It’s OK To Wave At Wine Auctions: Inside The $346 Million Wine Auction Industry


4 minute Read

It’s OK To Wave At Wine Auctions: Inside The $346 Million Auction Industry

Yes, they serve free Krug Champagne at Christie’s wine auctions, a treat I was happy to discover when I attended my first Fine and Rare Wines of the World auction in 2013. Shocked to discover that these auctions are open to the public, I traded yoga pants for the chicest thing in my closet (my only Little Black Dress, thank you Banana Republic), grabbed a glass of bubbly and took a seat toward the front.

Around me, impeccably dressed couples and Euro-chic men with perfectly coiffed hair whispered and pointed at booklets detailing each lot. These were just one of the things I’d been afraid to ask for as I walked in the door, certain I was breaking an unspoken rule by attending.

Surrounded by screens covered with international currency symbols stood the auctioneer on a platform reminiscent of a colonial court. From his stately wooden pedestal he announced each lot, which instantly appeared on another screen behind him and the bidding began. Paddles were raised, representatives answered phone calls and waived in bids from the sidelines, and online updates rolled in on the screens. Within an hour, millions of dollars of Bordeaux and Burgundy found new homes.

Working predominantly on consignment, they don’t seek out producers, amazing retail values, or elderly private collectors, but instead let those entities approach the house to sell their wares, wine or otherwise.

Terrified to even move my hands, naively thinking I might be taken for a bidder, I was happy to discover that accidental bids on fine wine rarely occur outside of the movies. You’ll need great credit or valuable collateral to bid on the world’s most coveted wines, but outside of first-growth Bordeaux and Grand Cru Burgundy, the world of wine auctions is a surprisingly easy one to infiltrate and understand.

First and foremost, it’s important to remember that auction houses are brokers. Working predominantly on consignment, they don’t seek out producers, amazing retail values, or elderly private collectors, but instead let those entities approach the house to sell their wares, wine or otherwise. The aloofness of these houses doesn’t stem from snobbery, but instead from the inherent flux of the auction business, which was worth $346 million in 2015 according to Wine Spectator. Each seller has a unique and private arrangement with the house, which means selling wine at auction involves a certain degree of secrecy.

Jeff Zacharia, President of New York-based Zachy’s (a house responsible for $55 of that $346 million last year), explains, “The minimum price, or reserve, is determined by a confidential agreement with an individual consignor and agreed ahead of the auction, though it’s not uncommon that some lots are offered with no reserve.”

In short, the larger and more valuable a collection, the less the consignor pays to the house. For example, the sale of a large private collection of rare Burgundy offers the house a chance to make thousands, compared to a small offering of lesser-known German wines. Like selling old comic books on eBay, auction experts look at historical price data, retail pricing, and other auction results to decide how to organize the wines.

In Sotheby’s upcoming sale of billionaire William Koch’s wine collection, over 20,000 bottles (roughly 1,600 cases) will be sold in an auction that could generate millions.

Once contracted, the excitement escalates as experts assemble the lots (auction speak for groups of bottles sold together) for a live or online auction. According to Conor Kriegel, head of auction sales for Sotheby’s Wine, there’s a good deal of strategy that goes into organizing sought-after wines into specific auction lots. “A lot is usually a full case from the same producer or region. They could be verticals, horizontals, or a single vintage. Bottom line, we want to make the lots appetizing for potential buyers.” And that’s not always easy. Kreigel adds, “An auction might include 7,000 lots, and we’re looking at every wine, and every bottle of that wine before lots are assembled.”

For example, in Sotheby’s upcoming sale of billionaire William Koch’s wine collection, over 20,000 bottles (roughly 1,600 cases) will be sold in an auction that could generate millions in cash, and garner significant prestige for Sotheby’s.

At the live auction itself, registered bidders get a paddle. These are the bidders who filled out the requisite paperwork, and have adequate credit to bid on the wines—and the reason you won’t accidentally bid by scratching your nose in the audience. Each time a lot is won, the price the auctioneer announces as he bangs the gavel is known as the “hammer price.” Though that’s the final sale amount, the winning bidder then pays a “buyer’s premium,” a fee up to 25%, that the buyer pays the house in addition to the hammer price.

Registered bidders are also the ones with the lot catalogs, detailing the bottles in each numbered lot. However, the same information is often available online, where much of today’s auction activity happens and where smaller bidders (ahem, you and I) have a chance to get involved in the bidding action.

“In our last eAuction, which consisted of over 1,000 lots, we had lots with a starting bid as low as $30,” says Zacharia. “A bottle of 1995 Louis Orderer Cristal sold for $270, when a more recent bottling can average $150-$200 per bottle. That’s an incredible value for a bottle with age,” says Zacharia, who notes that special bottles can often be bought below retail costs in an auction setting. Plus, thanks to the internet there are a wealth of inexpensive auction websites trading entry-level wines that make experimenting with bidding breeze.

“There’s a lot of good wine worth bidding on,” adds Kriegel, “Per glass, our auction prices are often in the $10-15 range. In the Bill Koch sale we have coming up, there are 2,000 lots under $4,000, for some of the best wine in the world.”

Even if you don’t get involved online with rare wines, your favorite charity likely already has. Longstanding charity auctions such as the Hospices du Beaune and Auction Napa Valley (which comes with a sticker price of $2,000, just to attend the auction) raise millions for charity annually. From Jackson Hole to Destin Florida, wine seems to inspire perhaps the grandest shows of philanthropy—with wine reaching record prices and items like Rolls Royces selling for far beyond their six-digest sticker prices. Normally, auctioneers donate their services to these events, and the houses stay on the sidelines, if they get involved at all. Wineries instead get to play the role of impossibly chic wine gurus…which they are.

From Geneva to Hong Kong, the business of wine auctions retains its elite image, but in the end auctions are just another niche for wine lovers to discover. Yes, they’re more expensive than Trader Joe’s (even with those fantastic hidden values), but they offer a unique chance for drinkers to see how the world’s fine wines move, and understand the how prestige is built around them. So check it out, you might even get some free Champagne.

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