Low port prices at auction

[David Spriggs]

I watched the Zachy's wine auction in L.A. on Friday and Saturday. Right as the auction got started I could see that port prices were going to be low... in some cases ridiculously low. Other wines were unbelievably high - 6 bottles of 2005 DRC La Tache for $33,500 - WOW, and that's the current release!

Several Port lots were passed with no bids at reserve. Here were some of the prices (prices include the 19.5% buyers commision):

An original wooden case (OWC) of 1994 Grahams - $717 ($60/bottle)

8 1994 Fonseca - failed to sell - low estimate $800 (the reserve was likely $750)

2 6-pack OWC 1997 Niepoort - $657 ($55 / bottle)

1 OWC 2000 Taylor - $777 ($65 / bottle)

4 1997 Quinta do Noval Nacional - $2151 ($538 / bottle)

1 OWC 2000 Quinta do Noval - failed to sell - low estimate $650 (the reserve was likely $600)

11 bottles 1977 Gould-Campbell - $598 ($55 / bottle)

OWC 1977 Gould-Campbell - $717 ($60 / bottle) - same consigner as the lot above. There were 6 cases of 1977 G-C from one consigner

and the ultimate:
1976 Niepoort Colheita - $359 ($30 / bottle)!

So, port prices are quite low at auction in the US. Of course, buyer beware here as far as storage goes.

-Dave-

[Moses Botbol]

Don't forget shipping costs and/or tax also. The GC ''77 sounds like the only deal there.

[Tom Archer]

Historically, when the economy catches a cold, fine wine prices catch pneumonia.

There's also clear evidence of a speculative bubble in the fine wine markets, although port has been much less affected.

A price correction seems inevitable at some point - whether or not that will be a dramatic one is a hard call; but I'd bide my time before buying young first growths.

On the port front there seems to be an awful lot of VP being made, with an amazing number of SQ's declaring 2005; but very little evidence of it being sold. When it is offered, the prices are ridiculous, given that this was not a generally declared year.

As a downward re-pricing of VP at release seems likely, I am not actively seeking to buy the youngest VP's and am being very hawkish with my bids on the 2003's.

Tom

[David Spriggs]

Agreed. I do believe that prices will drop further. I know that I did very well in the early 1990's when the UK and the US had a recession and there was a ton of ports dumped on the market. I picked up a lot of 1985 Graham's and 1997 Warre's during those times. Still working through them, though it was hard to keep my hands off them.

Generally, what I do at auction is bid very low... even below low estimate. I almost always get out bid. At this auction I won most of the stuff I bid on. That's a change. I know my wife wasn't very happy about the bill!

-Dave-

[*skangeodonolyea]

Can you watch the auction online, or only in person?

[David Spriggs]

Can you watch the auction online, or only in person?

I watched it online... not the actual auction but I could see the final prices show up for each lot online.

-Dave-

[David Spriggs]

Don't forget shipping costs and/or tax also. The GC ''77 sounds like the only deal there.

Moses,
Are talking about previous auction pricing or retail? I know that the 1976 Niepoort Colheita starts at $130 in Northern California. So $30 looks like a great deal to me.

And of course the price 1977 G-C has exploded over the last year. It starts at about $119 now. Last year you could easily find it for $75.

-Dave-

[*skangeodonolyea]

How do you watch the Zachy's auction online? Can you see results now?

[Glenn E.]

Uncle Tom,

How far back would you guess that the "over pricing" goes? Is this just a trend post 2000, or does it go back into the 90's?

I ask because I'm wrestling with a decision. I have found a case of 1994 Taylor Fladgate for about $160/bottle. That seems like a pretty good price relative to other offers, but it's a lot of money to be dropping on a case of Port and I'm still not experienced enough to know whether or not that really is reasonable. I know that it is one of the 100 point Ports (WS) and so I'm seriously considering the purchase, but I'm finding it difficult to do because I'm worried that I'd be overpaying.

Do you think the price inflation has hit Ports as far back as 1994? Even if it wasn't overpriced at release, if recent releases are overpriced the older vintages might be dragged upwards as well.

[Tom Archer]

How far back would you guess that the "over pricing" goes?

It actually goes back a very long way; the last vintage to be released at a reasonable price was the 1970.

1975 was presented to the market as a superlative vintage, and more than just a declared year. Those who bought the rhetoric got their fingers badly burned..

