The Wine Collector

This cool gadget can be pointed at a wine glass or bottle and immediately tell you the temperature to the tenth of a degree (F or C). Measuring only 2" x 4" and weighing only a few ounces, it's the perfect item to take along to restaurants to ensure your wine is served at the right temperature. It comes in its own soft sided case with a strap.

Vinfolio is giving one of these away (while supplies last) with any first-time wine purchase from us of $1,000 or more. A $59 dollar retail value, you can claim yours by visiting Vinfolio's wine store and placing a qualifying order. You must also either mention the "thermometer promotion" in the special instructions of your order or in an email to service@vinfolio.com after your ordered is placed. It is not for sale separately.

If you have less than 100 bottles in your wine collection, stop reading. You don’t need software, including Vinfolio's free VinCellar online cellar management software.

For the rest of you, this post explains why you should use software:

1. Know what you own, where it is, what you liked –Avoid duplicate purchases, enable drinking or selling wine before it goes bad, locate wine more easily in your cellar, record personal tasting notes, and track pre-arrival purchases from multiple retailers to ensure you receive what you paid for.
2. Access integrated third-party reviews – While some professional reviewers won’t license their reviews, the ability to tap professional scores, reviews, and drink date recommendations in an integrated way from within your chosen cellar management software saves time cross-referencing multiple independent sites and provides a mechanism to keep review content current without manually updating it. This will never be available in Excel. Integrated community tasting notes are also a good source of opinions when organized properly.
   
3. Track cost details and current values – Understanding your cost relative to the current value of a wine may affect what you select to drink, donate or sell (and you ability to document your tax basis). Integrated access to current valuation data also helps you maintain proper insurance coverage on your wine collection.
4. Analyze your collection – The ability to examine your wine collection through reporting and graphs is important for achieving balance or other objectives you have.

Despite the benefits, we still find most new customers come to Vinfolio with no record of what they own and those that do, usually have an outdated Excel spreadsheet. But then most software does not offer the critical integrated data capabilities outlined in points #2 and #3 above. Therefore, the return on investment (ROI) for the personal time needed is still too high to justify the effort for most busy collectors.

Time-saving, convenient features and services can lower the “investment” and raise the “return!”

1. That's why Vinfolio licensed Stephen Tanzer's and Allen Meadow's professional reviews for use in VinCellar.

2. That's why Vinfolio acquired and then converted the Wine Price File from a print-only resource to a primarily online valuation tool integrated into VinCellar.

3. That's why Vinfolio barcodes every bottle purchased from us and adds all details to VinCellar for you automatically

4. That's why we offer on-site inventorying, invoice data entry, and invoice scanning services.

5. That's why we’ve made it easy to use your VinCellar account to select wine to submit for sale through us or arrange physical transfers to or from our storage facility.

Bottom line: There are compelling benefits available for using cellar management software. We’d love you to use our free online VinCellar offering but even competitive products would be better than using nothing.

A recent article in the Economist titled “Fruity little numbers” and a post in the Dollars and Sense blog titled “The price of wine – not about the wine” inspired me to go back to Economics 101 and apply the law of supply and demand to explain fine wine pricing.

Supply

For any given vintage of a wine, the maximum supply is determined by total production in that year. Limited production relative to demand (e.g., Screaming Eagle, Harlan Estate, Le Pin, Petrus, DRC) leads to high initial prices. As production is fixed and supply can only decrease with consumption or with collectors storing wine for later consumption, the supply curve will only ever shift upward and to the left. Therefore, for any given quantity demanded, the price should increase with less available supply (unless demand falls faster – perhaps by negative changes in elements contributing to demand such as a reduced score from a major wine critic).

Demand

Demand is driven primarily by factors shaping consumers’ perception of quality:

1. Scores and reviews from professionals and the wine community. Parker 100 wines, Wine Spectator's Top 100 wine list, public community tasting notes, etc.
2. Appellation of origin. Terroir matters.
3. Reputation of the producer, of proven “celebrity” winemakers, and of the wine’s ability to age. Newer garagiste producers need to develop track records.
4. Marketing efforts by producers including label design, bottle selection, promotions, events, advertising, and extent of domestic and international brand development.

Other factors include:

1. The growing global population of wine drinkers, not only in the U.S. but in new markets like Russia, China, and other parts of Asia.
2. Investment appreciation potential, which is not necessarily a primary factor but may be a secondary consideration to many when deciding to buy fine wine.

For older wine, the provenance and bottle condition directly affect demand including:

• Past storage conditions and history
• Original wooden case or packaging intact
• Bottle fill levels
• Label, cork, and capsule condition
• Color

What about the costs of production?

Fine wine is generally not priced on a cost-plus basis once one a certain price threshold is exceeded (e.g., $50?). The producer’s objective is to price to perceived value, not costs. So get over the fact that Screaming Eagle now sells for $500 from the winery while their costs are a fraction of that. When demand is high relative to supply, production costs are irrelevant.

