Wine Auction Market William Sokolin

Growth and Trends in the Wine Auction Market

Back in 1989, when William Sokolin famously broke a purported bottle of 1787 Chateau Margaux previously owned by Thomas Jefferson—a fake it turned out, he did more than break a potentially valuable bottle of wine. He also probably broke the law. Sokolin had taken the bottle on consignment from an English merchant and was trying to sell it in New York. In 1989, however, it was still illegal to sell wine in New York on consignment. It was also illegal to sell wine at auction. A secondary market existed, but it was a shadowy world of sales among collectors, all illegal. Auction sales finally became legal in New York in 1993, and the first sale was held in 1994.

Fast forward thirteen years. In 2007 there were five auction houses in New York alone that sold in total almost $150 million of wine. With impressive growth New York began outselling London, the previous center of the auction wine trade, in 1999. From that year on the U.S. dominated the global wine auction market, until 2010 that is. In 2008 Hong Kong lifted its 40% import tax on wine, and its auction market exploded. Within one year Asian wine auction totals had surpassed Europe’s, and in two years they surpassed those of the U.S. The global market readjusted starting in 2013, with the U.S. regaining the primary spot and Asia receding to second place, albeit by a wide margin over Europe.

Wine Auction Market

Demonstrably, the wine auction market is young and subject to rapid changes. Since World War II, and more recently during the period of great growth between 2005 and 2011, Bordeaux dominated the auction market, both in the volume of wines coming to market and the prices realized. This situation changed dramatically in 2011. Bordeaux underwent a market correction following a period of intense Asian interest, with 2012 prices auction prices of some wines reaching six year lows. This year also marked the ascendancy of Burgundy, which began to capture the imaginations and bids of collectors. While Bordeaux has spent the past seven years trying to regain its prior stature and pricing, Burgundy has gathered strength and produced record prices each year.

This year also began a five year period during which the volume and value of sales either declined or stagnated. While sales between 2012 and 2016 exceeded those for most of the history of wine auctions, with the exception of Burgundy, whose prices remained solid during this period of difficulties, they represented a sobering come-down from the heady results of 2010 and 2011. This retrenchment should caution those who regard the secondary market for wine as being inexorably in growth mode.

Wine Auction Market

Of course, what goes down must come up—or at least often does in the investment universe, and 2017 saw an increase in volume and value of sales over 2016, with Burgundy leading gains, a situation prefigured by its stability during the recent years of market decline. Moreover, preliminary results for 2018 indicate a record year for world wine auctions, which suggests that there is a robust future for the wine auction market. A series of offerings from superb private collections and consignments from top flight wineries suggests a strong global supply of collectible wine and no let-up in the near future.

While this makes for interesting observation, the uncertainty is whether these are buying or selling opportunities. You could sell Burgundy now, reasoning that the record prices cannot be sustained, but then had you applied that analysis and sold any time in the past five years you would have missed out on additional appreciation. Similarly, the relative softness of Bordeaux could be seen as an opportunity. If previous auction demand is an accurate indicator, Bordeaux, despite its recovery over the past few years, has been undervalued since the 2011 correction, unless, that is, the 2010 prices were a phenomenon not likely to reoccur any time soon. One should also consider whether the dominance of Burgundy and Bordeaux in the auction market indicates where collectors should direct their attention or, in the alternative, whether the less traveled paths of Champagne and Italy present the opportunities, or whether the soft markets for Port, Madeira and Sauternes are wise investments waiting to happen. What is certain, however, is that the development of the global wine auction market is vibrant and dramatic and that a wise investor will maintain a careful, critical eye and, perhaps, take advantage of expert advice.

Dylan Breger
About the Author:

Dylan is the Associate Marketing Manager at Borro Private Finance and covers the trends of all luxury asset classes