Asian Buyers Snub Bordeaux, But Auction Houses Insist "They'll Be Back"

    This past weekend, the cooling demand for top Bordeaux vintages among Asia's emerging wine collectors was starkly apparent at a US$2.5 million auction at Sotheby's in London.
    Jing DailyAuthor
      Published   in Finance

    Case Prices For 1982 Chateau Lafite At Least 20% Down On Mid-2011 Highs#

    Jing Daily

    This past weekend, the cooling demand for top Bordeaux vintages among Asia's emerging wine collectors was starkly apparent at a US$2.5 million auction at Sotheby's in London. Though the sale was 95 percent sold by lot, with Sotheby's holding that the auction "breathes fire into the wine market" during the first week of the Chinese Year of the Dragon, Bloomberg writes today that dealers say the total was close to auction forecasts, with the selling rate benefiting from lower pre-sale estimates. Less enthusiastic bidding from Asian collectors indicates that this increasingly important buyer class is taking a breather -- at least at far-flung auctions heavy on Bordeaux. This is having knock-down effects on prices for prestige bottles, with prices dropping 20 percent from the market highs achieved in the middle of last year. However, according to Miles Davis, partner at Wine Asset Managers LLP, this is to be expected. Said Davis, "The wine market remains volatile, though it’s leveling out...It’s following the classic pattern of a 20 percent decline after a global shakeup.”

    This drop in prices, amounting to a 20 percent discount on sought-after wines like Lafite, which went through a sustained price increase fueled by Asian demand from 2008-2011, was good for UK-based wine buyers. British traders bought the most valuable lots at this weekend's auction, with the most expensive a case of 1982 Chateau Petrus, which sold for U.K.-based traders, sensing an opportunity to buy stock at an attractive price, captured the seven most valuable lots on Jan. 25. The most expensive was a 12-bottle case of Chateau Petrus from the highly rated 1982 vintage. This sold for US$61,493 with fees, over a high estimate of $56,617, around 35 percent less than the $94,047 spent by an Asian buyer for the same wine in London last summer.

    Despite less of a presence among often free-spending Asian buyers, auction houses insist they're not going anywhere, and will come back strong in a more diverse range of wine segments. From Bloomberg:

    U.K. bidders bought 58 percent of the lots. Asians took 29 percent. In 2011, two-thirds of all the lots valued at more than 10,000 pounds at Christie’s auctions in the U.S., Europe and Hong Kong fell to Asian bidders, according to David Elswood, the company’s London-based head of wine.

    “There’s still plenty of demand in Asia,” Davis said. “They’ll be back.”

    The Sotheby’s sale provided further evidence of demand for Bordeaux second-growth wines, which have attracted interest from Asian buyers as prices of the more expensive first-growths have become more volatile in recent months.

    One such second growth is Leoville Las Cases, a Saint- Julien estate in the Medoc just to the south of Chateau Latour which has been a top wine producer of the region for more than 250 years. Three cases of Leoville Las Cases 1982 sold for 3,680 pounds each, above their upper estimate and close to the $6,100 achieved at an Acker auction in Hong Kong in November, while others in the sale achieved their estimated range.

    As Jing Daily noted earlier this month, look for Asian buyers -- particularly those from the Greater China region -- to focus their efforts on top Burgundy while expanding their horizons somewhat this year, gradually diversifying away from "big label" Bordeaux. Though we expect to see demand sustain continued interest in top-flight Bordeaux for the time being, issues like rampant counterfeiting -- over 70 percent of Chateau Lafite in China is estimated to be fake -- and a realization among Chinese collectors that there is a world of other wines out there, should make for an overall more dynamic (and at times unpredictable) wine market in China this year. As Acker Merrall & Condit CEO John Kapon recently told the WSJ, “Domaine de la Romanée-Conti has become the strongest brand in the market and certainly taken over Lafite [...and some] of the Bordeaux energy is also diversifying into California and Italy.”


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