Hammer Time: Buying Wine At Auction
By John Lenart in Food on Sep 26, 2014 7:00PM
The dining room at Tru was filled with about 70 people. Mostly men, mostly over 55. It was pretty quiet. Corks from amazing wines were pulled. Grand Cru Burgundies from the greatest producers and vintages flowed like water. I’m talking about wines I had never even seen before, let alone tasted. Men walked from table to table sharing these trophy wines with friends. “Bob have you tried this ’78 Ponsot Clos de la Roche?”
All the while a somewhat staccato, almost droning voice filled the room “I’m at a thousand do I have eleven hundred. One thousand is the bid, any takers at eleven hundred? Fair and final warning, sold, for one thousand dollars to paddle number 913.”
I'm at the Hart Davis Hart wine auction. Most of the lots being sold are well outside of what I can afford. In fact, many of the wines being auctioned this day are wines that even the wealthy buyers will likely never open. These are collectibles, more like buying a piece of art than a product to be consumed. Now, you might be saying to yourself, “I'll never be able to afford buying wine at auction.” Just read on and you'll see that an auction is a place for even the average wine consumer to score some amazing wines at great prices.
If you are interested in buying mature wines that are ready to drink now, rather than waiting years for current vintages to age, there are some great values to be had at a wine auction. According to Hart Davis Hart CEO Paul Hart, age is where wine auctions set themselves apart from wine shops. “If you shop the major wine shops in the area, you can find quality, you can find diversity, you can find collectible high end wines, you can find great affordable wines, but you can't really find wines with age. If you're searching for mature wines there are really very few options and an auction can present some great opportunities.”
Now, before we get into auctions, let’s clear the air first. You may have heard about the recent conviction of wine forger Rudy Kurniawan in the news. This one time wine collector bilked millions of dollars from other wine collectors by consigning extraordinarily rare wines to auction. The only problem for the buyers of these wines is that Kurniawan had forged them. He’d buy less expensive wine and create fake bottles, labels and capsules to look like extremely rare wines. Then he’d consign them to auction and rich collectors would buy them.
It was a great plot. I mean who could open a bottle of say, a 1920’s vintage Grand Cru Burgundy, taste it and know if it was the real deal or not? But Kurniawan got greedy, as do all criminals eventually, and his ploy unfolded. He was arrested at his home, where he had set up a veritable print shop and wine forging lab. He was convicted to 10 years in prison.
Moral of the story, let the buyer beware. To be honest though, wines worth counterfeiting aren’t something the average auction buyer needs to worry about.
But if you are concerned about the authenticity of a wine being sold at auction, don't sweat it. Provenance of a wine is something Hart Davis Hart and other reputable auction houses take very seriously. Hart tells me, “Every bottle, whether it's a $10 bottle or a $10,000 bottle gets inspected, so if we see something that's a little bit off, we reject those bottles.” In fact they work closely with wineries to be sure the wines for sale are in fact genuine. Going so far as to study the type of paper the labels are printed on to the ink used to print them. But typically this isn't an issue as most wines consigned come from trusted sources, commonly customers who the auction house has worked with for many years.
Prior to each auction the auctioneer publishes a book which lists every single lot available. This catalog gives a description of the wine in each lot and the condition of the bottles. It also lists the expected hammer price of the lot expressed in a range, like $350 - $600. Often times the lot could sell for significantly lower or higher than this range which is just a pre-sale estimate. And that's one of the cool things about attending an auction, you're an active participant in the actual market being set for a given wine's price. Hart says “The market is actually occurring right in front of you. So you've got somebody from Hong Kong on the phone, bidding against an absentee bid from Brazil, and four people in the room that want that wine. And they are all determining what is the global market for that wine.”
But the wines aren't all super pricey collectors’ wines. There are a lot of wines at each auction being sold that are drinking wines too, many in the $50 per bottle range. According to Hart “There are a lot of wines that get overlooked because it may be a vintage that people don't know as well, or that is seen as unsuccessful. But oftentimes we find gems in those things. One of my favorite things to do is find wines I love that have low ratings from critics because they're going to be cheaper and more available.”