The impact of high prices on wine buyers

• If you are “priced out” of a wine you like, move on to discover alternatives in your price range. They exist.
• Get recommendations and advice from your retailer or others.
• Trust your palate to assess quality instead of relying on perceptions of quality that others are trying to shape for you.

Chart source: Wikipedia

BusinessWeek.com has an interesting article called “Sophisticated cellars” posted on November 22, 2006 with an attractive online slide show of some beautiful wine cellars by a number of well known cellar designers (including their price tags). While all wine cellars should deliver the same basic function of protecting your wine collection in ideal climatic conditions, the sky’s the limit on the potential cost of creating one.

As cellar designer Paul Wyatt comments in the article, cellars are “a specific symbol of power, of success.” The cellar’s role as a status symbol has no doubt driven a meaningful part of the 35% annual growth in the industry for the past five years. According to Jim Deckebach, the founder of Wine Cellar Innovations, the custom cellar industry now generates $500 million in sales annually.

For some great ideas of what can be done, I recommend getting Wine Cellars: An Exploration of Stylish Storage.

Ask any wine collector and they will tell you the ideal temperature for storing and aging wine is 55 degrees (which is why it’s the temperature of our wine warehouse). What happens if you store your wine at higher temperatures?

Alexander J. Pandell, Ph.D. authored the most scientific analysis on this topic that I’ve found titled “How temperature affects the aging of wine.” You can find it along with some other material on his site called The Alchemist’s Wine Perspective. The article is worth reading in full but I will try to distill the key conclusions which are:

1. Higher temperatures accelerate the aging process dramatically (e.g., storing wine at 59 degrees ages it 50% faster than 55 degrees)
2. Faster aging increases the rate of undesirable chemical reactions which can produce “compounds with foul odors and off tastes.”

How much faster does wine age at higher temperatures?

Pandell argues that many chemical changes (reactions) taking place over a period of time create the benefits of aging fine wine. Of the variety of reactions which can occur (both desired and undesired), each different type occurs at different speeds based on temperature. The results shown below in the charts illustrate his best estimate on the relative rate of aging wine caused by raising storage temperatures above 55 degrees. One chart mirrors his three data points and the other attempts to extrapolate the same data to a scale for any storage temperature.

For example, 3 months of aging at 91 degrees is equivalent to 14 years of aging at 55 degrees. Three months of aging 73 degrees is equivalent to 2 years of aging at 55 degrees.

Bad tastes created by higher temperatures are the real killer

In case you think you’ve discovered an easy way to avoid cellaring your wines for years or decades at 55 degrees, there’s a catch. To quote Pandell: “…higher temperatures will result in undesirable chemical reactions taking place that were either too slow or non-existent at the lower temperatures…higher storage temperatures make available many new pathways for desirable AND UNDESIRABLE reactions.” Apparently, the rate of “bad” reactions increases with temperature much faster than the rate of “good” reactions.

Bottom line: Store your wine at 55 degrees (or as close to it as you can get), whether you build a wine cellar in your home, buy a wine storage unit, or use a professional wine storage facility. Note that many professional wine storage facilities can be at 58-59 degrees (to lower their energy bills) so make sure you ask what their facility’s temperature is.

A post in James Laube’s Unfined blog yesterday titled “That’s right, women are smarter” inspired me to consider why female wine collectors seem to be scarce. The general demographic profile of a wine collector is 90+% male, 40’s or older, and with some disposable income to support their “habit.” When I checked Vinfolio’s list of top 100 customers based on wine spending, only 5% were women. The big question is does this reflect the market or are we just bad marketers?

Here are some possible explanations (without any supporting facts):

• Women tend to have a broader range of collecting-related interests from shoes and handbags to clothing and jewelry where they prioritize their spending. Wine just does not bring as much pleasure per dollar as those other categories. (Note: this is an observation from a female staff member).
• Married women allow their husbands to take the lead on wine collecting to generate leverage to justify spending on what they want (see prior point).
• Many men treat wine collecting as another arena of competition and a method of signaling to others they have “made it.” Women tend to choose other means to compete or to signal success.
• Women are more disciplined drinkers and physically smaller. This in turn leads to less consumption and a lesser need to collect.

What’s your theory?

Over lunch today with the charming, down-to-earth Karen MacNeil in St. Helena, she mentioned that her book, The Wine Bible, has sold over 380,000 copies compared to the average for a wine book of only 6,000 copies. Released in 2001, sales are still going strong (still ranked #957 on Amazon amongst all books). While this is a great book for a wine novice, it’s equally appealing to the experienced wine collector, especially in its succinct coverage of wine regions often neglected by collectors like Germany. Selling for less than $14 on Amazon, this 904-pager (which took Karen 10 years to write) is a steal and another great holiday gift idea.

Karen just released a new book on food and wine pairing in September 2006 titled Wine, Food & Friends. It apparently sold out of its 100,000 copy pre-release production run so Karen may soon have the top two best-selling wine books of all time.

