As a wine director there are multiple reasons to search out and purchase wines in the auction market. I began my own foray into buying at auction years ago, as the wine director of Redd (in Yountville, CA), when I got access to older vintages and pricing. The vast majority of wine lists then and now are loaded with current vintages; leaving those who prefer wines with age to suck it up and commit infanticide, or worse yet, BYOB. Some establishments, such as The French Laundry and RN74 in California or the now defunct CRU and Veritas in New York, are/were able to have grand lists with decades of older vintages through consignment relationships with investors or owners. Those who are either not fortunate enough to have such relationships, or who work in areas lacking collectors with trophy cellars, have the auction market to assist.
Before beginning to consider the possibilities of the auction market, check the relevant alcohol laws in your specific state and county. Buying at auction and reselling in a restaurant is not legal everywhere. Please do your due diligence as it is not only your job, but likely your establishment’s liquor license and fellow employees’ livelihoods that could also be in jeopardy if you buy and resell wines illegally.
Know What You Want
As you take your first steps into auction buying, really focus and understand what it is you want, and formulate a plan. What type of breadth and depth are you looking to add to your current inventory? Given a healthy budget you may be looking for vinous wines going back twenty, thirty and forty or more years in half-case or full-case quantities. But most budgets are smaller, and most wine directors may just be looking to add a smattering of wines with age to supplement lists featuring mostly young wines. Such an approach may include wines in the three- to ten-year range, in smaller two- to four-bottle lots, stretching the amount of distinct wines that will show up on their list and lending the list the appearance of a deeper cellar.
Different auction houses, both live and online, specialize in these scenarios, so some research is key. For smaller quantities the online auctions represent the best channel for one- to three-bottle lots. Smaller lots tend to not make it to the live auctions, but look for stand-alone online auction houses (WineBid), or online branches of brick-and-mortar houses (Zachys, Acker etc.). Online auctions are also a great resource for wines beyond the blue chips (DRC, Leroy, Jayer, First Growths, etc.) that are the bread-and-butter of the live auctions. But if you are looking for a full case of a top wine in OWC (original wood container), then live auctions will be your focus.
Searching for Burgundy and Bordeaux? You’re in luck! Almost every auction house focuses on wines from these areas. Interested in adding some California wines with age to the list? Not as easy. The European houses, (Christies, Bonham’s, Sotheby’s) tend to focus on European wines with only the occasional Napa blue chip, like Screaming Eagle, Harlan Estate or Colgin.
Price and Provenance
The two most important factors to consider when purchasing are the price of the wine and (more importantly) its provenance.
Price is simple: what will my final bottle cost be after taking into consideration the hammer price plus the fees that will be added to it? Fees include the buyer’s premium, which ranges from 14% to 25% depending on the house. (A buyer’s premium is a fee charged as a percentage of the hammer price that encompasses both the commission that will be paid to the seller, and the fees that keep the auction house lights on.) Below are the current buyer’s premiums from a selection of major auction houses:
Tax also factors into price. The buyer’s premium is added to the hammer price and the tax is charged on the total. One easy mistake to make is add the tax and buyer’s premium percentages together, and add the value of this combined percentage to the hammer price. Don’t!!! You need to figure out the sum of the hammer and the buyer’s premium first, and then add the tax to that total. I made this mistake and it cost me.
Keep in mind that tax is state- and county-specific; for my purchases in California (and for the below example) it is 8%. Remember: if you are purchasing for your restaurant you may utilize your resale license and pass the tax burden on to the final customer.
Insurance, which some houses charge, is 1% of the total, including the buyer’s premium. And don't forget the price of shipping, which can range from about $6-$8 a bottle for larger shipments up to $20 for single bottles. It’s easy to see how that great deal on a bottle can quickly escalate until it’s no longer a value. You have to be aware of these additional costs when placing your bids.
For example, imagine I purchased the same bottle of wine for the same hammer price ($100) from three different auction houses:
In the above example Acker is licensed in CA; therefore I am responsible for tax even though the auction takes place in New York City. On the other hand, Hart Davis Hart is located in Chicago and not licensed in CA, so with a lower buyer’s premium and no applicable tax I am saving $13.34. WineBid is located in the Napa Valley (where I reside), and it has a lower buyer’s premium. Since I can pick the wine up shipping costs do not apply, and I save $28.49 over AMC and $15.15 over HDH. While these differences may seem minimal, when you apply a 250% markup (a bargain in restaurants these days!) to the bottle cost your list prices become:
AMC = $382
HDH = $349
WB = $311
What price would you rather pass on to your customer?
