Executive Summary

After a record-setting year in 2018, the market for collectible wine continued to be very strong through Q1 and the first part of Q2, although there are signs that it is now beginning to slow.

Volume trends

Slowing in some places, accelerating in others, the first half of 2019 was an interesting period in the market for fine wine.  It was perhaps inevitable that the pace of the wine auction market would begin to slow after the blistering pace of 2018.  This slowing of the market is seen in several ways.  The first of these is the fact that the aggregate total of all sales was 7.4% smaller in the first half of 2019, in spite of the fact that there was nearly the same number of lots offered.  This year there were 42 international sales, with 43,561 lots offered that produced $255.6 million, while in the first half of 2019 there were 47 sales with comprised of 43,306 lots that produced $236.8 million.  The difference here, however, is relatively easily explained, as last year Baghera conducted the 215 lot sale in Geneva of the wines from the estate of Henri Jayer that netted $34.6 million.  Although Baghera conducted another single-owner sale this year with the wines of Domaine René Engel, it netted only $1.8 million.  As charming as the older Engel wines are, it is no surprise that their sale would not equal the results of the Jayer sale.

Key players

Other houses also worked at a slower pace in 2019.  Acker had one less sale and a drop in value of more than 23%.  Christie’s had the same number of sales globally but lost almost -20% by value.  These performances were offset, however, by HDH (same number of sales, +10% by value), by Sotheby’s (one less sale but +14.6% by value), still largely benefiting from their Q1 “Tran-scend-ent” sale in Hong Kong, and most notably by Zachys, who more than doubled their sales compared to the same period last year by putting on three additional sales.  This leaves Sotheby’s hanging on to first place with $64.5 million in sales, Zachys nipping at their heels with $62.7 million and Acker coming in third with $42.7 million in sales.

Geographical differences

It is interesting to compare performance by sales site.  In the period from 2008 to 2011 there was a very significant difference between results in Hong Kong, London and New York, and the market may again hand collectors opportunity for arbitrage.  Although it may at this point be deceptive (as we will discuss later), Hong Kong year-to-date has shown incremental growth, going from $89.5 million H1 2018 to 92.7 million in the same period this year (+3.5%).  The UK was down nearly 20%, moving from $25.3 million to $20.3 million, and as expected Geneva was down -86.9% in the absence of the Jayer sale.  These results were mitigated by some extent by fairly robust growth in the US, up 16.3% from $101.8 million to $118.4 million, with sales in New York providing the bulk of that impetus.

Is the Burgundy bubble bursting?

In category terms the market has been obsessed by Burgundy these several years, and collectors are still preoccupied with the topic.  The short answer is “not yet”.  Collectors are still very excited by Burgundy, although it does appear that the very top end is softening.  One instructive example is 1990 Romanée Conti.  Overall it is down 1.4% from last quarter, but it is still up 13% from the end of 2018.  However, digging deeper reveals there were three six packs all in Sotheby’s May NY sale that all made $26,867 per bottle but that this was followed by a single bottle at Christie’s NY that sold for $20,000, and then another single bottle that sold at Acker in Hong Kong for $17,916 – in other words, a stable market that started falling steeply at the end of the second quarter.  1999 La Tâche also showed a fair amount of volatility during May with full six packs selling for as much as $41,925 at Christie’s Hong Kong sale and for as little as $34,580 at Zachys in New York, a difference of more than $1,000 per bottle.  Sometimes that volatility can certainly be due to provenance.  In Sotheby’s high-grossing “Tran-scend-ent”  sale at the end of March, they sold a three pack of Leroy Musigny for $55,986 and a single bottle of the same for $17,596, while none of the four bottles sold in 2018 made more than $13,000.  These results put this wine at +31.7% for the year, the best performance in the category.  More typical was Coche Corton-Charlemagne which finished the quarter at an average of $5,961/btl, which is -0.9% from Q1 but still +14.6% from year end 2018, and 1990 Rousseau Chambertin, which ended at $5,412/btl, down slightly from last quarter’s $5,671, but still up from the $5,111/btl close of 2018.  However, less-desirable property lagged behind.  One Zachys vendor in Hong Kong had a sold rate that barely exceeded 78% due largely to the large quantities of négociant Burgundy in the consignment.  While late-season sales in London (Sotheby’s), New York (Zachys), Chicago (HDH) and Los Angeles (Heritage) all showed strong sell-through rates, there is still some evidence for a slowdown.

Bordeaux prices stagnate

The slow, steady growth in Bordeaux prices seems to have reversed itself in the second quarter, with nearly all of our leading and coincident indicators moving into negative territory.  ’82 Lafite gave up the most ground, moving from an average of $3,742 last quarter to $3,386 in the second quarter.  Here, too, prices fell towards the end of the period, but the rate of change is distorted by the anomalous results of over $6,000/btl produced by Zachys in their March sale in New York.  Factoring out these prices would leave the average at about where it was at the end of 2018: $3,135/btl.  Most Bordeaux prices, even for sought-after wines such as ’89 Haut-Brion, appear to be slightly lower than the peak in the first quarter of the year but still somewhat higher than they were in 2018.

Where are prices heading?

Prices in other categories such as champagne and Rhône are also following this general trend.  Some, like ’90 Monfortino are strong (+17% over last year), while others are losing ground (’07 Masseto, -17.2% over the same period), but these are the exception rather than the rule.  Anecdotally, to judge from recent results in sales where we were bidding on behalf of clients, the majority of interesting wines are still selling within the estimate range, but they appear to be selling at the lower end of the range instead of at mid-estimate or between the mid-estimate and the high estimate.  Moving from the third to the fourth quarter we advise a fairly conservative strategy in order to avoid overpaying.

There are two important external factors that in our opinion will greatly influence wine prices for the balance of 2019.  The first of these is the economic and political unrest in Asia, principally the trade war between China and the U.S. and the demonstrations currently roiling Hong Kong society.  Hong Kong and China are two important sources of demand for the fine wine market and as we saw with Xi’s “anticorruption” initiative in 2012 – 2013, a slackening of demand from Asia can create strong downward pressure on prices.

The other main factor will be the uncertainty regarding Brexit and the British market.  At present these forces have been driving demand in the U.K. as traders stock up to hedge against any eventual increases in price that would come from a hard Brexit.  This may soon reverse, however, if the pound continues its slide, and it may become more attractive than it has been in some time to buy in the U.K.  At present merchant offers have still shown fairly aggressive prices, but this is an area to watch in the coming months in order to maximize the arbitrage between sales sites.