The '77's were released at a similar price to the '75's, after adjusting for the rampant inflation of the day. This was the last vintage to reward those who bought at release with a return that came anywhere close to a mainstream investment.

Prices were hiked for the release of the '80 vintage, by which time it was becoming apparent that the 75's were nothing like as good as had been made out. Sales slumped as a result.

After adjusting for inflation, release prices were then broadly similar up until the 2000 vintage, since when a new wave of greed has crept in; fuelled, I suspect by the bubble in Bordeaux.

However, the secondary market is simply not supporting the release prices. A person who bought a case of Dow or Graham 2003 at release, has paid for professional storage and now sells it at auction, will only nett about 40% of their investment, after all expenses are taken into account.

The thing that really irritates me though is the producers stubborn refusal to deal with customers directly on sensible terms. They need make little or no reduction to the price they receive, if they would only cut the middle men out of the loop..

Tom

[Derek T.]

The thing that really irritates me though is the producers stubborn refusal to deal with customers directly on sensible terms. They need make little or no reduction to the price they receive, if they would only cut the middle men out of the loop..

Is that a general problem with the wine trade or is it specific to port producrs? If general, perhaps it is simply a case of the producers not wanting to set themselves up to cope with all of the different legislative and taxation regimes in their target markets. Why do that work yourself when someone else can do it for you?

[David Spriggs]

How do you watch the Zachy's auction online? Can you see results now?

The results are posted in real-time. You can see them here for the last auction.

http://www.zachys.com/auctions/SearchRe ... ctionId=50
-Dave-

[Ronald Wortel]

On the port front there seems to be an awful lot of VP being made, with an amazing number of SQ's declaring 2005; but very little evidence of it being sold. When it is offered, the prices are ridiculous, given that this was not a generally declared year.

You're absolutely right. And at the same time the shippers are releasing masses of older SQ's (like 1995) at large discounts. Last year I bought a case of Vargellas 1995 for €25 a bottle. Warre's Cavadinha and Dow's Bomfim cost the same. Why then, should we pay over €40 for Vargellas 2005, which is probably of similar quality.

[Tom Archer]

Is that a general problem with the wine trade or is it specific to port producrs?

I believe a similar problem exists in Bordeaux, and probably elsewhere as well.

perhaps it is simply a case of the producers not wanting to set themselves up to cope with all of the different legislative and taxation regimes in their target markets

I can understand them being deterred from shipping small quantities to remote locations, but why won't they offer sensible prices to those who would like to take delivery ex. quinta, or in VNG?

I'm hoping that sooner or later, some of the small independant players will break ranks..

Tom

[Tom Archer]

Have a look at this table of prices from the IVDP, and note in particular the first column, Vintage Port

http://www.ivdp.pt/en/docs/Porto/Table%2014.pdf

This shows that the average price obtained for vintage port shipped to the UK was 13.94 euros per litre, which works out at £8.36/bottle, less than a third of the average retail price.

This includes late released wine as well as freshly bottled.

Given that 2005 was not a generally declared year, a competant, but little known independant SQ should be content to see a truck leave their premises, having loaded up their new VP for less than 100 euros a dozen.

Tom

[Andy Velebil]

Did you see Norway's average price

[Moses Botbol]

Don't forget shipping costs and/or tax also. The GC ''77 sounds like the only deal there.

Moses,
Are talking about previous auction pricing or retail?

Auction.

[David Spriggs]

Don't forget shipping costs and/or tax also. The GC ''77 sounds like the only deal there.

Moses,
Are talking about previous auction pricing or retail?

Auction.

Ah! ok.. I was loking at wholesale in the UK and retail in the US.

-Dave-

[JacobH]

Have a look at this table of prices from the IVDP, and note in particular the first column, Vintage Port

http://www.ivdp.pt/en/docs/Porto/Table%2014.pdf

This shows that the average price obtained for vintage port shipped to the UK was 13.94 euros per litre, which works out at £8.36/bottle, less than a third of the average retail price.

This includes late released wine as well as freshly bottled.

Given that 2005 was not a generally declared year, a competant, but little known independant SQ should be content to see a truck leave their premises, having loaded up their new VP for less than 100 euros a dozen.

Tom

Tom, it’s hard to tell from this chart, but are there not unavoidable financial costs which have not been included here and which will eat into the profit margin? In particular, I am thinking of the duty and tax on the wine and the auctioneers’ premiums. That particularly affects the lower end of the Port market as the cost of duty and VAT on the duty in the UK runs at about £2.50 a bottle.