Low inventory on WineBid the last few weeks. Must be that sellers are not wanting to fire sale their bottles, just yet.
I don’t know. There is a few week lag time between consigning and it going up, so a couple weeks ago gets into the teeth of the pandemic, where logistically it was difficult to do much of anything including even getting the wines to WineBid. So I am not sure it says much. Let’s see where things are in a few months.
Lots of folks sitting at home bored, wanting something to do and honestly when a wine I want via auction crosses the imaginary line in the sand I have for the price I just move on to the next bottle.
Winebid has been actively seeking wines by running a free inbound shipping promo on the site.
I’d love to see some detailed analysis of wine auction markets. They’re really odd and interesting. They represent a teeny teeny portion of the wine biz (SWAG - not more than a few percent), but not clear what fraction of the ‘fine wine’ biz. I bet very small too.
It has really weird supply and demand characteristics. The big auction houses focus on the ultra high end (more than $100 a bottle, many > $500). We’ve seen demand outstrip supply at all levels, and therefore prices have gone way up.
My guess is that buyers at places like Zachy’s and HDH auctions (ultra high end, mostly speculators or the super rich) are really different from K&L/Winebid (more wine obsessives/drinkers).
For non-speculators who buy at auction (relatively wealthier, relatively more white collar) things haven’t changed that much yet except we’re at home, bored and drinking more.
So if this line of reasoning is close to right, we won’t see auction markets change significantly until the economy overall tanks for a few quarters and/or something happens that drives the speculators out/selling. This weeks HDH Burgundy auction should be interesting!
Only the timing of this promo is new. WineBid has been running a free consignment shipping promo annually since at least 2005 …
As to the OP, the auction market is doing strange things right now. A lot of international buyers are fighting over relatively meagre pickings as a whole bunch of auctions have been called off (pretty much everything in the UK for example), apart from the peer-to-peer sites. I’ve seen some strangely over the top bidding in the past few weeks.
I’m not trying to pick on you at all, Rich. This post echoes a sentiment I see a lot here–that buyers of some wines, particularly more expensive wines, are “speculators”.
Can you explain a little more fully what you mean by this?
A speculator is someone who invests in any venture for the purpose of attempting to make a profit. Is your suggestion that a lot of people buying Rousseau Chambertin, just as an example, are buying it in the hopes that it will appreciate and they can sell it for a profit later? Or are you saying that those prices are driven by trade buyers like merchants and restaurants that hope to sell the bottles at a profit later as part of their business?
There are very few wine investment funds out there these days. There was a mini boom at one point, but most have failed. A few are still going, but they are not a significant part of the buying pressure.
I’ve watched and participated in the high end wine world for a while, and I can say that from what I see most buyers of high end wines are in fact drinkers. There are definitely many who believe–and for a long time have been vindicated–that wine will be more expensive in the future, so that by buying in the past they have saved money on the bottles they have drunk and retain the option to sell undrunk bottles at a price higher than they paid for them. But when you factor in storage, insurance, and, most of all, the bid/ask spread, the returns would have been modest, with some exceptions.
I don’t see speculation as a significant part of the wine market. What am I missing here?
For the Internet, this is the most gentle form of being ‘picked on’ so I appreciate the feedback, and it’s a fair criticism and question.
Note that I said I GUESSED that the ultra high end is driven by “mostly speculators or the super rich.” Maybe the latter point is tautologous, as anyone who can buy wine for $500+ is by definition rich. By speculator, I just meant anyone who is buying wine OTHER than the primary purpose of drinking the wine themselves. I guess the question is, why do people buy up large quantities of ultra high end wine? Do they intend to drink it? Or do they intend to create an asset for their children? Are they trying to create a lifestyle? An ornament for their house, their cellar? A vehicle for impressing business partners? Are they buying the wine for a business purpose (i.e. for a restaurant, store, or to re-sell in some other way)?
So ok, speculation isn’t perhaps correct. I’d love to see some real data. Who is buying high end wine? For what purpose? If we could understand that better, we could better forecast what will happen in the current market downturn. That’s the core question in this thread. Wine Berserkers dreaming that some beautiful high end wine that they can no longer afford will fall in price back to a more accessible place.
My assumption has always been that there are a certain number of “drinkers” who are exceptionally wealthy and simply don’t see a $300-500 wine as a significant cost – they view it the way we obsessive types who are less wealthy would view a $30-50 wine. Burgundy production is very low once you break it down to producer/vineyard level, so if a particular producer/vineyard catches on among exceptionally wealthy social circles it very rapidly zooms up to $300, $500, or even $1,000+ plus per bottle. Because the people who now want a case in their cellar for future dinner parties simply don’t really care about price that much. I mean, imagine if your income was $5 million or $10 million a year, you could drop $500 in a heartbeat. This makes the dynamics of the auction market quite reasonable, all that it takes is a couple of wine tastings or dinner parties among a very wealthy social circle where people ohhh and ahhh about a particular producer/vineyard and all of a sudden the marginal buyer is an order of magnitude wealthier than they were before. From the outside it looks semi-random but it makes sense.
I very much doubt the true high end wines will become accessible/affordable to most of us ever again. I am just looking for prices on some very good but less celebrated wines to return to their price levels of 3-5 years ago.
Rich,
Thank you for explaining your thoughts.
