The Wine Collector

I don't review many books on this blog but Living with Wine by Samantha Nestor was too tantalizing to pass up.  What wine collector wouldn't want a voyeuristic photographic tour of some of the most luxurious, tasteful, "high design" wine cellars in the U.S.?  After all, how could you possibly design a better one than your friends if you don't have sufficient examples to stimulate how high to set your standards?

"Wow" cellars

Living with Wine showcases 30 cellars in 256 pages including associated tasting rooms, storage areas, and some perspective from the owners (some of whom have celebrity status).  The cellars are split into five categories with names like "The Gentlemen's Haven" and "Urban Retreats and Inspiring Spaces."  Each cellar is aptly named too with appropriate (and clever) names like "The Man Cave". "Chelsea Girl", and "Morrocan Moods."

The good news for those of you looking to use this book as a guide to finding the right resources for your own purposes is that Samantha included a detailed list of resources used to create each cellar from designers to architects to cooling system providers.

Bottom line: Every wine collector would love to have this book.  As the holidays approach, it's a great gift idea instead of the latest wine accessory or botltle of wine for your wine collector friends (or spouse).  The book retails for $75 but you can pre-order it at Amazon using one the links above for $47.25 (it releases in two days on October 27).

P.S. All book reviews such as this are offered to readers without receiving any compensation from book publishers (other than a free copy of the book to review) or commissions from book sales.

This afternoon's announcement (see Wine Business story) by Amazon that it is killing its wine program came as a bit of a surprise given the hard work put into the initiative over the past several years.  But, as anyone operating a wine retailing business knows, the regulatory landscape is an absolute minefield that in this case has felled the leader in ecommerce.  Frankly, I personally welcomed Amazon's planned entry into the business as it would have ultimately led to more wine drinkers, many of which would develop into future purchasers of the fine wine Vinfolio sells.  Moreover, it would have brought a deep-pocketed player to the table with strong motivations to lobby for rewriting the out-dated wine shipping laws that make operating a wine retailing business in the U.S. like dealing with 50 foreign countries at once.

Wineries have an alternative: Vinfolio's Marketplace

The Vinfolio Marketplace has quickly become the world's largest online fine wine marketplace.  There are about 44,000 unique wines currently listed for sale out of over 270,000 wines owned by users of Vinfolio's VinCellar free online cellar management application, and by the users of our partner for the Marketplace, CellarTracker.  While the initial focus of the Marketplace was aggregating supply owned by individual wine collectors, it is equally applicable to the trade.

Wineries may be interesting in reading a prior post of mine called Vinfolio Marketplace "Highly recommended for Wineries and Importers from June. VinTank, the digital think tank of the wine industry, profiles why the Marketplace matters to wineries.  The key benefits are:

• Complete anonymity - This is different from Amazon but it provides more flexibility for a winery to sell items at other than list price if it so desires.
• Increased revenues - The winery controls the price of sale at all times and may vary it up or down from transaction to transaction.
• Flexible inventory management - Sell allocated or library wines at secondary market premiums and/or reduce oversupply at discounts.
• Access to new customers - U.S. and international buyers, especially in Asia, through our Hong Kong operation.
• Cost effective - Fees of 15% of sales or $6/bottle minimum (whichever is greater).

It's 100% legal

This question is often raised, and is likely to come up again given Amazon's regulatory difficulties.  See our Marketplace FAQ - 3rd question under General: "Is the Marketplace legal?

Intrigued?  Email us

If you're in the trade, email trade@vinfolio.com and we'll forward a complete information package for your evaluation

Are you already paying higher prices for fine wine in the U.S because of demand from Hong Kong and mainland China?  Absolutely.  And if you're a first growth Bordeaux drinker, don't expect relief any time soon.