Yesterday’s Sotheby’s auction got me thinking about the role of wine auctions as a buying channel for consumers. I could think of only three reasons for consumers to bother buying wine through auctions:

1. Access to rare wine – “Rare” may mean limited quantities in circulation or having a particularly distinguished provenance (especially for older wine).
2. Getting a bargain – Reserves (even with buyer’s premiums added) are typically below retail price levels.
3. The “experience” – Participating in live bidding or pre-auction events is fun. Even for absentee bidders, when your bid succeeds, it’s often described as “winning.” Who doesn’t like winning?

The counterarguments are as follows:

1. Most wine offered is not really “rare” – On average, I would estimate 80%-90% of the wine sold via auctions is available in the retail channel. Many retailers, including us, buy wine for resale directly from the same private collectors that auction houses tap.


2. Bargain hunting is time consuming - The disciplined buyer needs to review a catalog of often 1,000 or more items, research retail alternatives and auction price history for each wine of interest, and then “back into” a maximum bid amount. The bid is determined by dividing your desired maximum out-of-pocket price by (1 + the buyer’s premium % + any insurance fee %) and then rounding down to a specific bid level. Once you know your bid amounts, you need to submit them to bid on an absentee basis or invest even more time to participate live. Given that you can expect to “win” only a small percentage of those items bid on, the overhead of your effort often reduces or eliminates the benefits gained.


3. Most bidders are absentee – As such, other than the small thrill of learning you have won some bids, why deal with the complicated and inconvenient buying process?

Bottom line: Consumers could consider the retailer channel as a substitute for the auction channel when seeking fine and rare wine. Even when retailer pricing is higher, the convenience of “buy it now” saves valuable time that often justifies a premium.

Vinfolio also provides a quote request service where we’ll seek out any wine not already in our inventory (when 6+ bottles or more than $250 in value) or maintain a record of your interest until the next time we have the wine available.

As predicted in my post of November 14 (the most expensive wine auction lot ever), the 50-case lot of 1982 Mouton Rothschild just shattered the single lot auction record. The lot sold for a hammer price of $880,000 which translates into just over $1.05 million inclusive of the 19.5% buyer's premium. This was almost exactly in the middle of the estimated $600,000 - $1.2 million estimated (hammer) price range.

The winning bid translates into $1,752.67 per bottle. This is almost 60% above the prior 2006 auction high for 1982 Mouton Rothschild of just under $1,110 and 127% higher than the 2006 auction average. The seller looks like the winner here (and Sothebys New York).

My bet is that we will see more "mega lots" in the future at auctions (where possible) as this "packaging" format has now proven its appeal.

I noticed a thread on the Squires Board today titled "Retailer emails: how many is too much?" The poll in the post asks readers to vote on which of five statements they most agree with ranging from "Two emails per week is excessive (from one retailer)" to "Send as many solicitations as you like." Interestingly, with about 70 votes cast at the time I checked, each of these extreme positions garnered the same percentage of votes (15%). Interpreting the other results, over 40% were gladly willing to receive as much as one email offer per day.

Arguments for more frequent email offers

• You are kept updated as to what's new and current market pricing levels
• Limited quantity wines can be quickly ordered before they sell out
• You can unsubscribe any time or set up an Outlook rule to autofile emails into a folder for later reading
• They're easy to delete

Elements contributing to a "high annoyance factor"

• Some retailers resort to hype and hucksterism in every email
• Many offers provide little value-added or context for the wines promoted (including creating needless inbox clutter with nothing but single-wine email offers)

You have a choice

Antispam legislation requires email solicitations to provide the ability to "unsubscribe" in every email. The complainers know this but they still complain rather than just opt out. The fact that most stay subscribed is a tacit admission that they get some value from the emails and are reluctant to go to the extreme of stopping them altogether for fear of missing good buying opportunities.

The real problem stems from the fact that wine consumers range from the serious wine collector to the casual wine drinker who have different inherently different interest levels in wine. This translates into different tolerance levels for receiving wine-related promotions in email or other forms.

What's the solution?

The solution for a retailer is to care enough about meeting the needs of his different customer types to provide a variety of alternatives to cater to every preference.

Here 's what Vinfolio does with its email offers and why:

• Daily frequency - We generally limit ourselves to one email offer per day and provide an option to receive just a weekly California-only email. We think this frequency strikes the right balance between different interests when combined with other alternatives we provide (see below).
• Value-added content - Our emails are generally thematic around a producer, region, varietal, or type of wine (e.g., bubbly or port) to provide greater context for making a buying decision. Offers are typically 5-10 wines but can be less or more. Scores and full text reviews are provided. Additional background on the vintage or producer is often added to provide an educational component.
• Ordering links provided - Our emails allow you to click on "Order Now" or "Add" buttons which take you to our site and initiate the ordering process to provide greater convenience to the buyer.

We also provide various alternatives to email offers if you choose to opt out:

• Offers archived on site - You can always view an archive of offers whenever you wish.
• Browse our wine store by offer - One method of browsing is to select wine grouped by what appeared in a prior offer. See the left side navigation of our wine store page.
• RSS "feeds" - This is the best solution. RSS feeds provide real-time notification of inventory additions grouped into either predefined wine categories or matched to totally personalized criteria tailored to your particular wine interests. You decide which feeds to subscribe to (or create) and can unsubscribe any time. You also can combine feeds from multiple sources into your "reader" which provides further convenience in grouping related content from different sources. Learn more by visiting our RSS page. Vinfolio is among a handful of wine retailers who currently offer this capability.

