CAUTIOUSLY OPTIMISTIC: THE FINE WINE MARKET IN 2011

With record totals and jaw-dropping prices achieved at auctions, the fine wine market was apparently in rude health in 2011. But the secondary market away from the auction rooms of Kowloon told a different story. The London-based fine wine exchange Liv-ex’s Fine Wine 100 Index, which “represents the price movement of 100 of the most sought-after fine wines for which there is a strong secondary market and is calculated monthly”, fell by 15% in 2011.

The Auction Houses in 2011

Most auction houses had their best-ever year. New York-based Acker Merrall & Condit achieved $110,454,801 in sales (including 22% buyer’s premium) in 2011, the highest-ever annual total for a wine auction house and a 12% increase on its 2011 total. Acker Merrall claimed “more than 500 records established in 2011”, including the “biggest auction of the year”, which made HK$112,740,200 ($14,453,872) on 8th and 10th December and included the “most expensive auction lot of the year worldwide”: a 1952-2007 vertical of Romanée-Conti that sold for HK$5,200,000 ($666,666).

Sotheby’s 2011 sales reached US$85,467,096 (including premiums of 15-21%), just behind 2010’s total of $88.27 million. London wine sales realised $27,191,060, the highest annual total there since the wine department was established in 1970 and an increase of 30% on the 2010 total of $20.97 million.

Christie’s totaled $92,672,909 (including premiums of 10-21%), from 29 sales conducted across six salesrooms. Like Sotheby’s its London sales totaled more than its New York sales. With London eight hours behind Hong Kong rather than New York’s 13 hours, bidders in China don’t need to stay up as late to bid by phone or Internet. Significantly lower buyer’s premiums at London auctions – 15% against 21% – also make it an attractive place in which to buy wine.

Zachys’ worldwide gross for 2011 was US$78,969,614 (including premiums of 21-22%), of which $31,742,214 was from US-based sales, with the remaining $47,227,400 from Hong Kong sales.

Chicago auctioneer Hart Davis Hart made $37,425,857 from seven sales (including 19.5% premium), a slight decline on its 2010 total but still enough to be the leading wine auctioneer in the USA.

Bonhams’ Wine Department finished 2011 with a year on year increase in sales of over 40% for the second year running, totalling $17 million from its sales in the UK, USA and Hong Kong (including premiums of 15-19%).

Despite record amounts of wine being sold in 2011, the fourth quarter saw the market slip. Sotheby’s 2nd October sale, which had a clearance rate of 93%, ended a run of 16-consecutive 100%-sold sales in Hong Kong. Volatility often signals a change and this was confirmed at Christie’s tepid 25th-26th November sale, which had a poor clearance rate of 77%. Its overall clearance rate at Hong Kong sales was only 82%, well below its other locations.

Lafite of clay

Auctioneers continued to whip up the Lafite “myth”. A 25-case lot of Lafite 1981-2005 sold for HK$3,500,000 ($450,648) at Christie’s Hong Kong in September but this proved to be its last hurrah in the Asian market. By October 2011 Hong Kong was saturated. Overexposure, excessive prices and forgeries led buyers to look elsewhere.

Lafite, it has turned out, is just another wine. The days of Chinese paying whatever it takes to get that case of 1982 are over. Like gold and oil, it became overpriced because of speculative buying.

The decline of Lafite doesn’t mean the end of the fine wine market, though. Hermitage La Chapelle, Le Pin, Latour and d’Yquem all shone at various auctions in 2011. But figures and anecdotal evidence show that the brightest star in the current market is Domaine de la Romanée-Conti. Intense demand in Asia for an already scarce product will cause prices to spiral out of control – and encourage forgers. But as the market matures buyers might look at other Burgundy estates for better value, just as there is more interest in Super Seconds and other Bordeaux Crus Classés.

Anniversary wines

The Mayans believed that the end of the world would be in 2012. Happily there are some decent vintages available to those celebrating an anniversary in 2012 – or winning an Olympic gold medal.

Overshadowed by the high-scoring 2000 and 2003 wines, 2002 is a very decent Bordeaux vintage and relatively good value. Tokaji and Port were more than acceptable in 1992, though French classics are mostly terrible. White Burgundy was good but low acidity and oxidation problems mean that most are now past their best.

There’s no Pétrus available for 21st anniversaries – the Merlot failed that year and none was made. But California was good.

Nothing of significance was made in 1987. Bordeaux in particular had a dreadful vintage.

Thirty years on, the 1982 Bordeaux vintage is as sought-after as ever. Champagne was also outstanding and Piedmont enjoyed a good year. This is a great Grange vintage too.

Release prices of the awful 1972 Bordeaux vintage were notoriously expensive. Burgundy was a bit better. But the best choice for a 40th anniversary is Tokaji, which had one of its best ever vintages in 1972.

The magnificent La Tache 1962 is the finest possible way to enjoy a 50th birthday. Tuscany had a good year, as did Champagne. Bordeaux wines are sound but have always been overshadowed by the much superior 1961s.

There is plenty of choice for Queen Elizabeth II’s Diamond Jubilee celebrations. Cheval Blanc and Pétrus 1952 are superb examples of a much-underrated Bordeaux vintage. This year was the first bottling of Romanée-Conti to be made from the vines that were planted after the war. Tokaji and Champagne were both successful.

Bordeaux 1942 was better than 1941, which is not saying much. Yquem was a success, though, and Burgundy was quite good too. There is nothing worthwhile from 1932 or 1922.

Centenarians can enjoy Lafite, Tokaji and Port!