2006 was a record year in the salerooms. John Stimpfig goes behind the scenes at the wine auctions and finds out where the real power lies.
Buying at wine auctions is becoming more and more popular – and more global. John stimpfig considers where the real power lies
How times change. Back in 1966, when Michael Broadbent’s fledgling Christie’s wine department reinvented fine wine auctions in London, its first season netted an encouraging but modest £220,634 from over 11,000 lots offered by 796 vendors. Fast forward to Christie’s 40th anniversary Finest & Rarest sale last October, when more than £1m worth of wine was hammered down in a single afternoon from just 365 lots.
Christie’s was by no means the only auction house who had major cause to celebrate in 2006. Talk to any auctioneer on either side of the Atlantic – and to a man (and woman), they’ll tell you that irrespective of awards and anniversaries, last year turned out be the most memorable, exciting and extraordinary year in the salerooms in the modern era.
To understand why, you simply have to look at some of the astonishing figures for 2006. Records were set left, right and centre as prices, percentages and totals rocketed out of this world to unprecedented intergalactic levels. Almost inevitably, Sotheby’s famous Millennium sale relinquished its seven-year record as the highest of all wine auctions. Last October in New York, it was smashed into smithereens by more than $10m when Acker Condit & Merrall’s two-day, single-vendor sale grossed a mammoth $24.4m.
Other records that went by the wayside included the highest single-lot price. This went to an anonymous bidder at Sotheby’s Park B Smith auction in November following a successful bid of just over $1m for 50 cases of 1982 Mouton Rothschild. So too did the record auction price for a single case of wine – by a country mile. Not once, mind you, but three times in the course of the year. The eventual winner was a case of six magnums of the legendary 1945 Mouton, bought for a breathtaking $345,000 at Christie’s inaugural LA sale in September.
Clearly, there has been some feverish competition for the top trophy wines which continued to surface as prices soared. And as the buyers’ market gathered pace throughout the year, so too did the competition between the houses of wine auctions to net the major consignors on both sides of the Atlantic.
Most obviously, the historic rivalry between the two big players of wine auctions, Sotheby’s and Christie’s, continued unabated – though these days there appears to be less antipathy between the two houses since the semi-retirement of Michael Broadbent. He famously hit it off with Sotheby’s department head Serena Sutcliffe MW in the same way that Manchester United’s Sir Alex Ferguson enjoys the company of Arsenal’s Arsène Wenger.
Today, Christie’s international wine department is run by the long-serving David Elswood, who is also its principal auctioneer. ‘To be honest, we’re almost unaware of the rivalry,’ says Elswood. ‘No doubt we are competing for the same properties. But beyond that I wouldn’t say there is any animosity. We know each other and bump into each other at tastings and events. If anything, it’s nice to have some competition because it keeps you on your toes.’ For her part, Serena Sutcliffe’s policy is never to comment on her competitors. ‘I never have and I never will.’
Nonetheless, both these wine auctions are more than happy to put one over on the other, given the opportunity. For instance, whoever comes out ahead in the worldwide revenue stakes will invariably crow about it as loudly as possible – strictly for business reasons, of course.
In recent years, Christie’s has tended to be top dog, partly because it conducts many more sales than its opposite number in Bond Street. ‘Our strategy has always been to serve the market from top to bottom through our network of auction venues throughout Europe, London and the US,’ says Elswood. ‘We want to address the market by doing the highest number and the most varied sales.’
In contrast, Sotheby’s has tended to aim more for the major collections and single-vendor sales that have come up for auction with increasing frequency in the last two years. ‘Single-vendor sales are very important to us,’ says Sutcliffe, who last year was the first member of the British wine trade to be awarded the Légion d’Honneur. ‘It is the ideal scenario, when you get a great collection worthy of a single sale. But we are also very interested in smaller great collections which we can group together.’
But how do they go about getting the big collectors to sign on the dotted line? ‘Sometimes a 50-page list does just drop on your lap,’ says Elswood. ‘Sometimes it’s a long game that you play with an individual collector whom you court over a period. Hopefully, you then get the business. But it doesn’t always work that way. For all the strategising, I would say that half of it is opportunistic in terms of us reacting to an enquiry.’