OK, so you're ready to head off to an auction and start bidding. Well, maybe not quite yet. There are a few more things you should know about wine auctions. First, you need to register to bid. But that's a simple process. Show up at the auction and pay a small registration fee then you're given a paddle. But you get more than a paddle for your registration fee. While the auction is happening you'll be poured tastes of several excellent wines. At the auction I recently attended we were poured a few very nice Burgundies, both red and white, and a two wonderful Champagnes. Of course lunch was also served, and a buffet at Tru is a treat to say the least. Many of the auction regulars even bring trophy wines to share among their friends. It's pretty audacious and showy, seeing these wines being poured around, but kind of cool none the less. So the auction is more of a food and wine event than a pure business event. According to Hart “It's a fun and interesting process that's different than shopping for wine from the shelf.”
Next, and most importantly, you need to know about something known as the “buyer’s premium.” This is how the auction house makes its money. The buyer’s premium is a fee which the buyer of the lot pays. It's a percentage of the final hammer price added to the total price. And it's not small. HDH has the lowest buyer’s premium in the industry at 19.5%. Some auction houses can range as high as 23.5%. If you win a lot with a hammer price of, let's say, $500 at a HDH auction, you'll pay a buyer’s premium of $97.50 for a total of $597.50, plus tax and any shipping fees. So just be aware of that when placing a bid.
You should also know that every lot has a reserve price set. According to Hart “Every lot has an estimate on it. And somewhere in that estimate exists a confidential reserve, and if we don't hit that reserve price the lot passes.” This doesn't happen often. In its last auction Hart Davis Hart sold 100% of the lots in that event.
While you're bidding on a lot you also need to know that people not even in the room may be bidding against you. Some via phone, through an auction agent in the room, others via the internet, and some people put in an absentee bid that's placed prior to the auction. In fact, if there's a lot at an auction that you'd like to bid on, and for whatever reason you are unable to attend the auction in person, you can place bids via these outlets as well. I had a friend who won a lot at this past auction which he placed as an absentee bid. No one in the room, via phone, or internet bid as high as his bid, so he got it.
Finally you don't get your wine that day. You can arrange to pick the wine up after the auction or you can have it shipped to you for a fee.
If you're interested in picking up some older vintage wines you ought to consider an auction. They are a lot of fun, and like Hart says, “You should come to a Hart Davis Hart wine auction because you get a great selection that includes wines that are older. You also get the value added of having a professional team inspect it. And those together are just invaluable for the buyer who wants to expand their horizons a little.”
If you want an older vintage wine but don't want to wait for the next auction, or you may want to avoid paying the buyer's premium, HDH also offers a selection of wines available via their retail sales website. Wines here are consigned and inspected just like the wines at auction.
Commercial wine auctions aren't the only wine auctions available. There are a number of charity wine auctions, which raise funds for various not-for-profit organizations. If you're feeling particularly baller you should check out the Lyric Opera of Chicago's Wine Auction this coming February. This fundraiser is held every three years. It takes place on the stage of the Ardis Krainik Theater and about 500 guests attend. I've seen the lots from previous Lyric wine auctions and all I can say is, “wow!” Serious wines and serious prices for serious collectors. In 2012 The Lyric Opera of Chicago Wine Auction raised net proceeds of $1.7 million. Like I said, baller.
The cool things about charity auctions like the Lyric Opera’s is that 100% of the hammer price goes to the organization. The lots are donated to the organizer from private collectors and even directly from some wineries. The auction is run by Hart Davis Hart so you know everything about it will be done at the highest level. Tickets may be purchased by contacting the Wine Auction office at the Lyric Opera at (312) 827-5682 or by emailing firstname.lastname@example.org
Either way, whether at a charity auction or at a commercial auction, these events give the wine consumer a chance to obtain some great wines, often at a great value, and sometimes for a great cause. I know some of this may sound intimidating, but really, wine auctions are a lot of fun. Check one out sometime.