Consider the following:

• Virtually all major auction houses have gone from zero Hong Kong auctions (as of March 2008) to having a high percentage of their global sales being achieved in Hong Kong since then (when the import duty was cut to zero).  In total, by the end of this month, there will have been 19 wine auctions held in Hong Kong since the duty cut.
• Almost all of the wine sold in Hong Kong is coming from the U.S. and Europe and would have otherwise been sold in those locations (with lower Asian buyer participation).
• Last week, I was in the UK and met with several major fine wine players who told me from 40%-60% (!) of their total sales is now generated from Asia.
• We're launching our own Hong Kong ecommerce site next month (see earlier post) and I just received an email today that Acker Merrill just launched their first Hong Kong Internet-only auction (both in HK$).
• The Hong Kong International Wine & Spirits Fair is coming up November 4-6, and the exhibitor list is more than double that of last year's event.
• Chateau Margaux is making its first ever visit to Asia next month for a wine dinner anyone can attend for about US$550.  There are more producers than you might think who are at a very early stage of developing their brands in Asia.
• According to a story in yesterday's Wall Street Journal titled China's Taste for Luxury, "robust Asian demand almost entirely offset falling sales [elsewhere] of brandy, champagne, jewelry and watches."
• Three days ago, the WSJ's Wealth Report blog had a post titled Only China Can Save Luxury Sales in which it mentions that Bain & Co. estimates luxury-goods sales in mainland China will jump 12% this year whereas the U.S. will be down 16%, Japan will be down 10%, and Europe will be down 8%.
• The same Wealth Report blog had an interesting post on October 13 titled Chinese are the New Kings of Bling.  The post notes that China is the world's second largest luxury goods market (after Japan) per a Goldman Sachs report.

Bottom line: The Chinese wine collector is already making an impact on global fine wine prices and I fully expect that they will capture an increasing share of the high end of the fine wine market, driving up prices for others in the process.  The good news is that savvy collectors have plenty of alternatives to the most well known producers.  Or, you can read these "tea leaves" and conclude fine wine is an interesting investment class to pursue, even if only for financing your drinking.

WinePrices.com's wine price indexes were up strongly in September after the normal summer slow period in global wine auction activity. The top three most actively traded fine wine indexes were up 9%-12% in September and 33%-44% year to date. Every index has double digit YTD gains and the most active indexes are within reach of turning in positive year-on-year returns.  See below for a table of some key stats and the full summary results page for all nine indexes (and archives from prior months).

Now that our financing is completed and the Vinfolio Marketplace is launched, we're finally in a position to resume our focus on expanding our existing Hong Kong operation.

Vinfolio Hong Kong ecommerce site launching in November 2009

Our immediate next step in Hong Kong is to convert our Vinfolio Hong Kong web site (www.vinfolio.hk) into an ecommerce site (see image - click it to enlarge). Here's what you can expect:

• Access to virtually all 2,000+ items listed in our online U.S. store plus Hong Kong site exclusives.
• Pricing in HK$ for pick-up/delivery in Hong Kong (within 1-2 weeks in most cases)
• Separate email offers of items from the HK online store(email HKoffers@vinfolio.hk to request to be added)

In short, Vinfolio Hong Kong will essentially become a local wine store to Hong Kong/Macau residents.  No overseas shipping need be arranged and no minimum purchase quantity will apply.  We will list all available items in a new "Vinfolio Hong Kong" listing on Winesearcher, WinePrices.com, and Global Wine Stocks.

Of course, our U.S. online wine store will continue to be available to Hong Kong customers if they prefer and the Vinfolio Marketplace will continue to be there exclusively.  Just keep in mind that those prices are in U.S. dollars for pick-up/delivery in San Francisco so onward shipping costs to Hong Kong are extra (whereas this is already included in HK site pricing).  U.S. purchases come with six months free storage in one of our climate-controlled facilities. Initially, we will not ship to other countries from Hong Kong so customers in other Asian countries will need to continue to order from the U.S. site or make their own arrangements from Hong Kong

Hong Kong wine storage facility targeted for 2nd Quarter 2010

We remain committed to opening a world-class wine storage facility in Hong Kong.  The tough economy and higher-than-expected capital expenditure requirements caused us to defer our original plans to open a Hong Kong wine storage facility in the Fall of 2008.  We've recently decided to pursue an approach in Hong Kong that we followed with our 20,000 sq. ft. Napa Valley facility that we opened in October 2008.  In that case, we simply became a tenant of a facility developed for wine-related businesses that required a climate-controlled environment.