For Sutcliffe, securing a collection is about top-class service, getting the detail right, global contacts, knowledge, experience and sheer professionalism. ‘Basically though, it boils down to a collector being convinced that you are going to do the best possible job for them. That’s when they hand over the collection to you – and not until then.’
Wine Auctions Power shift
In the last five years, it has become increasingly clear that most (though by no means all) of the major collections have been bought and sold in the United States. Indeed, ever since the ban on holding wine auctions was revoked in New York State in 1994, the real auction action has shifted more and more across the Atlantic to the Big Apple. In fact, so much so that for a few years now the US in general, and New York in particular, has eclipsed London in terms of sales volumes. Last year, for instance, American wine auctions grossed well over $150m, leaving Europe for dust – despite a series of very strong sales on this side of the Atlantic.
It goes without saying that neither Christie’s or Sotheby’s were backward in setting up shop in the US and developing this relatively new market. Both pioneered strategic partnerships with local players – today Christie’s collaborator is NYWines, while Sotheby’s operates with Aulden Cellars. Meanwhile, the recent growth of local competition from a number of wine retailers-turned-auctioneers has been nothing short of remarkable.
Having initially formed an alliance with Christie’s, the NY merchant Zachy’s went solo in 2002 and experienced exponential growth. In 2005, it hammered down $34m worth of wine from just eight sales. Only Christie’s surpassed that, with $42m from its 43 international auctions in the same period. But 2005 was no one-off. At the end of last year, Jeff Zacharia predicted 2006 would be the company’s best year ever with $35m sold.
Without question though, the latest and most meteoric rise comes from Acker Merrall & Condit, which only began its bricks-and-mortar and internet sales in 1998. Having had two partnerships with other houses, it too has ‘gone it alone’ to great effect under the leadership of the young and ambitious John Kapon. In 2005, Acker Merrall took $20m in sales at auction. But last year, it was expecting to triple that figure to a staggering $60m sold. Astonishingly, nearly $35m of this came from two sales and just one anonymous collector.
Other players who are competing for consignments include Morrells in New York (which also runs online sales), Winebid.com in cyberspace and Hart Davis Hart in Chicago. The latter is going great guns with the gavel, having notched up some $14m worth of sales in only its second year. According to its president and CEO Michael Davis, ‘we have maintained a steady 98% sold by value from our first auction in 2005. Statistics such as these were unheard of 10 years ago.’
Given the volume and quality of great wine coming under the hammer in the US, it is hardly surprising that there has been some tough and highly innovative marketing to net both the major consignors and big bidders. Most notably, Acker Merrall & Condit and Morrells both imposed a 0% commission for the vendor, whereas most other houses work down from a figure of around 10%. ‘This was the spark that allowed us to get the goods, to get quality consignments – and if you’ve got the goods, the buyers come,’ says Kapon.
Some have also added more glitz and glamour to the hitherto staid auction format. Zachy’s, for instance, relocated its Saturday auctions to some of Manhattan’s top restaurants. It also hired two of the world’s most high-profile auctioneers, Fritz Hatton and Ursula Hermacinski (aka the Goddess of the Gavel). Both are ex-Christie’s and developed their more entertaining styles at the Napa Valley Wine Auction. There’s no question that this talented twosome has proved a powerful draw.
However, the local players haven’t had it all their own way. The major London auction houses have also had no shortage of Stateside successes in the Big Apple and beyond. Sotheby’s can claim some landmark successes with a number of single-vendor sales including its Park B Smith and Russell H Frye collections which grossed a cool $15m. Sutcliffe was also predicting that revenues would also be up ‘considerably’ on 2005 (which in turn were 40% up on 2004). Bonhams & Butterfields’ Richard Harvey MW was also predicting in November that revenues will be up by 35% on 2005. Equally, Christie’s North America predicted another exceptional year in the US.