Bottom line: Wine collectors are discriminating individuals by nature and used to getting what they want, which extends to defining how they wish wine retailers to market to them. You should demand more choices from your preferred retailers or simply try us.

Alder Yarrow of Vinography has an interesting post today called “Now THAT’s cultivating a market” about an effort to cultivate wine drinking in China among 100,000 middle class families. This is part of a broader trend aimed at satisfying expected growth in Chinese consumer demand to tap into a “luxury lifestyle” that includes wine.

An article from Business Week’s February 6, 2006 issue titled “In China, to get rich is glorious” paints an amazing picture of how wealth creation is driving demand for luxury goods. Ernst & Young estimates that the Chinese luxury market currently generates more than $2 billion in sales annually and is growing at 20% annually. By 2010, China is expected to have 250 million consumers who can afford luxury products, more than 17 times the current number. The impact of Chinese buying will increasingly affect worldwide auction prices for fine wine and other items considered to be luxury goods.

China is already on the radar of some forward-thinking British wine retailers such as Berry Brothers & Rudd who have been marketing Bordeaux futures to the rapidly growing number of affluent Chinese (300,000+ millionaires is a commonly quoted statistic). Vinfolio is about to launch its own initiative in partnership with Winespring and its local partners to sell collectible wine directly in China (it’s almost easier than dealing with interstate shipping regulations). We already sell wine to consumers in Japan, Singapore, and Hong Kong and expect this to be a growing part of our business.

As a follow up to yesterday' s post on the most expensive wine auction lot ever, I received a request to generate a list of the most expensive 750ml bottles ever sold at auction. The resulting list had numerous 19th century vintages of Yquem, Lafite-Rothschild, and Latour in it. As these older vintages seemed to comprise their own category, I filtered the list to remove any vintage before 1900.

The list below represents the highest prices (including buyer's premium) per 750ml bottle achieved at auction by the first 20 unique wines bearing a vintage of 1900 or later. Only the highest price for each unique wine is shown even though multiple lots of a wine may have sold for higher prices than other wine lower down the list.

1. 1945 DRC - Romanee-Conti, $32,900
2. 1959 DRC - Romanee-Conti, $30,550
3. 1945 DRC - La Tache, $28,200
4. 1941 Inglenook - Cabernet Sauvignon Estate, $24, 675
5. 1945 Mouton-Rothschild, $24,167
6. 1929 DRC - Romanee-Conti, $23,500
7. 1923 DRC - Romanee-Conti, $22,515
8. 1934 DRC - Richebourg, $22,325
9. 1985 DRC - Romanee-Conti, $22,325
10. 1962 DRC - Romanee-Conti, $20,563
11. 1911 DRC - Romanee-Conti, $18,960
12. 1919 DRC - Romanee-Conti, $18,960
13. 1923 Roumier, Georges - Bonnes Mares, $18,763
14. 1978 DRC - Romanee-Conti, $17,038
15. 1966 DRC - Romanee-Conti, $16,450
16. 1934 Roumier, Georges - Musigny, $15,405
17. 1961 Jaboulet Aine, Paul - Hermitage La Chapelle, $15,405
18. 1945 Roumier, Georges - Musigny, $14,813
19. 1945 Ponsot - Clos de la Roche, $14,220
20. 1947 Ponsot - Clos St.-Denis, $14,220

A few observations:

• Unlike the 50-case 1982 Mouton Rothschild lot referenced in yesterday' s post, all of these prices were established based on small lot sizes ranging from 1 to 12 bottles.
• Burgundy dominates with 85% of the unique wines and DRC - Romanee Conti rules.
• All prices were set in 2006 except #4 in 2006 and #20 in 2005.
• 95%% of the wines are French
• Only 25% were vintages from the latter half of the 20th century.

Note that the source of the above information is Vinfolio's own Wine Price File, the standard industry reference for wine auction price results from all major wine auction houses worldwide. Details on the The Wine Price File may be found by visiting http://www.wineprices.com/.

This weekend's Sotheby's wine auction in New York promises to break the auction record for the most expensive wine lot ever sold at auction. The wine is from the collection of Park B. Smith, the co-owner of the wonderful, wine-centric Veritas restuarant in New York City.

With an estimated hammer price of $600,000 to $1.2 million, Lot #150 consists of 50 cases of 1982 Mouton Rothschild (all 750mls), a wine rated 100 points by Robert Parker. All are in original wooden cases, have been cellared perfectly, and are in exceptional condition according to the catalog. The buyer's premium on top of the hammer price is 19.5% and this is not discounted for wine as it is in other Sotheby's categories like art. This would bring the out-of-pocket cost for the winning bidder to an estimated range of $717,000 to $1.43 million when the premium is added. The previous high of $345,000 (including buyer's premium) was set only in September 2006 by Christies New York with a mere 6-magnum lot of 1945 Mouton Rothschild.