The problem, however, is that these ready-to-occupy facilities simply don't exist in Hong Kong (at least, I'm not aware of them).  There are "air-conditioned" facilities and cold storage facilities but none designed for a constant 55 degree (F) (or 12-13 degree C) temperature and humidity-controlled environment.

Therefore, we've set out to find a financial/real estate partner (corporate or individual) to finance the development of a world-class, Hong Kong-based, wine storage facility that Vinfolio could lease and operate as a tenant.  We're willing to completely manage the design process as we essentially already completed one in 2008 before we put the project on hold.  Any interested parties should contact Anthony Mak, Managing Director, in our Hong Kong office at (852) 3748-3833 or anthony@vinfolio.hk and he would be glad to provide a more detailed description of what we're seeking in a partner on this project.

Hong Kong International Wine Fair November 4-6

Vinfolio Hong Kong will have a booth the International Wine Fair next month.  Please stop by and meet our Hong Kong team in person.  I will also be in Hong Kong from Nov. 3-6 as will our Vice President of Marketing, Jay Moore.

When we launched the Vinfolio Marketplace this summer, a number of people in various online wine discussion boards raised the issue of shipping wine to Vinfolio in extreme heat, fearing the wine could be damaged prior to Vinfolio's inspection.  The inbound shipping speed is determined by Vinfolio according to rules designed to protect the seller's wine.  To prove the point, we commenced a series of tests in August using bottle probes kindly lent to us by Cellar Central (see prior post "Web-based cellar monitoring").

Parameters of Test #1

1. Fedex overnight priority service (delivery by 10:30 am local time).
   
2. 12 bottles shipped in Styro shipper from our San Francisco warehouse (SF high was 68 F that day) to a "hot weather" destination city which experienced to a temperature range the next day from 77-102 F.
3. Bottle temperature probe placed in a bottle in a corner of the box.
4. Ambient temperature measurement device place inside the Styro to measure air temperature inside the box.
5. The package was routed through Memphis (Memphis temperatures were 74/92 on the departure date and 75/90 on the delivery date).

Maximum wine temperature reached of 69 F

A few observations on the chart below (click the chart to enlarge it):

• While our warehouse is at 55 F, we deliberately allowed the bottle temperature to float upwards to 61 F before handoff to Fedex to simulate the high end of the range of any home cellar.
• Note that Fedex pick-up time is approximately 4:30 pm PST.  Therefore, the maximum time before delivery is about 18 hours when overnight priority is used.
• Despite significant variation in air temperature inside the box as it moved through Fedex's system, the bottle temperature rose at a steady pace without reaching the highs of the ambient air.
• Even with a high temperature forecast for the destination city, the ambient temperature in the box stayed well below actual highs for the day (and generally below the low for the day).
• At 10:30 am, the wine had only reached 69 degrees, or 8 degrees above the starting temperature.

Additional useful information

• The thermal mass of 12 cooled bottles inside the Styro seems to buffer against air temperature fluctuations.
• We ran other tests with higher and lower starting temperatures.  The impact on the final temperature was insignificant (a few degrees).

More tests to come

We plan to run the following tests:

• 6 bottles shipped overnight to a 90+ degree destination (to test impact of fewer bottles on maximum temperature reached)
• 6 and 12 bottles shipped with 2-day service to a 80-90 F degree destination (consistent with our Marketplace inbound shipping rule)

Bottom line: Shipping overnight priority in Styro (at least with 12 bottles at cellar temperature) protects your wine in even the most extreme heat.