Wine-Auction Market Hits Record High
Amid a flood of new collectors, Wine Spectator's Auction Index posts its largest gain ever
By almost any measure, the auction market for fine wines is scorching right now, entering record-breaking territory. In the first half of 2006, Wine Spectator's Auction Index—the magazine's compilation of 154 frequently traded collectible wines sold at major U.S. auctions—gained 26.4 points, hitting a new high of 249.67, the largest jump in points since its inception in 1995.
The index's 11.8 percent rise in value over the second half of 2005 is the third-largest percentage increase ever posted. By comparison, during the same six-month period, the Dow Jones rose only 4 percent and the NASDAQ fell 1.5 percent.
Overall, volume also rose a substantial 32 percent above that of the second half of 2005. All told, the Auction Index has experienced a phenomenal 62 percent rate of growth since the second quarter of 2003.
What accounts for the dramatic increase in auction activity? A flood of new collectors has joined the ranks of veteran auction-goers, according to both Jeff Zacharia, auction director of Zachys, and Jamie Ritchie, North American wine director for Sotheby's. That influx has contributed to increased demand, as these buyers are competing for a limited supply of fine and rare wines, chiefly trophy bottlings from Bordeaux, Burgundy and Napa Valley.
"Global wine markets are very strong, putting upward pressure on prices," Ritchie noted. (To the relief of many collectors, however, prices for non-trophy wines have been comparatively stable, trading in many instances at a midpoint between the high and low estimates.)
Further fueling prices, an abundance of hard-to-come-by consignments have come on the block. Many veteran collectors are cashing in on the bidding frenzy by consigning their treasures. And wines with pristine provenance from single-owner collections always command a premium over multiple-owner consignments.
For example, the first half of 2006 got off to a roaring start in January when Acker Merrall & Condit established a new record for the highest sale total generated by a single cellar belonging to an American: more than $10.64 million. Lot after lot was knocked down above estimate largely because the consignor, a West Coast-based collector, was renowned for his impeccable taste and rigorous selection. Six items fetched in excess of $100,000, including a six-magnum case of DRC Romanée-Conti 1971 that brought $136,275.
A little more than a month later, NYWinesChristie's held an unprecedented evening sale of treasures at which the average price per lot was $22,000—about 10 times the average hammer price at a typical sale. Five lots surpassed the $100,000 mark, including six magnums of DRC Romanée-Conti 1985, which commanded $170,375—the highest price ever paid for a case of wine at a commercial wine auction.
In May, Sotheby's wine department scored its second highest total ever —$7,832,755—at the sale of the cellar of Russell Frye, a Massachusetts- and Florida-based businessman. Over the past 10 years, he had assiduously assembled a highly focused, 8,500-bottle collection consisting of first-growths and their equivalents, premier Burgundies and a smattering of California and Italian wines. Among the highlights was a double magnum of Château Lafite Rothschild 1865 that brought a record $111,625.
In many of these cases, bidders in the salesroom competed against an aggressive absentee order book and determined collectors on the telephone. The latter proved to be fearsome contestants, snaring a large share of the treasures on offer. (Many collectors choose to remain anonymous; securing a telephone hook-up with the auction house for the day of the sale is the next best thing to being there in person, and ensures privacy.)
The percent-sold rates at these sales are another indicator of the health of the wine-auction market. The average rate for the first half of 2006 was an extremely high 93 percent. The NYWinesChristie's evening sale was 100 percent sold. The Aulden Cellars-Sotheby's auction of the Russell Frye collection was 99 percent sold. Zachys conducted several auctions where the rate was 97 percent or better.
Along with the 154 wines analyzed for the magazine's biannual Auction Index report, Wine Spectator's online auction database tracks the performance of more than 15,600 cellar-worthy bottlings, representing 880 wineries and more than 3,000 unique wine labels across a range of vintages and in a variety of bottle sizes.
Among the categories of wine for sale, Bordeaux (which constitutes the lion's share of the Auction Index) was the leader, with a 14 percent increase in average price in the first half of 2006. That was followed by California, with a 13 percent increase. Italian estate bottlings were virtually unchanged from the second half of 2005, and Vintage Ports were down 3 percent.
First-growths and their equivalents rose 10 percent in price overall. The best-performing wine of the first half was Château Ducru-Beaucaillou 1961, which spiked 167 percent to an average of $831 per bottle. Château Le Pin 1990 rose 85 percent to average $2,739.
Bordeaux's celebrated 1982 vintage displayed the greatest strength among that region's listings (with prices up 25 percent), largely because it is a classic vintage now approaching maturity. The 1990 vintage rose 20 percent, whereas its twin, 1989, gained only 5 percent. The 1961 and 1995 vintages rose 8 percent and 9 percent, respectively.
One factor pushing up prices for older Bordeaux vintages is the much-hyped newest vintage. "The expensive 2005 Bordeaux futures are also impacting on mature vintages available at auction," said Ritchie.
Among other French collectibles, Rhône reds were fairly flat in the first half of 2006. Nevertheless, Domaine du Vieux Télégraphe Châteauneuf-du-Pape La Crau 1995 rose 82 percent to average $62 per bottle, and M. Chapoutier Ermitage Le Pavillon 1990 climbed 38 percent to average $324 per bottle. Overall, Chave and Rayas were the top performers in the Rhône group.
California cult wines rose 14 percent as a category. Harlan Estate and Screaming Eagle outperformed their counterparts with an average price increase of more than 19 percent. The strongest individual cult showing during the period was Harlan Estate 1994, which rose 40 percent to average $1,027 per bottle.
California's heralded 1994 vintage outperformed the rest of the state's pack, gaining 24 percent in value. Like the 1982 Bordeaux, many of the 1994 Cabs are approaching peak drinkability and consequently garner strong prices. The highly rated 1997 vintage rose 13 percent. In contrast, 1990 gained only 2 percent. Leading listings included Heitz Cabernet Sauvignon Napa Valley Martha's Vineyard 1985, which averaged $258 per bottle (up 41 percent), and Harlan Estate 1994, at $1,027 per bottle (up 40 percent).
Italian estate bottlings were basically flat. Two exceptions hailed from the highly rated 1997 vintage: Gaja Langhe Sorì San Lorenzo 1997 rose 46 percent to average $309 per bottle and Luciano Sandrone Barolo Cannubi Boschis 1997 gained 36 percent to average $177 per bottle. In contrast, Gaja Langhe Sorì San Lorenzo 2000 fell 44 percent to average $187 per bottle, and Altesino Brunello di Montalcino Montosoli 1990 declined 49 percent to average $154 per bottle.
Most Vintage Ports experienced a mild decline during the first half of 2006. Yet Taylor Fladgate 1963 and Graham 1994 bucked the field with respective average gains of 13 percent and 9 percent.
As everyone who follows the fine-wine scene knows, past performance is no guarantee of future results. But there's no doubting the current auction market is hot. Despite the heated atmosphere, Ritchie doubts there are many speculators among the successful buyers. "They'd better be drinkers," he said. "At today's prices, it would be virtually impossible to make a quick return on one's investment."
--Auction data compiled by assistant tasting coordinator John
Suidut
Note: As of the first half of 2006, auction results from Chicago-based Hart Davis Hart have been factored into the Wine Spectator Auction Index average; the firm's first year of business was 2005, during which it sold $9.5 million worth of fine wine.