According to Vinfolio's Wine Price File database, the general price trend for the 1982 Mouton Rothschild has been steadily upwards as reflected in the auction pricing chart in the wine store portion of our site. As the accompanying table on that page shows, the highest price paid in 2006 (and prior years) at auction is just under $1,100 (including the buyer's premium). Note that Vinfolio sold its last bottles of our most recent supply for $800 each last week and there are five other U.S. retailers listed on Winesearcher Pro offering it now for $795-$800. The median price of the 26 U.S. listings is $995 and the high price goes all the way up to $1,600 a bottle.

Let's say we were willing to pay $1,100 a bottle (inclusive of the premium) for Lot #150 as this bid reflects a price actually paid at a recent auction (even though there are higher "asking" prices from more expensive retailers). That means our bid would only be $660,000, well below the $717,000 low estimate with premium. Arguably, the exceptional provenance may be worth some further amount as might the ability to capture this quantity of 100 point wine with one bid. You might also look at the price appreciation trend in the chart and rationalize a much higher bid by considering a purchase as an investment.

One way or the other, wine auction history is likely to be made on November 18th and it appears Sothebys is shooting to establish a single lot record that will last longer than a few months.

While most wine collectors know about Winesearcher.com, the popular wine price comparison engine, many seem to overlook the fact that it presents partial or complete search results depending on whether you are an unpaid visitor or a paid subscriber to their "Pro Version" ($29.95/year).

Here are some statements from different parts of Winesearcher's site which paint a clearer picture (italics added):

• "Free searches are often restricted to wines from merchants who sponsor us."
• "If a wine can be located among our sponsors, we do not show other retailers' wines."
• "The subscription Pro Version provides full price comparisons between all price lists."
• Using all data, "we have found that the average price of the cheapest supplier is half of the most expensive."

So just to be clear, when even one sponsor has a listing for a wine, the only price listings you will be viewing in the free version for a given search are those of sponsors. Despite this, 97% of site traffic visits the free version and there are only 8,500 subscribers to the Pro Version (worldwide). If most of their 8,034 wine stores were sponsors, it might not be an issue but my best guess is that Winesearcher has only a few hundred sponsors.

Bottom line: Given the price of a good bottle of wine relative to the reasonable $29.95 annual fee, subscribing to Winesearcher Pro is as close to a no-brainer as it gets for any wine collector.

(Disclosure: Vinfolio is a sponsor of Winesearcher.)

Bill Nanson's Burgundy Report blog has a great post today titled "Merchants and faulty bottles...some advice...".

Vinfolio's guiding principle is "Fine wine. Finer service." One of the ways we implement "finer service" within our retailing activities is by promptly resolving customer service issues such as the faulty bottle scenario which Bill Nanson describes. I particularly agree with his point that "there's a big difference between 'fault' and 'responsibility'." Regardless of the rigor we employ to source flawless bottles, such as sourcing from reliable suppliers and inspecting all wine before sale (see our wine inspection guidelines), it's impossible to catch everything (e.g., I know of no way to detect TCA without opening the bottle). However, we recognize that the lifetime value of a customer dwarfs the cost of resolving an occasional problem (even though our retail margins are thin too).

Responsibility is also a "two-way" street. The customer may decide to save a few dollars when shipping and not adhere to our recommended shipping policy. If we conclude that this is what caused the problem (such as a leaking bottle shipped in warm weather), then the customer bears responsibility for his own poor judgment.

The net result of our philosophy is our wine guarantee and returns policy. I haven't seen a more robust published policy from any other retailer.

A few further comments:

• Most retailers don't even have a published policy except perhaps caveat emptor.
• Some time limit after sale is required although we may choose to waive it based on circumstances.
• We may ask for questionable bottles back but not usually on the first few requests from a given customer. We understand that it's inconvenient but it may be required of us to obtain a refund from a supplier. Only if a particular customer is returning bottles frequently would we wish to double check the customer claim.
• We cover round-trip shipping should any bottle be sent back and replaced.

I would love to hear any comments on how we can improve our policy.

Definitions

• “Futures” is a term generally reserved for newly released wine offered for sale now but for future delivery. The term is most commonly associated with Bordeaux futures which have a delivery timeline of 18 months to 2 years after initially being offered on the market.
• “Pre-arrival” is a term used to describe wine offered for sale prior to its arrival at your retailer. Pre-arrivals are analogous to futures in respect to future delivery but may or may not be a new release. The delivery timeline for pre-arrivals also tends to be much shorter – perhaps a week or two when coming directly from a winery or distributor, or as much as six months if being imported from Europe.

Two primary reasons to buy futures and pre-arrivals

1. Secure your supply. Often, there are only finite amounts available of highly scored or sought-after wine. “First come, first served” applies.
2. Obtain better pricing now. There will almost always be opportunities to buy a particular wine again but prices tend to rise as supply dwindles and secondary market sources (including individual collectors) are tapped for more. Many Bordeaux chateaux produce large quantities of wine and artificially limit supply in early futures offerings to manage pricing. Ultimately, the need to sell forces the additional supply onto the market and keeps prices down later. In the past 10 years, I’ve been able to buy virtually any Bordeaux wine later when in stock (or on short-term pre-arrival) at the same or even lower prices than originally offered.

