As a follow up to my last post titled Time to invest in fine wine?, I performed a similar analysis on the results of the Hart Davis Hart Fox cellar auction in Chicago on September 19-20, 2008. A few points about this cellar need to be kept in mind when evaluating the results:
- The provenance was impeccable (even better than "typical" fine wine auctions)
- The auction included the largest offering of Lafite-Rothschild ever to appear at auction
- Over 700 cases of first growth Bordeaux and over 1,000 bottles of DRC were offered
- 100% of the lots were sold for $11.2 million (see post auction press release).
The surprise to me was that despite these advantages, which would one think would translate into above average market prices, the results obtained (in aggregate) were no better than 2008 auction averages (using 8/08 YTD data). See the chart below:
If one assumes the provenance alone should have generated a 5-10% premium, then these results can be interpreted as a weakening of fine wine prices since earlier in 2008.
Even more surprising was the price performance of the premium Bordeaux and DRC lots. In total, the eight producers below accounted for 910 lots or 57% of the 1,597 unmixed lots offered. Only Lafite-Rothschild generated more premiums than declines to 2008 market averages (no doubt due to high Asian demand).
In fact, even with Lafite-Rothschild included, these premium wines did relatively worse than the other 43% of lots. The chart below is comprised of the subset of 910 lots of these wines and the median (or typical) per bottle price achieved for a particular lot was 95% of the 8/08 YTD auction average.
Conclusions
The analysis above, combined with the analysis of the Zachys auction results from the same weekend, are signaling a consistent message: namely that fine wine prices are under some modest pricing pressure at the moment. However, given the fine wine market's long-term fundamentals, I believe this is a buying opportunity for those interested in wine investing.
In turbulent markets, there seems to be a trend towards investing in hard assets (see yesterday's WSJ story titled When stocks tank, some investors stampede to alpacas and turn to drink). I don't know about you, but I would far prefer to invest in wine that exotic livestock.
P.S. The methodology used in this price analysis was the same as in my prior post. We took the auction price results (inclusive of buyers' premiums) for all unmixed lots sold and compared the average per bottle price per lot to the given wine's 8/08 YTD auction average according to WinePrices.com.