From the collectors and clients and folks I know in the collecting community, it’s true that for some, wine is perhaps not their biggest hobby. It might be something they do on the side–something social but that does not occupy their brains as fully as it does for others. But for many of even the biggest buyers and collectors, it is indeed all consuming. There are people who drink very expensive wines very frequently, maintain another full time job that obviously pays quite well, but are totally obsessed with wine to their core. There are people that only half jokingly do two dinners a night to taste more. Just my two cents, but I would say don’t underestimate the wine passion of wealthy collectors. Many of them are quite serious about wine. Like everything in life, there are certainly fakers and charlatans out there. Guys that open overpriced wines that are not ready to drink to impress their dinner guests. But there are lots of wealthy drinkers that are totally serious and very knowledgeable.
I wasn’t asserting that the US system is particularly progressive. It’s certainly not relative to countries like Canada the UK. I just looked up the figures for the 1%'s contribution to total federal tax revenue because someone way back challenged that ~40% figure, and I thought I’d factcheck it. It turned out to be roughly right. Given the enormous spreads in income and wealth, the 1% can pay that much even under a not-very-progressive rate structure!
John and Greg - I also researched this thanks to Paul’s initial comment and then the provision of a data source. Fair to say “… of Federal Income Tax” is only (less than) half the story. Best attempt I came across at more meaningful analysis across the various types of tax is here:
This shows the top 1% earn ~21% of all income (within limitation of reported / declared of course) and pay ~24% of all tax; and it is only at that top 1% level that total tax % exceeds total income % by more than 1%. So all up really only very mildly progressive.
Getting back to wine auctions 
. The HDH auction was strong for sure today - just my feeling. As a collector I won some nice bottles - lost a bunch and I’m willing to pay up for what I want/need. Some of this stuff is non-existent in the US. So when factoring in any tariffs I can see many bidders thinking that buying overseas and paying 25% more will make it even more important to get bottles in an OWC 6 pack from a nice cellar in an auction - just hit the “BID” button… This is certainly factoring into backfill decisions I’m making now.
Out of interest, Jonathan, what type of stuff is “non existent” in the US? Is that basically all the pointier Burgundy or really just specific producers / styles?
HDH seems to always have a great selection from many different producers and vintages in their live auctions. Looking at the catalog can be like looking inside a candy store for a kid with a sweet tooth - everything is right there to sample and none of it is available anywhere within a short bike ride (where talking about a kid here :p). Low supply and high demand bottles seem to still be driving prices upward and to the moon - from Bruno Clair bottles all the way up to Rousseau Chambertin and through the roof (DRC). Raveneau is a good example also - a bottle here and there at retail at a reasonable price isn’t enough to want to cellar… For vintages that aren’t found at retail or from a retailer that might get you a small allocation of a special wine - the effort to seek out such things seems to grow with supply ever shrinking. As a lowly wine consumer at the end of the supply chain, I often think that there are way to many middlemen taking their cut along the way which probably adds to upward pricing pressure also as the industry grows with businesses trying to make a profit - many are friends and I’m not ITB. Producers like Fourrier/H-N and even Lafite, they’re selling direct to consumers through auctions (recent vintage and/or back vintages) - getting most of the profit and prices still go up because of provenance. I can imagine that someone in the wine supply chain that would get a case of Rousseau Chambertin would be more than likely to sell through auction vs. at a discount to a wholesaler or consumer. Looking at an auction catalog and putting in absentee bids seems to beg the question even more now-a-days - maybe I should have put in a bid one increment higher which cumulatively adds to the bidding fervor. Tariffs can all of a sudden make the cost of buying an already expensive and rare’ish bottle of wine look less expensive at auction all things considered. Just some thoughts from a consumer that’s finding it harder to buy bottles that they like because everyone else also likes them. Frustrating and I know I can’t be alone .
Ding ding ding. Compare the quantities available to auction to the quantities your typical retailer might get. For example 2016 lafarge ducs, two retailers I know got 3 and 6 bottles, respectively. So if a consumer wants to get even a 6-pack he/she can either work multiple retailer connections (and deal with picking up/shipping each) or overpay a little at auction. And this isn’t even a real unobtanium wine…
I’ll chime in at a macro level…
The level of wealth globally now, even after the equities markets try to recover from a noticeable tumble, still dwarfs what life was like back during the last major downturn (Great Recession of 2008-09]. Not that being a billionaire nowadays is insignificant, but the number of them (and the level the top 100 have risen to) currently is markedly different than the last downturn. Check out the 2009 Forbes billionaire list, which had Bill Gates at the top slot with $40B when the list was published:
Now compare to the real time (gotta love technology advances!) Forbes billionaire list, where a mere $40B would have put Gates outside of the Top 20:
Larry Ellison was #4 on the 2009 list with $22.5B. His net wealth has tripled since then to $68.3B as of the close of the market yesterday, and the result is he actually drops a spot to #5 on the current list. He can thank the nosebleed wealth of Jeff Bezos and Bernard Arnault for that.
This same dichotomy percolates down the range. A 6-figure USD salary for newly minted college grads in many STEM fields has been pretty much a de facto standard for a number of years now, whereas it was much more hit and miss 12 years ago. In the major metros, there are plenty of folks who are still comfortably well off even as their stock portfolios and 401Ks took a significant hit.
TL:DR - even with the many businesses and workers who’ve suffered significantly due to this downturn, there are still plenty of folks with the means and resources to continue pursuing wine…
Just out of curiousity, is there any segment of the online wine auction world that has started going down?
I always thought the biggest differential between initial retail / tasting room price and their eventual auction transaction price was for CA pinot and syrah, but maybe that’s wrong or just a hunch from limited observations/conversations.