In addition, for Bordeaux and some other futures, you can generally specify your preferred bottle size (including large formats) because you're purchasing the wine while it's still in barrel. Finally, for any new release purchase, you gain the comfort of knowing you have minimized any handling/provenance risk.

Risk factors

1. Advance payment – You're required to pay to secure your order because the retailer has to pay his supplier. Contrary to what some collectors believe, there's no long-term “float” benefiting the retailer.
2. Retailer stability – As with any business where you're in a creditor position until your purchased goods are received, you should deal with reputable, financially stable retailers. This is a more significant issue with the longer timeframes involved in futures.
3. Forgetting what you bought – Active wine collectors often buy from multiple retailers and quickly have an administrative problem tracking what they bought from where. Disorganized or unethical retailers may neglect to remind you that they owe you wine. Vinfolio's free online VinCellar cellar management software helps you track pre-arrivals from any source.

Note that Vinfolio guarantees that wine purchased from us will be delivered as originally sold, even if our supplier defaults (rare but it could happen) and we have to repurchase it from elsewhere at a higher price. Read our 125% pre-arrival guarantee below which I believe is unique in the wine industry:

Vinfolio's 125% pre-arrival guarantee

It may occur that a supplier of a Vinfolio pre-arrival or futures purchase does not deliver the quantity or bottle sizes originally sold by Vinfolio to Customer. Should this occur, Vinfolio guarantees that it will attempt to repurchase the wine from another source, including at its own greater cost. If within three months, Vinfolio cannot find the wine from another source, Vinfolio will refund the purchase price plus 25% which shall complete its obligation to Customer. If, however, Customer wishes to cancel the order prior to the foregoing three-month period without waiting for a replacement to be found, the refund will be for the original amount paid (i.e., without any premium added or cancellation fee applied).

 

Give a decanter. Specifically, a magnum-sized decanter.

Many wine collectors will buy magnums (or larger formats) for long-term cellaring as they tend to preserve the wine better than 750ml bottles due to a lower ratio of oxygen to wine in the bottle. While most wine collectors may have a couple of decanters, they aren't likely to have a magnum-sized decanter.

In fact, of the 15 decanters I own, only two are for magnums. There is something festive about large format bottles and that same is true for magnum decanters. If you have a great bottle of wine (which is very likely to require decanting), why not present it in something beautiful? Britain's William Yeoward is one of my favorite sources for decanters and I personally own two of the classic but modern Geneviere design which comes in four sizes ranging from 400ml to 3200ml (sized for half bottles to double magnums).

Decanters may or may not have stoppers and many new designs avoid them for more flexibility in design. However, I generally prefer them with stoppers so I can avoid drinking too much and safely "gas" what is left for consumption over the following few days.

An article in today's Wall Street Journal called "Old wine, new bottle" (WSJ online subscription required) discusses the decanter market's growth. It points out that Reidel's sales of decanters doubled from 2004 to 2005 (now accounting for 10% of its business) and that it has introduced six new styles in 2006. Even Williams Sonoma has almost doubled its decanter offerings in the past two years to 17 today.

My final suggestion is to buy early as magnum decanters are harder to come by and the design you prefer may not be easily located at the last minute.

As a follow-up to yesterday’s post on the top 10 wines sold at auction, I decided to focus only on US wines (turns out all are from California) to see who the most popular sellers were given that only Harlan Estate made it into the overall rankings.

Here are the top 10 most frequently sold US wines at auction based on the number of lots sold in the first half of 2006 (regardless of vintage and bottle size):

1. Harlan - Proprietary Red - 454 lots
2. Opus One - Proprietary Red - 240 lots
3. Dominus - Proprietary Red - 219 lots
4. Screaming Eagle - Cabernet Sauvignon - 175 lots
5. Araujo - Cabernet Sauvignon Eisele Vineyard - 166 lots
6. Bryant Family - Cabernet Sauvignon (Pritchard Hill) - 159 lots
7. Caymus - Cabernet Sauvignon Special Selection - 146 lots
8. Colgin - Cabernet Sauvignon Herb Lamb Vineyard - 127 lots
9. Mondavi, Robert - Cabernet Sauvignon Reserve (Unfiltered) - 127 lots
10. Dalla Valle - Maya - 121 lots
    

A few observations:

• Harlan Estate has a fairly dominant position with almost twice the number of lots sold as #2 Opus One.
• Mondavi’s reserve cabernet may have dropped off many collectors’ radar with the proliferation of other quality producers in recent years but this is a good reminder that sophisticated buyers recognize its quality.
• The others are all recognized cult cabernet producers so perhaps the real question to consider is: “what up-and-comers will be on this list in the future?”

Please feel free to post your predictions for the top up-and-coming, collectible wine from California (or elsewhere in the U.S) in a comment.

