Wine auctions plunge as Chinese Bordeauz demand cools

Bloomberg News
Posted12/25/2012 6:23 AM
  • Wine sales by the biggest auction houses plunged 19 percent in 2012 as economic and political uncertainty in China cooled demand for trophy-name Bordeaux.

    Wine sales by the biggest auction houses plunged 19 percent in 2012 as economic and political uncertainty in China cooled demand for trophy-name Bordeaux. Bloomberg News

Wine sales by the biggest auction houses plunged 19 percent in 2012 as economic and political uncertainty in China cooled demand for trophy-name Bordeaux.

Sales by Acker Merrall & Condit, Christie's International, Sotheby's, Zachys and Hart Davis Hart Wine Co., excluding Internet business, raised $322 million with fees this year, down from the record $397 million achieved at equivalent events in 2011, according to data compiled by Bloomberg News.

Buying from China, the main driver of growth in the international trade for fine wines, was sluggish in the first three quarters of 2012, reversing the rises of 14 percent and 75 percent posted by the same five auction houses in 2011 and 2010.

"China has been a sleeping giant for most of the year," Miles Davis, partner at London-based Wine Asset Managers, said in an interview. "It feels as if it's gently waking now. We've recently had some big orders from Asia and prices have fallen far enough for business to pick up across the board."

Demand revived in the last two months of this year, following the selection of a new leadership in Beijing in November and perceptions that the prices of certain Bordeaux vintages -- such as 2000 and 2005 -- had once again become attractive, dealers said.

Davis cited slowing economic growth, over-stocking by Hong Kong dealers and a government crackdown on corruption as factors behind somnolent Chinese wine buying in early-to-mid 2012.

Still, by the end of the year Hong Kong accounted for 44 percent of all sales at the five leading companies, making it once again the biggest international auction center.

Christie's Record

This year, London-based Christie's raised $87.7 million with fees from its auction-room events, including the 152nd Hospices de Beaune charity auction, down 5 percent on 2011. Excluding Beaune, it sold $80.1 million, according to data compiled by Bloomberg. Christie's in addition held three Internet sales totaling $1.42 million.

Figures, subject to confirmation by the auction house in January, were bolstered by the 4.2 million pounds ($6.7 million) at its 1,470-lot London sale on Dec. 13-14, a record for any "various-owners" offering in the U.K. capital, Christie's said.

About 27 percent of the entire year's sales from the five houses were generated in November and December. The Beaune auction, held in collaboration with Christie's on Nov. 18, raised a record 5.9 million euros ($7.6 million).

New York-based Acker took $76.7 million through the auction rooms, down 25 percent on 2011, and a further $6.65 million through Internet sales, making its auction total $83.32 million. Zachy's raised $66.4 million, down 16 percent.

Hart, Sotheby's

Chicago-based Hart Davis Hart and Sotheby's -- who, unlike Christie's, don't hold wine auctions in mainland Europe -- were the biggest losers. Sotheby's registered $64.5 million of international wine sales in 2012, down 25 percent, with Hart contributing a further $26.3 million, contracting 30 percent.

Burgundy was the biggest mover of 2012, routinely supplanting Bordeaux in post-auction lists of top 10 prices.

Stellar sums were paid for wines from the cult Vosne- Romanee maker Henri Jayer, who died in 2006.

Jayer's Cros Parantoux, from a 2.5-acre premier cru vineyard that was an artichoke field in World War II, acquired trophy status after a case of the 1985 vintage from his private cellar fetched a record HK$2.06 million ($265,645) at Christie's Hong Kong in February.

Jayer Prices

Jayer captured the top six prices at Sotheby's Dec. 12 sale in London, led by the 42,300 pounds paid by an Asian bidder for six bottles of Cros Parantoux from the 1990 vintage, estimated at 26,000 pounds to 34,000 pounds.

Though high prices for Burgundy makers such as Jayer and the Domaine de la Romanee-Conti set headlines, the market for fine wines, both at auction and in the trade, continues to be dominated by Bordeaux.

Bordeaux represents more than 80 percent of the international wine trade, according to the London-based Liv-ex database of daily dealer sales. Demand remains little changed. The website's Fine Wine 50 Index, monitoring sales of the 10 most recent vintages of the region's five First Growths, stood at 299 on Dec. 17, 10.4 percent down for the year, said Liv-ex.

"Auction prices for the top Bordeaux wines have dropped between 20 percent and 50 percent over the last 18 months," David Elswood, Christie's International Director of Wine, said in an interview. "The market for some chateaux like Lafite went crazy and was making up most of the unsold lots at auctions. Levels have been adjusting to the 'Asia effect' and sensible buyers have taken over again."

Asian Boom

At Hart's Dec. 8 auction in Chicago, a case of a case of 1982 Chateau Lafite-Rothschild raised $33,460. In October 2010, at the height of the Asian wine boom, a case of this same wine sold for a record HK$1.03 million ($132,700) at Sotheby's, Hong Kong.

In addition to speculative Asian buying of first growths such as Chateau Lafite, confidence in the Bordeaux market has also been battered by ambitiously priced "en primeur" campaigns for the 2010 and 2011 vintages.

"Trading conditions are going to continue to be challenging," Elswood said. "We're not expecting any upturn in the Bordeaux market in the first half of 2013. People look to those wines for a sense of assured value. If we get another over-priced en primeur campaign we could have a serious problem."

(Scott Reyburn and Guy Collins write about the art and wine markets for Muse, the arts and culture section of Bloomberg News. Opinions expressed are their own.)

Muse highlights include Richard Vines on food, Martin Gayford on art, Amanda Gordon's Scene Last Night and James Russell on architecture.

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