Is rare wine on the rebound? Judging by the sudden auction craziness out there, big spenders appear to be back with a vengeance.
Disclaimer: If stratospheric wine prices make you disgusted or light-headed, consider twice before reading on.
Earlier this month, Hart Davis Hart, the prominent Chicago-based wine auctioneer, sent jaws dropping with a $3.27-million (U.S.) one-day sale - well above its catalogue estimate of $1.84- to $2.75-million. In a transaction befitting the days of subprime debauchery, two cases of 1982 Château Petrus in double-sized bottles, or magnums, sold for $65,725 and $59,750, far above the expected prices of $24,000 and $35,000 respectively.
At Acker Merrall & Condit, another big U.S. broker, the busy fall auction season started auspiciously with two larger-than-expected sales. A New York auction brought in $2.5-million against an upper-end estimate of $2.4-million. And this past Saturday in Hong Kong, the company sold 8,300 bottles for $6.4-million, including a case of 1989 Château Petrus for $43,436 (U.S.). The top lot in the New York auction was 12 bottles of the California cult cabernet sauvignon Screaming Eagle 2001, which went for $24,200 - more than $2,000 a bottle, a substantial sum for a young, barely cellared vintage.
One major reason for the better-than-expected results is purely optical. Several auction houses, including Acker Merrall, have been reducing their estimates in an attempt to attract new bidders. But hammer prices have been impressive, frankly, and all three of this month's auctions managed to move 100 per cent of their inventory.
"Prices are approaching the peak levels of 2008," said Paul Hart, chief executive officer of Hart Davis Hart. "We are in the midst of a huge surge in prices and I believe that we will see continued strength through the fall season."
That would be welcome news to organizers of wine auctions around this country. The vast majority are charity events that take place in fall and winter and have become a growing source of income for health-care and cultural institutions.
One of the liveliest is the auction associated with Toronto's Grand Cru Culinary Wine Festival in support of research at Toronto General and Western hospitals. Recession be damned, the inventory this year features some of the most sought-after wines in the world. Example: two three-litre bottles of 1971 Domaine de la Romanée-Conti La Tâche, an iconic red burgundy. Another trophy that's sure to go home in a well-padded crate: a six-litre bottle of 2005 Château Haut-Brion, a top red Bordeaux and favourite wine of Thomas Jefferson from the most acclaimed Bordeaux vintage of the past quarter-century.
Todd Halpern, an auction watcher who owns wine-importing firms in the United States and Canada and who is co-chairing the Grand Cru festival this year with Toronto benefactor Cheryl McEwen, attributes the sudden feverish activity to newly wine-besotted collectors in Asia as well as shrewd European buyers taking advantage of the U.S. economic downturn.
The annual Grand Cru festival, which takes place this year Oct. 29-31 (www.grandcru.ca), only holds auctions every two years and so was spared from the soft sales climate of last fall. Mr. Halpern is cautiously optimistic about this year. "I believe the high-end market has bottomed out and I think it's on the rise again." His opening-bid request for those two three-litre bottles of 1971 La Tâche will be $25,000 each.
Organizers of the Toronto Symphony Orchestra's Fine Wine Auction are positively bullish about this year's event, scheduled for Oct. 21. Last year's auction managed to raise an almost-record sum for the 19-year-old event despite the downturn. "In the worst market environment, we had standing-room only," said Bryan Nykoliation, co-chair of the event.
The auction did not go unscathed, however. Prices were down. It's just that more wine had been donated to the cause in return for lucrative tax receipts. "We sold more bottles, but at a lower bid price," Mr. Nykoliation said.
The recession's impact on the exotic-wine market was perhaps best seen last year at the Liquor Control Board of Ontario's Vintages Finest and Rarest Wines Auction (416-365-5767), the only regular commercial auction held in Canada. Twelve per cent of the 2008 auction's lots went unsold, compared with just 3 per cent in 2007. Total take for the event, held in two stages (in October and December), was $3-million, about $300,000 lower than anticipated. "Given the quality, we could have done at least 10-per-cent better than that," said Barry O'Brien, director of corporate affairs for the LCBO.
Some of the weakest-performing lots last year were from New World regions such as California and Australia. The reason? It's hard to pin it down precisely, but many cult reds from those places, such as Torbreck Run Rig and E&E Black Pepper from Australia, lack a long track record of cellar worthiness and have become much easier to find at the retail level in Ontario. Why bid them up at auction when you can buy them in stores?
Some price watchers believe the recession has forever altered the perceived value of luxury wine, and that many shoppers have permanently traded down to a more affordable price point.
"I that it's entirely possible that we're looking at a permanent shift in what people value and how much they value it," said Mike Veseth, a professor of economics at the University of Puget Sound in Tacoma, Wash., who is writing a book titled Grape Expectations: Globalization, Two Buck Chuck and the Future of Wine .
Still, Mr. O'Brien is sanguine about the coming LCBO event, to be held on Oct. 16, 17 and 18.
"This September, things seem to have emerged strongly from where they were before," he said, referring to auctions he attended recently in New York.
Commercial auctions such as the sold-out events that took place at Hart Davis Hart and Acker Merrall will refuse to sell lots unless the bids exceed a minimum price set by the vendor. "To be 100-per-cent sold at very good prices suggests a great deal of confidence in the market," Mr. O'Brien said.
A profitable game
Buying at auction is a rich person's sport, to be sure. Older vintages tend to sell at a substantial premium to the already high original price
But for sellers, unloading at auction can be absurdly lucrative, even when the wine is donated to charity. That's because donors receive a generous receipt against income tax, the amount usually based on the wine's replacement rather than retail value. And that's the key.
In Canada, a collector-worthy bottle of 1990 Château de Beaucastel Châteauneuf-du-Pape would have cost about $50 upon release in the early 1990s. To replace it now from the international market, including shipping to Canada, would easily take several hundred dollars. In fact, the tax receipts can be so attractively high that some people have been known to donate a $50-retail-price wine to a charity in return for a $400 receipt, then turn around and win back the same bottle for a bid of $200.
I don't know about you, but at my torturously high income-tax rate, a $400 tax receipt would be worth more than a $200 refund, so I'd be making a net profit from the government. It's the hidden reason that fine wine has become such a popular collector's item.
Grand Cru Culinary Wine Festival
Oct. 29: wine tasting and live auction
Oct. 30: series of dinners in private homes with acclaimed chefs
TSO Fine Wine Auction
Wednesday, Oct. 21, Commerce Court West, 199 Bay St., 56th floor
Vintages Finest and Rarest Wines Auction
Oct. 16, 17 & 18, Waddington's Galleries, 111 Bathurst St., Toronto
To order a $20 auction catalogue or purchase tickets to a rare-wine preview tasting ($275), call Vintages Customer Service, 416-365-5767.