Auction Action

Peter D. Meltzer - September 2006

Eagle-eyed wine auction chronicler Peter D. Meltzer provides the keys to profitable bidding.

Any restaurant that's serious about wine should take wine auctions seriously. Auctions have changed the means of acquiring fine and rare wines that are not always available from conventional distributors by showcasing mature vintages that can go straight onto a wine list. Provided you've done your homework, you should pay no more than the going market rate.

Whether you're looking to bolster your cache of Château La Mission-Haut-Brion Graves 1975 or lay down some inexpensive 2001 bourgeois crus, auctions constitute one-stop shopping. With anywhere from a few hundred to several thousand lots priced at between $350 and $150,000 a case, the range of possibilities is enormous. In any given sale, you can expect to find labels from the world's major wine producing regions, led by classified Bordeaux. Auctions are often the sole venue for hard-to-come-by bottlings consigned directly by their producers.

Piero Selvaggio, who presides over the Santa Monica–based Valentino Restaurant Group, says that if you're ambitious about your wine list, auctions are a must. "If I'm looking for an Angelo Gaja Barbaresco 1971, eventually it will crop up at a wine auction." Robert Bohr, who manages the 65,000 bottle wine cellar at Cru restaurant in Manhattan, concurs. "The main reason for a restaurateur to attend a wine auction is to access otherwise unattainable older vintages that give depth to a wine list."

Learning the auction ropes is fairly easy, but negotiating them requires a bit of practice—and patience. The best way for a first time auction-goer to get the hang of the process is to attend a sale with no intention whatsoever of bidding. Don't even register. Just sit in the back and take in the entire room to get a good perspective on what's going on. Observe the bidders, the bid-steps, the auctioneer's movements, and the overall rhythm of the sale.

When you're ready to go to an auction and buy, in order to maximize your chances of securing specific wines at a reasonable price, formulate a game plan before you raise your paddle or click your mouse. Otherwise, the odds of getting carried away or ending up empty-handed are strong.

Savvy buyers meticulously compare wholesale prices and auction estimates, for there is clearly no point to bidding more than a distributor is charging for the same product. Familiarize yourself with wholesale price lists and realized auction prices (often to be found in back issues of auction catalogs or online) to get a feel for current demand. WineSpectator.com has an excellent auction database, with 16,000 listings. The site is accessible by subscription for $49.95 per year.

Once you've done the research, set a ceiling for your maximum bid and stick to it. Few cellar-worthy wines justify frenzied bidding. Remember, you have to resell your purchases; a private collector doesn't. Many seasoned buyers prefer to place absentee bids to prevent their emotions from getting the better of them on the salesroom floor. Submit the maximum amount you're prepared to pay for a lot (exclusive of the buyer's premium, taxes, and so on) by fax or e-mail. If yours proves to be the winning bid, you pay no more than one bid-step above the underbid. In the event of a tie, the lot goes to the first registered bid. By attending a sale in person, however, you increase the likelihood of snaring something special that might not initially have caught your eye.

Remember to factor all the supplementary charges into the final cost of your bid. Auction houses levy a buyer's premium ranging from 10 to 19.5 percent of the hammer price (though some online transactions are free). Trade buyers do not pay sales tax, but shipping, insurance, and interest charges could add another 15 percent to the bill.

Wine levels (also known as ullage) listed in the catalog are the indicators of a bottle's condition. The levels may vary according to a wine's age and the manner in which it was stored. Top or upper-shoulder levels are not uncommon for 30-year-old wines but are unusual for a 10- or 20-year-old vintage, where levels should still be into or close to the bottle's neck. To put it simply, you run a high risk with lower than average levels. That's why prices for vintage classics can fluctuate enormously.

Serious wine collectors target lots that have been consigned directly by a winery or a château, followed by single-owner wines acquired upon release. Such impeccable provenance may significantly increase the hammer price, but especially fine acquisitions can be promoted on a wine list or a tent card, justifying the extra expense. Sensible (that is, low) markups will assure a quicker turnover.

At auction, you are basically buying "as is." You are dependent on the accuracy and integrity of a firm's published reports, and unless there was something patently wrong about the descriptions, you have little recourse. Don't hesitate to contact the auction specialist if you're unsure of any aspect of a lot on offer. When bidding online, scrutinize the About Us box for background information. Some Web sites do not display those data but instead provide an e-mail link where you can question the actual consignor. Don't even consider bidding on a wine that lacks a proper description.

Some buyers prefer to bid by telephone. The mechanics are simple enough. Provided you are bidding on an item that is worth roughly $2,000 (the minimum sum will vary from house to house), you can prearrange a telephone hookup with the auction house. A representative will call a few minutes before your targeted lot goes on the block and perhaps give some idea of the flavor of the sale. When the lot comes up, he will repeat the current bid and ask whether you wish to up the ante or stop.

Auction estimates are only a guideline; they are not a guarantee. They're usually based on previous hammer prices and serve as an approximation of the final, or winning, bid. Hotly contested items sometimes sell for double or triple the high estimate, whereas some lots barely manage to find a buyer. It's not in the auction house's interests to inflate its estimates in the hope of securing higher prices.

Almost all wines offered at auction have a reserve—a sum privately agreed upon by the consignor and the auction house below which the wine will not be sold. The reserve is usually set somewhere between 80 and 100 percent of the low estimate but never rises above it. For that reason it's virtually impossible to snare a case radically below the low estimate. But because consignors set reserves individually, identical case lots may not necessarily sell for the same price. Wines that fail to sell are "passed" or "bought in." These wines are normally returned to the consignor. However, some auction houses will attempt to sell them privately to their client lists.

Bid-steps are listed in the catalog. Make sure you acquaint yourself with the process, because at select stages (which may differ from house to house) the bidding will jump in increments of $50 instead of $25 or $100 instead of $50. On extremely expensive items costing in excess of $10,000, there is some flexibility and auctioneers may accept a half step instead of a full one.

Every seasoned auction-goer has his own technique. Some simply raise their paddle at the outset of a lot and lower it only when they have either secured the item or exceeded their spending limit. One particularly effective tactic for high-priced items is to enter the fray at the very last minute when the high bidder thinks the lot is his. It tends to demoralize the opponent but can backfire if the underbidder has very deep pockets or if your timing is off and the auctioneer brings down his gavel before he sees your raised paddle.

Look for price disparities that arise when "parcels" or multiple case lots of the same wine go on the block. In the event that they're not all snapped up by a single buyer (the winning bidder has the right to exercise that option), prices tend to drop as the auctioneer proceeds to the end of a voluminous offering. It's a matter of supply and demand. However, if you're desperate to own the item, you should get in at the beginning, even at the risk of paying a premium. According to your inventory requirements, your picking up a parcel of, say, 10 cases of Dominus 1999 might have tremendous appeal.

Mixed lots containing vertical offerings or horizontal ones often represent very good bets. Sometimes the hammer price falls below the combined value of the individual wines contained in the lot. Curiously, three- to four-bottle lots of premium wine often command proportionately less than a full dozen does. Online auction sites like Winebid.com specialize in one- or two-bottle sales—perfect for the buyer who doesn't want a full case.

The most satisfying and informative aspect of a wine auction is the presale tasting. For a relatively modest fee, participants may taste dozens of fine wines that are scheduled for sale. No matter how valuable professional wine ratings may be, there is no substitute for tasting a wine yourself and determining whether it's worth a bid.