. HDH’s Chicago staff regularly visits Asia, most recently hosting dinners in Singapore, Shanghai and Ho Chi Minh City. Other auction houses employ similar strategies.

U.S. auction totals rose strongly in 2010, totaling $154 million compared with the previous year’s $107.6 million. But that growth isn’t attributable to an upswing in demand by Americans alone. Much of it, primarily for first-growth Bordeaux and top Burgundies, is from Asians bidding by fax, phone or streaming Internet to U.S. sales rooms. Sotheby’s New York’s Ritchie estimates that one-third of his lots by value now are won by Asian bidders. At Christie’s New York, Asia accounts for about one-half of sales, says Charles Curtis, head wine specialist for the U.S. and Asia.

Trends thus far in 2011 paint a conflicting picture. Hong Kong sales continue to rake in impressive-looking numbers, but at a Christie’s Hong Kong sale in March that achieved sales of $9 million, several lots of high-end Bordeaux failed to sell. Many blamed high estimates set by the consignors. Whatever the reason, it shows that there is an upper limit at which even Hong Kong bidders will sit on their paddles.

One perplexing aspect of the auction market is why Internet-only sales haven’t grown more. The draw of Internet sales is that they offer a wider variety of wines than live auctions. But Winebid.com, by far the largest operator, grossed $24 million last year, down from a high in 2008 of $26 million. According to the U.S. Census, domestic retail e-commerce sales grew by 21% in the same period. But there’s reason to believe that Internet-only sales could pick up. Acker posted back-to-back months of Internet sales over $1 million this year and is revamping its website to attract more business, while newcomers WineGavel and Spectrum both have introduced Internet-only components.

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