As buyers we become very familiar with the wholesale cost of the wines we know and represent on our lists. When buying non-current vintage wines at auction, wholesale is irrelevant, but knowing the market value of a wine becomes very important. I am not a professional, and I don’t do this for a living (so opinions from true professionals may vary with regards to the utility of the below sites for valuation), but after buying in auctions with great frequency for almost a decade, through experience and exposure I am usually able to gauge the value of specific wines. If you are new to it and are not used to watching wines in auctions week after week and year after year, a few valuable sites exist that may help you ascertain the value of bottles with accuracy. The three I recommend are winesearcher.com (ProVersion), winemarketjournal.com and cellartracker.com.
Winesearcher has a search function that allows you to pull up any wine in the world that is in inventory from participating retailers and auction houses both domestically and internationally. The site is free, but for full benefit I utilize the Pro Version ($39.00 a year), which displays a larger number of sellers and the lowest-priced retailer/auction houses that are not displayed on the free version. The annual cost is easily made up with one great score. Of course, when looking at the retail prices of older wines remember that they are probably on the high side, which is why they might still be in stock in the first place.
Wine Market Journal is a database tracking what specific wines have hammered at in auctions both foreign and domestic going back to 1997. If bidding in auctions, it is important to know what the wine you are interested in normally sells for. It is a pay site with two separate memberships: the Standard version is $9.95 per year and the Professional version is $129.95. The main differences are in search capability: how quickly is the information searchable to you, how many searches can you perform per month and how far back can you search for prices.
Cellartracker allows you to inventory and track your purchases and consumed bottles. I find this useful as it allows me to pull up historical information; what have I paid for bottles in the past that I may be interested in bidding on again, and what is the average price paid by other users on the site for the same wine. A little extrapolating needs to take place, but these benefits, along with the ability to link in to Wine Market Journal, makes it a useful plus for me. The site is free to use, but donations are requested depending on cellar size. The site only becomes really useful once you’re a donor.
Provenance is even more important then price. Provenance is the biography of a bottle of wine. Without known provenance, price is mostly irrelevant, unless you’re the gambling sort. No matter how great the price, if you don’t know where and when it was purchased and how it has been stored, then walk away. Like most things in life, if the price is too good, there is probably a reason. Provenance is tricky. Auction houses tend to have boilerplate verbiage when it comes to auction catalog descriptions. You’ll be utterly amazed at how many “distinguished gentlemen” with wines kept in temperature-controlled cellars since release you’ll read about.
Provenance ties into the ethics of the auction house too. This purpose of this piece is not to point fingers or to tell the reader with whom to do business, so take the following as a relaying of information and not my stand on the matter. Anyone who has heard of Hardy Rodenstock or Rudy Kurniawan will see the fallacy in auction provenance statements. For a true laugh, read the Acker catalog for The Cellar I and The Cellar II sales where they completely fabricated a story and history to sell millions of dollars worth of wine from Rudy Kurniawan. Acker is not alone; it is easier to name the auction houses that weren’t involved in knowingly selling wines from one of these two fraudsters and fabricating provenance to do it. The rarer and more expensive the wine, the higher the risk of fraud.
Research is key with producers too, as conditions on some wines that should set off storage alarms might not with others. Seepage on a five- to ten-year-old Dujac Grand Cru Burgundy would have me running the other way. If the bottle were a Domaine Leroy Burgundy or a Joh. Jos. Prum Mosel Riesling instead, I would look at the rest of the condition of the bottle but not be too worried about the seepage, as both producers are notorious over-fillers. Familiarize yourself with fill levels respective to age, so when a wine has a 3-5 cm ullage, you can consider its age or lack thereof and feel confident in bidding or passing. In this respect it helps to know the auction terms and condition acronyms like the back of your hand. Here are the usual suspects that you will find in most catalogs:
Now that I purchase wines to drink rather than resell in a restaurant, I have the luxury of being lax on some bottle conditions. Soiled and ripped labels, cut or missing capsules (usually done for authenticating), and age-relevant ullages (which can really vary for Burgundy) are not huge concerns anymore. If you’re purchasing for a restaurant and have to resell, some customers may not be comfortable with these conditions on a bottle they are buying. These conditions all affect the value of the wine, but may also affect your ability to resell in the restaurant environment.
