'The Asian learning curve is a fast one...' Interview with Serena Sutcliffe MW

  • Thursday 7 October 2010

Serena Sutcliffe MW, head of Sotheby’s International Wine Department, discusses the Asian market, the power of the internet and the future of wine auctions with Adam Lechmere

Serena Sutcliffe MW of Sotheby's

AL: How did the recent library sale of Chateau Lafite come about? [on 29 October in Hong Kong Sotheby’s is selling some 2000 bottles direct from the chateau's cellars spanning vintages from 1869 to 2008]

SS: Well, it was off and on for a long time. At the beginning of the year, I thought things are looking seriously good at the moment, and I said ‘What about it?’ and Eric [Baron Eric de Rothschild] just said, ‘Yes’.

What made you decide to hold it in Hong Kong?

Lafite see China as a great emerging market, and of course they have vineyard interests in China [Lafite, in a joint venture with CITIC, China’s largest state-owned investment company, is developing 25ha of vines in the peninsula of Penglai in Shandong province] so they are really interested. And obviously Lafite is the wine of the moment - it led the charge in China. There is no doubt the Chinese have a lot of interest in Bordeaux, and while the other [properties] are coming on, Bordeaux for them starts and finishes with Lafite.

But they are adding to their library of names all the time – it’s like America in the 1960s and 70s, when there were comparatively few [Bordeaux] names that American wine lovers knew – perhaps the top seven or eight estates. Now the Americans know every name under the sun.

Which chateaux would you be particularly pleased to be able to sell at auction in Hong Kong? If you got a consignment of Palmer, say, or Cos d’Estournel?

I’d jump at it. I’d be happy with any of those in Hong Kong because I can talk to all my clients, they know us and they have confidence in our history

I’d love to do some work on Leoville Barton. It needs more profile. Throughout the 90s it’s been so good, and I don’t think enough people around the world realise how good it is. In my view it’s a ‘super second’ [ie a top-class second growth] but it’s not there on price. Not that I want to push the price up for normal drinkers but I’d like people to know what they are missing. Big Asian buyers are ready to buy super seconds if they have some age.

Do you think the Chinese are going to eventually buy wider than the first growths at en primeur?

I think the Asian learning curve is a fast one. But if you’re buying a new vintage before it’s been bottled, and you’re being asked to buy new names, that’s really quite a lot to take on board at once. They’re not really en primeur buyers – but if they were going to buy they would stick with the names they knew otherwise it’s two new things at once.

In the secondary market it’s different. At auction you are buying a known entity: it’s in bottle, it’s got a track record, it’s got maybe 10 to 15 years bottle life in it, everybody knows what it tastes like. So new buyers are more confident.

But if you’re encouraging someone to buy en primeur for the first time, to put their money down two and a half years before they even see the stuff, for a chateau they haven’t even heard of, based on one tasting in March – this is a big step, particularly as there are so many wildcats out there [in China].

Another problem is the organisation on the [Chinese] mainland. Hong Kong is pretty organised, but there are a lot of cowboys on the mainland and that is not conducive to a confidence-giving exercise in en primeur marketing. There are no rules and regulations, and people are just doing what they like. People are offering wines for sale that they haven’t a hope in a million years of ever getting.

How important is the internet in China in auction terms?

In a wild west atmosphere you might say that physical sales in the auction room could be increasingly important, so that people know what they’re getting into.

What do you think the market will look like in five years' time, if we have a string of great vintages, for example?

It’s in the order of things that [the Chinese] will become players in the market. And I think they will do it direct. Up to now [buying] has been with London merchants but now I understand Latour is setting up a direct office in Beijing [this has not yet been fully confirmed by Latour].

The Bordeaux negociants are thinking about that. What does it mean if the first growths are going to set up offices [in Beijing]? Maybe they’re not going to use negociants any more, let alone the London traders. I could see noses being put out of joint, and people wondering, is this the future?

What will it mean for the Chinese market if they can buy direct from the chateaux?

People will be reassured if they can buy direct. If they have a one-on-one relationship then that’s good, but if there are tons of intermediaries – which is what they have in China at the moment – they have all these people offering them wine and that is very worrying. Half the time they will put down money and never see the stuff.

Can I ask about Sotheby’s new retail operation in New York? How did that come about?

It’s a natural follow-on because under New York law an auction house has to have a retail partner so we have become retailers ourselves.

It won’t affect the auction market in any way. It’s a service for local people – New York is appallingly served with wine shops when you compare it with London. You can go 20 blocks without finding a wine shop.

[In terms of stock] the shop has a much wider range. Auction tends to be top end, and although there will be top end wines in the shop, there will also wines like lovely Italian whites for US$30 or an Austrian white, say.

In the Bordeaux market, if we accept that it’s solid and is not a bubble that’s about to burst, how are the high prices of the blue chip wines in China eventually going to affect the smaller properties?

This is not just about China: there are people who are into the very expensive top-level Bordeaux in Taiwan, in South Korea, and in Indonesia. There’s always a finite number of the very rich anywhere, so the growth has to slow down a bit. But what one hopes for is more ‘trickle down’ of wealth, as we hope we have seen in India, as that will make the market for wine wider.

With Asia the problem is quantity. DRC [Domaine de la Romanee Conti] is regarded out there with total awe, but we all know the [tiny] quantities [that are produced], and the allocations. The unique thing with Bordeaux is the quantity to quality ratio.

Is there a Chinese market for California wines?

Yes, in China I think there is real scope for some of the California wineries because so many people in Hong Kong know the west coast of America, so California is familiar to them.

At the moment they are interested in a few Californian wines. Screaming Eagle is highly sought-after, and prices go very high when we have it, as we did recently in Hong Kong [in the 2 October sale several lots of the renowned Napa Cabernet went for up to £2000 a bottle – for example a 6-bottle lot of the 2002 fetched HK$157,300, or over £12,000], but the quantity is so small that it is hardly part of the market, just a rare gem. Harlan is really recognised in Asia and goes very well – it has become a Californian benchmark for them. I wish Ridge could get better known. They are such extraordinarily complex, and often exotic, wines.

What about the challenges Sotheby’s faces – the competition from relative newcomers like Spectrum, who seem to be making a lot of noise at the moment.

A lot of people make a lot of noise.

But there are big developments in the auction world – the rise and rise of the internet for example.

The internet is absolutely vital. It is unbelievable how wine auctions segued into internet bidding: people took to it like ducks to water. It has been a complete natural for wine. We added it a year ago in all three centres [London, Hong Kong, New York] and it’s been a huge success. It works because people have confidence in our vetting process, and even when they come to the sale they don’t see the wine - they don’t all charge down to the storeroom where it’s kept.

Nowadays in an auction you have all four things coming at you - you have the room, the telephones and live internet and absentee bids. But still the physical room is the most important – the fact is that in the auction room you can see you’re buying from the great collections – the actual entities – and they have been catalogued by the experts, and checked. I think that process will go on being important.


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