The Brit pack has responded to US success by adopting some of the techniques used. Sotheby’s offers lunch at its Saturday sales and bidders can bring their own wine. Christie’s has also begun to host wine dinners and masterclass events around its sales. It has also introduced a multimedia auction feature that allows you to bid from your computer in real time against the room and telephone bids. In a $3.3m sale in November, clients from Europe, Asia and the Americas successfully bid on 22 lots for an online total of $318,000.
Currently, though, the question on everyone’s mind in the US is how long can the bull market continue and when will the bubble burst? For most there are no signs yet that the market is about to stumble. ‘It’s still very strong,’ says Zacharia. ‘I think 2007 will be a very exciting year.’ According to Nikos Antonakeas of Morrells, ‘this is the strongest market I have seen in 23 years. In my view, the true blue chips and the old and rare vintages will continue to rise.’
Sutciffe is also guardedly confident about the market in general and New York in particular. ‘I’ve been in the business for too long to think that everything stays the same forever,’ she says. ‘These things go in cycles. But unless something very odd happens globally, beyond our control, I don’t see it collapsing. Instead, given the amount of spending power out there, and providing we can find good things to sell, I think it will continue for some time yet.’
Elswood appears the most cautious. ‘I think the market has probably peaked in 2006,’ he says. ‘Nevertheless, I think we will see good continued demand for the few super-rare wines at the very top of the market.’ Time, as ever, will tell who exactly is on the money in what promises to be another action-packed year in the salerooms, on both sides of the Atlantic.
Who Buys What And Where
Although Christie’s ran auctions throughout Asia from 1985, it stopped doing so in 2001. One reason why neither Christie’s nor Sotheby’s now run sales in the region is the sheer expense of doing so. Another was the danger that prices could become overheated, and buyers would end up paying over the odds at local events. ‘Nowadays though, a lot of our Asian clients are far more savvy and are more than sufficiently confident to buy regularly in London – where they also have more sales to choose from,’ says David Elswood.
‘As a rule Asian buyers tend to buy more wine in the UK than they do in the US because they like to bid in England,’ points out Serena Sutcliffe. ‘Many have links in the UK, and professional wine storage facilities are well developed here. That said, if it is a lot that they are completely mad about acquiring, they will not hesitate to bid in New York.’
Certainly, Asian buyers have come back on to the scene with a vengeance in the last couple of years. In 2005, 24 of the top 100 lots auctioned by Sotheby’s in London went to private Asian buyers. ‘Five of those were Pétrus, four were DRC and three were Latour. With DRC, one does wonder whether, if the Asians did drop out for a period, the price would drop a little,’ adds Sutcliffe.
Elswood also points out that ‘we tend to think of Asians as buyers. But actually, we have quite a few clients who bought at our Asian auctions in the 1990s who are now quite active sellers. There’s no question that Asian collectors have become much more sophisticated.’
‘Generally, Americans stick to buying in their home country. But they will buy in London for some of the very top wines, despite taking a hit on the exchange rate,’ says Sutcliffe. ‘Of course, some of our clients buy on both sides of the Atlantic because they have houses in London, New York and the South of France. And certainly many Indians, South American and Russian collectors buy both in the UK and the US. ‘
A Buyer’s Market
Last year’s stellar auction prices have also opened up a huge gulf in the saleroom prices between top and bottom. ‘The market is incredibly polarised at the moment, both in the US and the UK,’ says Richard Harvey MW of Bonhams and Butterfields. ‘So while it is very buoyant at the top, it’s much softer in the middle. At the bottom, drinkers can pick up some real bargains for the non-trophy wines – particularly cru bourgeois, less glamorous Burgundies and good Rhône growers from exceptional vintages like 1998, 1999 and 2001.’
This view is endorsed by William Chadwick of the Abergavenny-based auctioneers Straker Chadwick. ‘There are definite bargains to be had at auction, particularly in the £100–300 a case bracket, where it’s a real buyers’ market.’ Unlike many of its competitors, Straker Chadwick does not impose a buyer’s premium of 15% or more. Instead, it charges a fixed fee of £7.05 per lot. This brings the cost of buying down and has attracted more bidders to its auctions than ever before.