Wine auction businesses, if tariffs persist.

They too may suffer, even if some benefit during the short run, as wine collectors patronize these venues either to monetize the price appreciation of tariff-subject wines, or to stockpile them before tightening scarcity.

What do you think?

I agree; anything that hurts wine consumption will hurt auction businesses in the long run. The tariffs will certainly i) reduce wine consumption period and ii) create substitution effects away from wine (whisky, bourbon, gin, sake, etc etc), and it is unlikely that other wine regions will completely make up for this. All we can hope for is a return to sanity in the long run (but then we’re all dead etc etc)

I do not think it will have much of an effect in the current market- but 10 years ago it could have been disastrous.

What has changed in the interim is the flexibility with which collections are transported across nations- both when being offered for sale, and when individual lots are delivered to buyers. These days, there is enough volume for the major wine auction houses to periodically send reefers back and forth- offering customers delivery to their home nation for little or no charge and with a wait of a few months at most.

Also, we are now at a point where Asia and other regions have a large base of owned wines that could come up for sale. For a long time, Hong Kong auctions were where Asian buyers bought up wines provided from around the world. Now there is a lot of wine in local circulation.

Additionally, I know at least one auction house has started holding US collections sold in the Asian market within the US until after the sale. In other words- the lots are sold in a HK auction, but are kept in the US until after the sale. They are publishing to clients the lots in each auction where the lots are US-located, and then US bidders avoid any tariff worries and Asian buyers will just wait a brief time to receive any lots that are purchased for delivery within Asia. In a recent HK sale I observed by phone, there was a modest- but noticeable- anecdotal (meaning I feel like it was happening but do not have hard sale data to quantify it) boost for Bordeaux lots that were still located in the US versus those already in Asia.

Finally- the “Hong Kong” premium has largely disappeared from the marketplace with greater volume and more flexible global transport. Once upon a time, I used to advise clients to wait and sell as much at one time as possible so that their collections would be worth the extra cost and time to get delivered and sold in Hong Kong where hammer prices were consistently stronger than in the US.

With that market inefficiency now largely removed, and with strength in demand in the US very high, it is not too difficult for individual markets to continue to function quite nicely (efficiently) on a self-contained basis, with the added benefit of strategies such as not delivering US-based lots to international destinations until sold etc.

If the 100% tariff comes into effect, the sheer impact of that on a broad scale will be incredibly disruptive, and it is difficult to predict what could happen. In the short term, I think it would drive a lot of auction activity- particularly within the United States- as some collectors seek to secure supply while others gladly take some big profits. But in the long term it would be detrimental because you would see dramatic supply disruptions and higher prices in a market that is already overheated and starting to soften. Simply put- we would go even further in the direction of a smaller number of people owning top wines and more people deciding it is time to find an alternative form of recreational consumption as Yao suggests. There is certainly already a budding market for luxury and limited edition spirits.

Goooood time to have a deep cellar of US wines.

Uh, no

Like stockpiling snow shovels for nuclear winter.

Good time to have a deep cellar of European wines, I think is the intent…
It is distressing to have to see this senseless trade action that does not directly impact the industries involved. Do we really think that by hurting hundreds of small producers and wineries along with import businesses, there will be a change in the Airbus subsidies? Does not seem to be likely. It appears this is the worst kind of isolationism.

Has anyone seen prices rising for Bordeaux currently on the shelf? It sounds like champagne prices have gone up at least somewhat? pileon

Depends on the store. I have not seen it happen with the smaller brick and mortar stores, but with one large national chain and a handful of large internet retailers there has most definitely been a spike in pricing on current stock in anticipation of higher replacement costs for future stock. One such retailer flat out admitted it to me last week (and to be fair- this is not an unusual practice in general when a major price disruption takes place for a given class of products.)

More broadly, many Bordeaux are strengthening at auction lately. As the Italy and Burgundy bubbles have grown and started to burst in some cases, solid mid-upper range Bordeaux (meaning the better wines excluding the Big Eight in “investment” vintages like 2000 and 2005) which were already priced quite nicely but starting to go up seem to have taken a more aggressive boost in the couple of months since the tariffs were announced.

Still a good time to buy out existing stocks where you find nice deals- I have certainly done a lot of that lately.

I really can’t imagine a scenario in which a huge import tariff on European wines isn’t of great benefit to the auction business by making existing U.S. stocks more desirable.

Assuming a shift from European to domestic wine happens in the auction space (I don’t think US Pinot is a substitute for Burg, or Napa Cab for Bordeaux, but let’s assume), why would the increased desirability of US stocks be expected to outstrip the losses due to the tariffs? There may be more bidders for the same wines, but will the experienced ones pay more for something other than the real thing?

I meant, U.S. stocks of European wine, which will now be more valuable due to the increase in the price of competitive wines that have to be imported from Europe. The tariffs unambiguously increase the price and value of domestically held European wine and auction houses are the major venue for selling such wines, it’s not complicated

Ahh, got it. I misunderstood, thinking stocks of domestic wines not stocks of European wines already here in the US.

David, you weren’t alone; I’d made the same assumption.

I would make two assumptions. First, wine prices at auction will increase to match market prices. I wouldn’t take less if I could get more. That’s how selling usually works.

And I wouldn’t think auction houses would hurt at all. In fact, if prices do increase, the houses will just make more money. It wouldn’t be logical to assume that people who buy at auctions are as price-sensitive as others. And if Americans move out, others will move in. Currencies fluctuate all the time and in an international market, things become more or less expensive for different people at different times.