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mixed case: opinion and advice

Flip Happens: For Better or Worse, Not All Wines Are Bought to Be Drunk

What do winemakers think when collectors resell their wines for big profits? And how do collectors end up going from mailing list to blacklist?
Photo by: Mark Weinberg

Posted: Jan 15, 2013 12:00pm ET

By Robert Taylor

This is the second installment of a two-part blog on reselling mailing list wines for profit.

Wine is a funny commodity. As with fine art, a smart investor with a sharp eye, a secure cellar and a little luck could buy a few cases of wine today that, 20 years from now, might pay for their child's college tuition. (Unlike fine art, wine has to be destroyed to be appreciated.)

But for a select few wineries around the world, their bottles tend to double or triple in value as soon as they leave the cellar door, no investor patience required. That group expands and contracts depending on the latest wine ratings, the economy and vintners' efforts to keep release prices in line with demand without overstepping the bounds of fiscal good taste—bounds that are leapt across with abandon when so-called "flippers" resell their allocations to wealthy wine lovers who are happy to pay through the nose for highly rated hard-to-find wines. Like it or not, flip happens.

In California, wineries like Screaming Eagle, Sine Qua Non and Marcassin hold perennial positions on that list of instantly resellable wines, and hot younger brands like Kosta Browne, Saxum and Scarecrow can be easily flipped for profit. Even Washington's Quilceda Creek and Cayuse have undervalued sticker prices.

People spend years on these wineries' waiting lists before finally getting the opportunity to purchase the wines. "The minute somebody gives me money for my product, it is now theirs and they can do with it as they please," acknowledged Manfred Krankl, whose 2008 Sine Qua Non The Duel Grenache was sold to list members for $220 and now goes for as much as $800 on the secondary market.

But what customers do with the wines after they buy them can alter their chances of buying those wines again. Nearly all of the aforementioned wineries have recently reduced allocations or kicked customers off their mailing lists for egregiously flipping their wines.

Winemakers' No. 1 concern is the quality and perception of their product, and quality control is out of their hands once they deliver the wine to its first owner. "What we would like to have happen is that people buy our wines because they want to drink them,” said Krankl. But, he continued, "… the people that really just purchase the wine with [flipping] in mind very often don't really care about the wine [and mishandle it]. And by the time the person ends up getting it and drinks it, the person that paid the highest amount of money out of anybody gets possibly the worst product."

No one I spoke to objected to members sharing an allocation with a fellow wine lover to split the cost. "We respect people who respect our wines," said Screaming Eagle estate manager Armand de Maigret, whose 2009 Screaming Eagle (release price $750) sells for more than $2,000 a bottle. "And if somebody buys three bottles from our list, and it’s very expensive and they cannot afford it, so they sell one bottle to a friend, and one bottle to another friend, I love it! That’s great!" he added. "If it’s to sell and ship it when it’s summer … oh no, please don’t do that."

Screaming Eagle kicked some people off its mailing list for doing just that. Krankl deals with flagrant flippers by reducing their allocations for the next release, he said, "because if the person feels the pressure to sell some of their wine, then we are apparently over-allocating."

Marcassin's John Wetlaufer, whose 2007 Marcassin Vineyard Pinot Noir (release price $125) is priced as high as $645 at a Los Angeles retailer, doesn't actively patrol the Internet looking for flippers. But when someone on the waiting list wrote to say that he had been offered a mailing-list member's allocation of the most recent release at a mark-up, asking if it was OK for him to buy it, Wetlaufer took action. "We sent him a letter saying, 'You don’t have to buy it from him, you can buy it from us,' and we purged the reseller, and we sent him his check back, and he got furious," he sighed.

“When we do come across a customer we are sure is a flipper, we deactivate them," said Saxum's Justin Smith via e-mail. His 2007 James Berry Vineyard Paso Robles Rhône-style blend ($67 on release; currently up to $550) was the 2010 Wine Spectator Wine of the Year, and current 2010 Saxum releases, priced at $89 for list members, now sell for as much as $240 per bottle. "Most flippers do a fairly good job hiding their identity. We did get a guy last year who e-mailed us to complain that his allocation was not big enough. When we looked into it, his billing address and residence were in one state and the wine was being shipped straight to an auction house in another state!"

Sonoma Pinot Noir specialist Michael Browne, whose 2010 Kosta Browne Four-Barrel Pinot Noir, released for $78, sells for nearly $200 online, has kicked people off Kosta Browne's mailing list for selling special bottles he'd given list members as gifts. However, he has a different attitude toward the wines he sells. "To penalize someone for taking a product that they buy and reselling it—is that our right to do that? … We'd rather have people buy their allocation and drink it, but how do we police that?"

