Global Wine-Auction Market Declines for Second Year

Hong Kong auctions buck trend with 113 percent increase in revenue
Dec 29, 2009

Wine prices at U.S. auctions remained strong in the fourth quarter of 2009, buttressing gains made in the previous quarter over the depressed prices from the turbulent start to the year. But despite a solid showing in the second half of 2009, the overall size of the global wine-auction market declined 16 percent in 2009. According to figures released by the major commercial auction houses, worldwide sales of fine and rare wines fell from $276 million in 2008 to $233.35 million in 2009, placing the total revenue at pre-2006 levels.

The United States, the largest market for collectible wine, saw the biggest pullback, realizing $106.05 million in 2009, a 36 percent decrease from 2008. New York sales fell 33 percent to $72.38 million. Internet sales dropped 11 percent to $28.67 million. Not all markets were dealt a recessionary blow, however. Hong Kong wine auctions rose 113 percent in value, to more than $64 million, a function of vastly increased volume of both wines on offer and the number of sales, as well as a better economy overall than that of the U.S.

U.S. auction results took a metaphorical roller coaster ride in 2009, with much of the loss seen in the first half of the year. In the first quarter of 2009, domestic auctions totaled $23 million, compared to $42 million in the first quarter of 2008. The gap widened in the second quarter of 2009 when sales totaled $30 million compared to $58 million the previous year. By the fourth quarter, the tables turned and sales rose to almost $35 million, up nearly $1 million from 2008. There were fewer lots in the fourth quarter of 2009 than that of 2008 (13,745 and 17,750 lots, respectively), which means the market was more competitive by the end of this year.

Zachys led the auction market in 2009 with $51 million in sales, followed by Acker Merrall & Condit at $44 million. Christie’s grossed $42.41 million (worldwide), and Sotheby’s achieved $42 million. There were signs of strength: Hart Davis Hart conducted a U.S. record of seven 100 percent sold sales. And despite the shaky financial climate, two new players debuted wine auctions in 2009: Spectrum, based in Irvine, Calif., sold $3.5 million worth of fine wine, and the U.K.-based Bloomsbury partnered with Sokolin Wine Company for an inaugural New York auction that brought in $1.4 million.

A unilateral decision by the major auction houses to lower estimates and reserves (the minimum price below which a wine will not be sold) after the fourth quarter of 2008 proved an effective antidote to entice buyers back to the sales room. Sell-through rates gradually rose from 72 percent in the fourth quarter of 2008 to 93 percent in the fourth quarter of 2009. Accordingly, estimates now are somewhat higher than in the beginning of the year, but they remain conservative overall compared to 2007.

Though the market has stabilized, as indicated by the revitalized sell-through rates, the overall size of the U.S. auction market has been reduced. Domestically in 2009, there were 45 live wine auctions comprising nearly 46,000 lots, compared to 59 sales with more than 60,000 lots in 2008. And blockbuster sales were on the wane: A Zachys auction was the only one to surpass the $5 million mark, whereas 2008 clocked five sales worth more than $5 million.

In retrospect, the first half of 2009 proved a golden opportunity to acquire rare wine for those prescient, or courageous enough to take the plunge against a backdrop of an economic meltdown. In January at Acker, six magnums of Joseph Drouhin Montrachet Marquis de Laguiche 2004 sold for $2,904 (58 percent below their fourth-quarter 2008 average). In March, two three-magnum lots of Château Le Pin 2000 each brought only $9,075 at Aulden Cellars Sotheby’s (down 56 percent). Also in March, six magnums of Château Margaux 1995 realized $5,040 at NewYorkWinesChristies (down 48 percent).

Although wine prices have largely recovered, they are still somewhat below the market’s peak in 2007. For example, Château Lafite Rothschild 1982, which had reached a record $54,970 per dozen at Hart Davis Hart in September 2008, found a low of $24,000 in February 2009 at a Zachys auction. Yet by October, a case of Lafite ’82 notched $38,720 at Acker Merrall & Condit.

Paul Hart, CEO of Hart Davis Hart, said that as the year progressed, he saw strength return to auctions at all levels, with red Bordeaux generally leading the way back. In September, Hart Davis Hart sold a case of Château Lynch-Bages Pauillac 2000 for $2,868 (up 85 percent from the second quarter of 2009, but still below an all-time high of $4,183, paid for 10 case lots each at an auction in May 2007). A case of Château La Mission-Haut-Brion 1945 fetched $72,000 in September at NewYorkWinesChristie’s (up 285 percent), and a dozen bottles of Screaming Eagle Cabernet Sauvignon Napa Valley 2001 commanded $24,200 at Acker (up 34 percent).

Prices appeared to have stabilized in the fourth quarter. The core wines tracked by Wine Spectator saw a 1 percent increase in price from the third to the fourth quarter. There were some notable sales, however. A case of Bodegas Vega Sicilia Ribera del Duero Unico Gran Reserva 1975 brought $10,890 (up 313 percent from the third quarter of 2009) at the November Aulden Cellars-Sotheby's sale of the Vega Sicilia consignment (which itself brought $1,088,698 against a presale estimate of $350,000). Also in November, a dozen bottles of Henri Bonneau & Fils Châteauneuf-du-Pape Réserve des Célestins 1989 sold at Zachys for $14,400 (up 133 percent).

According to Serena Sutcliffe, worldwide head of wine for Sotheby's, 2009 will be remembered as the year in which Asian nationals overtook Americans in the purchase of fine wine at auction. She said that 57 percent of her global auctions sold by value and 32 percent of all wine sold at Sotheby's New York was bought by bidders from the Far East.

In Hong Kong auctions, wines generally sold for prices far above their U.S. averages. In October, Sotheby’s sold a case of DRC Romanée-Conti 1995 in Hong Kong for US$93,977 (up 17 percent over its second quarter auction average). In November, Zachys sold a case of the famed Château Mouton-Rothschild 1945 for a staggering US$218,581 (up 245 percent from its second-quarter U.S. average), and Acker sold a case of Château Pétrus 1982 in Hong Kong for US$93,667 (up 95 percent). The top earner for Christie’s in Hong Kong sales was a 78-bottle "superlot" of 1999 Domaine de la Romanée-Conti which sold in November for US$185,760.

One reason for the disparity in prices between Hong Kong and America is because supply in Asia is much more limited in the face of voracious demand. But don't expect it to remain that way for long. Added Jamie Ritchie, Sotheby's senior vice president, North America, "In 2010, we expect to see ever larger quantities of wine offered for sale in Hong Kong, most of which is likely to be sourced from America. As a result, we will continue to see smaller U.S. auctions, but larger Hong Kong auctions and so long as we have a steady economy, we foresee consistent demand at current price levels."

John Kapon, Acker’s president, concurred. "Looking ahead, he said, “we do not see any signs of the market slowing down in 2010. In fact, we would not be surprised to see Hong Kong surpass New York in 2010 and become the auction world's biggest market."

Collecting Auctions News

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