Note that the source of the above information is Vinfolio's own Wine Price File, the standard industry reference for wine auction price results from all major wine auction houses worldwide. Details on the The Wine Price File may be found by visiting www.wineprices.com.

The top 10 most frequently sold wines at auction based on the number of lots sold in the first half of 2006 (regardless of vintage and bottle sizes) were:

1. Mouton-Rothschild - 1,157 lots
2. Lafite-Rothschild - 904 lots
3. Latour - 863 lots
4. Margaux - 828 lots
5. Haut-Brion - 645 lots
6. Petrus - 639 lots
7. Cheval Blanc - 545 lots
8. Yquem - 537 lots
9. Lynch-Bages - 476 lots
10. Harlan Proprietary Red - 454 lots

This list pretty much defines the dreams of any wine collector. A few observations:

• All but one wine is from Bordeaux. Admittedly, Bordeaux is made in fairly large volumes so has an advantage in a list using a volume-based metric. But, it has also proven itself for long-term cellaring.
• Harlan Estate leads the CA cult wine category.
• The members of the top 10 auction wines are fairly constant. The same list prepared using the last half of 2005 data includes the same first 8 wines in the same order (except Lafite and Latour are flipped). The last two wines in the prior period were Pichon Lalande and Leoville Las Cases.

Note that the source of the above information is Vinfolio's own Wine Price File, the standard industry reference for wine auction price results from all major wine auction houses worldwide. Details on the The Wine Price File may be found by visiting www.wineprices.com. Auction data from the Wine Price File is also integrated into Vinfolio's ecommerce site and free VinCellar online cellar management application.

If you have other wine auction facts you would like to know, please add a comment with a request.

Today's post on Dr. Vino's wine blog, titled "Developing: the next shipping battle?" is worth reading. He spotlights an issue that many state legislators trying to implement last year's Granholm Supreme Court ruling, and most wine consumers and collectors, don't fully understand which is that while the case pertained by wineries, its outcome should be applied equally to any licensed party who sells wine. As one CA retailer pointed out in a comment on the post, the Supreme Court decision did "not refer exclusively" to wineries and clearly has broader implications.

From a consumer point of view, why should there be any legal distinction made between whether you are permitted to buy wine from an in-state retailer, an out-of-state retailer, a small winery, or a large winery? You should be able to buy the wine you want, from the sources you choose, to maximize your choices and to save money. Why is this so complicated?

Because the "battle" is really about who has the right to sell wine and where. On one side are the wholesalers, who are fighting to preserve a form of economic protectionism implemented at the state level. On the other side are wineries and retailers who wish to compete nationally as if we were a single country, not 50, like every other industry.

Vinfolio is a member of the Speciality Wine Retailers Association which was formed early this year to create a "borderless wine market so that consumers can purchase and receive wine directly from any retailer in the United States." Here is a one-page fact sheet (pdf) which explains the mission. As this is an industry trade group, if you are a wine consumer and wish to get involved in supporting the cause, please visit Free the Grapes which shares a similar objective.

As outlined in my prior post on Top 10 wine collecting mistakes, the majority of common mistakes are associated with buying wine. Vinfolio buys large quantities of fine wine, both from commercial suppliers and from private individuals, and all of it is inspected and either accepted or rejected upon arrival according to our Inspection Guidelines.

Individual wine collectors may apply these same guidelines in several ways:

• For auction house purchases, evaluate whether to bid based on the condition information disclosed compared to our acceptance criteria.
• For any purchase, examine bottles upon arrival for signs of concern and raise issues immediately with the retailer or auction house for resolution.

As pointed out in the guidelines, our decision to reject a wine simply means there is an increased risk of it being inferior and is not a definitive judgment of quality. However, it’s our best assessment without opening the bottle and tasting it. You may decide some reasons we reject wine don’t bother you as they may be more cosmetic (e.g., torn labels) but such reasons negatively impact value should you ever decide to sell the wine.

1. Buying wine solely on professional scores without sampling along the way. I started and continued buying high Parker-scoring Australian wine in the mid-1990s only to discover that they were not to my taste when I finally got around to opening some. Use professional reviews as an input, not a substitute, for your own purchase decisions but rely upon your own tastes.


2. Buying too rapidly before taking the time to figure out what you like. As Allen Meadows of Burghound.com once said, “I have never met anyone whose taste did not change.” In my own case, my preferences have shifted dramatically from Bordeaux and cabernets to Burgundy and pinot noir over the past 10 years.


3. Chasing trophy wines only. There are many worthier and less expensive alternatives that help round out one’s knowledge of a particular region. For example, I enjoy trying the undiscovered gems recommended by Doug Wilder in his weekly Wilder Side of California wineletter.


4. Buying too much. This is a relative statement but it applies to both individual wines as well as to varietals, regions, vintages, and relative to one’s collecting objectives (if you even bothered to establish any). One should always keep in mind the epic vintages, however, and be poised to stock up.


5. Placing too much emphasis on lowest price when buying. Buying wine is not like buying electronics. Low priced bottles, particularly from older vintages, may have been stored poorly before you bought them and could therefore be damaged or worthless goods.