It's possible he could. Kosta Browne bottles are individually numbered, but the winery doesn't track them. Browne's forthcoming Cirq label, a small-production Sonoma Pinot brand that will be ripe for flipping right out of the gate, will be individually numbered as well. Browne says he will track who buys each bottle and where they end up, though not for the purpose of penalizing flippers.

Screaming Eagle is also set to begin individually tagging bottles to help prevent counterfeiting. "With the 2010 vintage that we will release in a few weeks, we are going to protect the wine a little bit more by using what Château Latour and a few others are using in France, the Prooftag system," said de Maigret. "It is time for us as well to be able to authenticate our wines in a very easy way. ... It is going to be protected through a code, but we are not Big Brother. We have other things to do [than track down flippers]."

One vintner, whose top wines regularly triple in price upon release and who has a 7,000-name-long waiting list, had no qualms whatsoever about flipping. "I came to America for a simple reason: because I like to be free, and I am a free man," exclaimed Cayuse's Christophe Baron, who was born in France. "Therefore, to me, if somebody buys a 3-pack of Bionic Frog—it’s a free country—if they want to flip the wine because they can make some quick money out of it, more power to them."

No matter your opinion of flippers, there is no clearer mark of success as a winemaker and a marketer than the making of a flippable wine, and Baron wears it as a badge of honor. “It makes me happy!" he said. "At the end of the day it validates my work, as simple as that. It is the ransom of success.”

Troy Peterson
Burbank, CA —  January 16, 2013 12:32am ET
Well I didn't get answers to most of the questions I posted in part 1, but I do find that the steps being taken against blatant flippers are eminently reasonable across the board. You have to respect the wine, first and foremost. Also, if the winery thought it needed a distributor it would go ahead and hire a real one so that it could enjoy more of the profit.

Wine is a labor of love for each of these wineries in the "highly-allocated" space and the consumers' joy is their joy. I can understand how flipping offends their sensibilities and robs them of their joy.
Mark Horowitz
New York, NY —  January 16, 2013 9:31am ET
I receive catalogs from auction houses each month. Dozens of these highly-allocated bottles are offered in each sale and one ore more of these bottles appear in photos on the covers of those catalogs. Flippers are clearly obtaining these wines to resell them, a practice which is distasteful to those who would appreciate the opportunity to purchase these wines off mailing lists for their own enjoyment. Yet, Christophe Baron is correct: it is a free country. Little can be done to stop the practice.
Christian Wyser-pratte
Ossining, NY —  January 16, 2013 2:26pm ET
Plenty can be done to stop flippers, and it should be done. Numbering bottles is step #1. It's so common for wines to be numbered in Bordeaux--and has been since before the great 1982 vintage--that I cannot understand why it's not done here. Tracking is then easy. As step #2, vintners should have a contract with people on their wine list that says, "buyer agrees that before five years from date of harvest have passed, buyer shall have no right to resell the wines purchased through allocation, except that his estate may auction off wines through a reputable auction house in the event of buyer's death. If wines are resold or auctioned that do not meet the estate sale exception above, title to said wines shall revert to vintner, who may reclaim same though payment of the original purchase price to the original purchaser, and said purchaser specifically agrees to that vintner's right as part of this contract, surrendering all right of litigation arising therefrom." Then step #3 is enforcement. Simple. Why do I care? Because flippers distort the market in an egregious way, and it spills over to other wines and inflates the whole market. Screaming Eagle wouldn't sell for $2,000 in the auction market if it weren't so tightly allocated in the first place.

I still remember buying a case of 1982 Cheval Blanc at Sokolin, a famous Madison Avenue retailer, in 1989. It was marked $90/bottle, but as we talked, the owner's son David said, "I'm going to let you have it for $75 because I know you're a collector who will drink it." I have, and I still have three bottles. I don't care what it sells for. All I know is I bought it, and I've enjoyed it, and I can never buy it again. But I don't have to.
Vishal Kanji
Portugal —  January 16, 2013 3:14pm ET
Flippers are able to flip because the market is ready to bear "distorted" prices in the first place. Wineries can kick a flipper off the list only to see him replaced by another flipper. They might as well start interviewing prospective clients to assess their right to buy from these wineries.

There is clearly a gap between release prices and market prices. Why don't wineries step in and just sell the whole thing through allocation?
1. Assuming they really do want at least some of their wine to end up with people who truly intend to drink it, and at a reasonable price, the 100% auction approach would see many of these clients priced out of the market
2. It would destroy (or, at least, erode) the mystique created around the brand, the wanting to get into the list, and threaten brand equity and long-term pricing potential that comes with

I think Baron and Krankl have it right. No need to be calling anyone greedy.

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