- Ygrec - High to Very High Shoulder- Montevertine - Top Shoulder fill- Pommard - Burgundy bottles use measurements instead, here is an example of a 4.0cm ullage
The Auction
Auctions are fun! There is excitement in the air, wines are flowing, and there is momentum and “fever.” However, all that excitement can be the downfall of successful auction bidding. It’s very easy to get caught up in live auctions, or even the last minutes of online ones, as competitive nature takes over and you want to win, win, win. Your best bet is to do research in advance and set a maximum price (including fees) that you are willing to pay, and don’t budge. Granted, this is easier said than done when caught up in the moment. I have found the best way to stick to your guns is to place absentee bids. An absentee bid is a bid placed without having to be present at the actual auction, and thus there is no way to get caught up in the excitement. With online auctions this works as well, as they allow you place a bid, and set a maximum or reserve bid that the house will automatically (and incrementally) bid up to for you.
The most important lesson to learn is that there is a lot of wine (even fine wine) in the world. Do not move from your preset price, because the wine you overpay for today will be available again very soon. And probably for less.
Now that you’ve done your research, placed smarts bids and won some lots of wine, what’s next? Things to consider are timing and logistics of shipping and payment. In a restaurant environment, you order wine from your distributor, it’s delivered, on the list it goes and you began selling it immediately, even though payment isn’t due for 30 days (in CA). You may have sold the whole case, or enough bottles to pay for the wholesale cost by the time payment comes due. Unfortunately, auctions do not work that way.
Unless you live near the auction house, the wine needs to be shipped. South of the Mason-Dixon line shipping with any regularity is becoming more and more of a problem as global climate change tends to make things a little warmer down there earlier and later then in the past. Payment is due immediately, but unless you can ship the wine right away you’re sitting on purchased wine (inventory) that is unsalable since it isn’t in house. Not the best predicament to be in at the end of the month when the GM is looking for your numbers. If you decide to dabble in the auction market, you may want to deal with houses that are either local, or only purchase when weather allows immediate shipment. During the warmer months a few of the auction houses will make consolidated, temperature-controlled shipments in trucks, so make sure to research that option thoroughly.
The other variable to keep in mind is recourse. When a wine is fouled by TCA, poor storage, or some other flaw we can immediately return it to the distributor/producer for a replacement or refund, and we do not incur any cost. Auction houses do not operate in that manner. Whether corked, cooked, oxidized, or even fake (in some cases), they keep your money and you have an expensive drain cleaner. You need to factor this possibility into your costs: the uncontrollable. I have been fortunate: through thousands of bottles purchased through auction, almost every bad bottle I have had has been “fortunately” corked and not a product of bad storage or questionable provenance.
I briefly mentioned ethics and auction houses above. From Rodenstock to Eric Greenberg and Kurniawan (Rudy’s case is still in the court system with what I can only imagine will be interesting nd damning divulgences to come) we have witnessed auction houses knowingly selling wines that they either had enormous suspicions about, or were from a consignor or agent that they knew to be suspect or fraudulent. There has been a massive breakdown of trust in the auction industry, and we as professionals and consumers need to think long and hard about whom we want to support. They continue on with their livelihood when they have knowingly tried to cheat or deceive us. Whether strides will be made by the industry or outside agents cleaning up the mess, we can only hope. Read up and research whose hands are tarnished before you start. Fool me once, shame on you; fool me twice, shame on me.
Nice article, Jason. It is worth mentioning that if one is considering this route of acquisition, take you time, be patient, and RESEARCH. Not all auction houses are created equally, in either inventory, or business practice. There are a few on your list that I would never consider doing business with, because of some of their unrepentant business practices in the past. Others may have been taken by Rudy/Greenberg/etc, but have since "seen the light" and are more diligent than anyone else in the industry.
Nicely done, Jason. As the former Wine Director of a Grand Award-winning cellar that was largely assembled through auction purchases I would only add that it's also highly beneficial to form relationships with auction house management if you are going to be making substantial additions to your restaurant's collection through them. As the people who acquire and assess the condition of their auction lots, they have first-hand experience with the provenance of the bottles you'll be bidding on. In my experience, you can trust them to give a more frank and explicit opinion off the record than might appear in the catalogs.
Nice article, Jason.
Master Heller, brilliant and insightful!
I am just starting to consider adding vintage depth in Bordeaux and Burg through auction, this is invaluable info...
Best
T
Great article Jason,
Thank You! I really enjoyed the fact that you mention the risk and ethics of using auction houses and the importance of doing research before jumping in feet first. Especailly for restaurant buyers, there is alot to consider and weigh, before deciding if buying from auctions are best for your establishment. Thanks again for a really informative and well writen article.