6. Buying from too many sources. You’re better off concentrating with a few retailers to obtain priority service, allocations and advice. This will also save you the management headache of tracking your pre-arrival purchases.


7. Not asking for more advice and help from your preferred retailers. Develop a personal relationship with a knowledgeable person at your favorite retailers, even if it’s only by phone or email. Listen to them even when advice may be contradictory to a score or an article. They want to preserve their relationship with you and have no incentive to recommend any wine just to move it.


8. Forgetting to drink a wine until it is past its prime. If you’re not going to drink it, you should at least sell it to recover your money.


9. Poor post-purchase storage and handling. Why buy great wine if you’re not going to care for it properly? Pay attention to weather conditions when shipping and pay for priority delivery service. Store wine in temperature-controlled conditions, either in a home cellar or professional storage facility.


10. Deferring the purchase of special vintages that you know you will want later (children’s birth years, anniversaries) will cost you more. I have three sons (ages 2-12) and each one has a mini collection of birth year wines that I put together for them while the wines were more affordable.

What are some of your mistakes? I would love to hear from you or your comments on my points above.

Wine collectors have an inherent curiosity to explore because they know that the more wine they taste, the more they will notice and appreciate subtle differences, both positive and negative.

A tasting group setting facilitates comparison and encourages a greater mental focus on the wine than casually having a bottle of wine with dinner. I’ve been in a tasting group of seven friends for the past eight or nine years. It’s been the single most important step in developing my own personal preferences. Here’s how our group functions:

1. We meet 6-7 times per year over dinner at one of our homes or in a restaurant.
2. The host selects the wine theme and obtains seven bottles for the tasting. Examples of recent tastings include 1999 Grand Cru Burgundy (red), Cheval Blanc vertical, 2002 Australian Shiraz, Phelps Insignia vertical, 1996 Bordeaux, and a 1997 World of Syrah tasting.
3. We split the cost of the wine equally; the host covers dinner and provides pre and post dinner white wine, champagne, dessert wine, or port. Note: I use a car service to and from these events!
4. Generally, we know the identity of the wines included in the tasting but all wine is served blind in numbered glasses.
5. We each “force rank” the wine from 1 to 7 to create a composite score for each wine. The lowest score wins.
6. We then go around the table and defend our rankings.

A few observations:

1. A rotating focus over time on various regions, varietals, single producers, etc. develops a broad range of tasting experiences.
2. Having the ability to taste seven great wines for the price of one bottle is economically efficient.
3. The top rated wines from critics rarely match the group’s preferences.
4. The price of the wine is not a good predictor of quality either.
5. The process of force ranking requires a real self-examination of one’s true preferences and builds self-confidence in one’s tasting skills.
6. We have a lot of fun and generally can’t wait for the next tasting!

Bottom line: if you aren’t already in a tasting group, call some friends and start one.

Given the title of this blog, it's fair to ask how one defines a wine collector.

Last night I was reading the new issue of the Wine Spectator (November 30, 2006) whose headline is emblazoned "Wine Collecting." On the editors' introductory page titled "Are you a wine collector?", they offer the following definition: "A collector is someone who enjoys wine enough to plan for future consumption." As they also pointed out, there's no collection size requirement to qualify.

In doing a quick Google search, I came across another simple definition on the www.savoreachglass.com site in an article titled The Basics of Wine Collecting in which they quote Dennis Overstreet (of The Wine Merchant in Beverly Hills): If you have more wine than you can drink at one time then you are a collector.

I would add a further qualifier which is that true collectors pursue collecting primarily for their future drinking pleasure and not investment purposes. Given the price of fine wine, it's hard to ignore the financial value of one's collection but money can be replaced while not all of your wine can.

A magazine reporter recently asked me to identify these risks and here's what I told him:

1. Not buying "cellar worthy" wine - Why collect wine which is merely average or will not improve in the bottle? Ideally, you should buy wine upon release (to eliminate the risk of bad provenance -- see #3 below) and nurture it in ideal storage conditions until it has evolved further in the bottle.
2. Paying too much for wine - Many retailers are limited by state alcohol laws into having structurally higher prices than retailers in other states. Calfornia-based retailers, on the other hand, are generally far more price competitive given a more flexible regulatory structure and ship to most states.
3. Buying poorly stored wine - If you buy older vintages, you may often not know exactly how the wine has been handled and stored from the time of its release until your purchase. Even one day of heat exposure can ruin a wine forever. As a result, assurances of good provenance may drive large differences in pricing for what is ostensibly the same wine but it's often worth the difference.
4. Buying fakes - The greater the price per bottle of a wine, the greater the risk of it being a fake. Many high end producers include anti-counterfeiting measures embedded in their labels such as Chateau Petrus. Dealing with reputable retailers is your best defense.
5. Not diversifying purchases - Too much concentration in any particular region, varietal, or single producer is a mistake. There is an enormous range of tasting experiences available so why limit yours? E.g., I rarely purchase more than a single case of any wine and often six bottles would be my upper limit. However, if you are buying for investment, increasing quantities could make sense.