Corporate Q&A

Vintage performance?

Sotheby’s boss discusses wine auction business in Hong Kong and China

Jamie Ritchie w

Ritchie: “Hong Kong auctions are the most exciting and enjoyable”

More than $6.8 million of fine wine went under the Sotheby’s hammer at two single-owner auctions and a multiple-owner sale in Hong Kong last weekend, with hundreds of lots of top-class Burgundy and Bordeaux available to collectors.

Sotheby’s says it has sold $11.7 million in the opening round of autumn auctions in Hong Kong and New York – comfortably ahead of the equivalent last year. In advance of next week’s second edition of The Little Red Book – our publication that looks at the key trends in China’s wine market – we spoke to Jamie Ritchie, Sotheby’s Wine CEO & President, Americas and Asia, for his views on the health of Hong Kong’s wine auction business.

Where is sales momentum strongest in the wine auction business at the moment?

We have certainly seen a strengthening in the US market and more price sensitivity for younger wines in the Asian market. Overall, I think we have a truly global market, where rare wines with perfect provenance will sell for the same price in all three major markets: Hong Kong, New York or London. The pricing differences that remain tend to be based on particular regional preferences, so lesser known mature wines would sell better in London, rare Burgundy and Italian wines in New York and Domaine Romanée-Conti (DRC) in Asia.

How about Sotheby’s experience in Hong Kong? And how confident are you in the future of the wine auction market in Hong Kong?

The Hong Kong market has matured quickly and we think the Asian buyers will remain the most important influence in the global market in the near term, as they participate in sales in every location. With the market strengthening in the US and prices being the same in each location, it looks likely that less wine will be shipped from the US to Asia for sale. So, on the surface it may look like sales in Asia are diminishing, but that is only because the selection of the location that we offer the wines is changing. The supply of wines for most of our Hong Kong auctions has been primarily from the US, then Europe. However, Asia remains the strongest market for selling large volumes of high value wines.

From a personal perspective, when do you remember seeing the impact of Chinese demand for the first time?

In January 2009 we started seeing aggressive buying from Asian clients in our New York and London sales, before we held our first sale in Hong Kong in April 2009. Given that the US market was very depressed following the collapse of Lehman Brothers, this transformed our wine auction business and meant we focused very heavily on developing our Hong Kong business.

The growth was incredible; in Hong Kong we sold $14 million in 2009 and $55 million in 2010. The height of the market was October 2010, when we held a single-owner sale of wines direct from Chateau Lafite – the low estimate was $1.4 million and it sold for $8.4 million. The next day, we had another $10 million sale, which lasted only one and a half hours.

In 2010 and 2011 I was travelling to Asia eight times a year – it was an exhilarating time. The market evolved very quickly so we were lucky to be able to recruit a great team of specialists with tremendous experience in the Asian marketplace. This newfound interest in fine wine also gave us the opportunity to start our retail business in Hong Kong, which opened at the end of last year. It represents a very interesting opportunity, as it offers fixed price sales, with minimum quantity, for immediate delivery, 365 days a year and we have a truly knowledgeable specialist to give advice to anyone interested in wine.

As a seller, what are the main criteria that would make me pick Hong Kong over auctions in New York and London?

It is true that there are still minor differences and market influences that would affect a seller’s choice of auction location and we take these into account with each recommendation when working with our clients. The major factors are the type and age of the wines, as well as their current location and the scale of the offering. The Hong Kong market is likely to be the best location for high value, large scale collections of blue chip wines; New York for rare Burgundies and sales from high profile US collectors such as Don Stott; and London for a diverse range of young and mature wines from European cellars.

What is important is that we analyse each cellar and make a recommendation as to the best location to offer the wines based on our sales results and experience.

You mentioned that a lot of the stock at Hong Kong auctions has come from collections in North America and Europe. Have Asian buyers started to sell some of the wine that they bought after 2008 too?

The majority of the wines that we have sold in Hong Kong have been sourced from the US, followed by Europe. However, wines from Asian collectors (whether stored in Hong Kong or the UK) are an increasingly important part of our business and over time they will come to represent a growing share of what we offer. Obviously, the purchase price always plays a factor when clients decide to sell.

What percentage of bidders at your sales last weekend were likely to be mainland Chinese, or Hong Kong traders selling to mainland China?

It is difficult to determine the exact value/volume of wine being purchased by mainland Chinese buyers, as we can only draw data from the invoice address, which can frequently be Hong Kong. However, we can say that the influence of mainland Chinese buying is still strong and healthy. For our Hong Kong auctions, we do sell 99% to Asian buyers, with Hong Kong and mainland China being the dominant buyers, followed by Taiwan.

Is there anything that you do differently in auctions in Hong Kong compared to the other locations?

In Hong Kong we get a significantly larger attendance in the auction room, with many active buyers, so it is important to keep the energy level up and the audience engaged in the room. We also get a significant amount of telephone bidding and live online bidding is also very important, so most of the action is in the room. For me, as an auctioneer, I think the Hong Kong auctions are the most exciting and enjoyable. We get many fewer absentee bids, so the auctions tend to go at a slightly slower pace [i.e. each lasts longer].

Is it possible to describe a typical Chinese buyer at your auctions?

I think generalisations are very difficult. Because drinking and collecting wine is relatively new to Asia, we get a huge cross-section of buyers from all ages and regions, with varying levels of knowledge. We have a number of Hong Kong buyers who are extremely knowledgeable and some of the best blind tasters I have had the privilege of dining with. On the other hand, we have some people who are completely new to wine.

But one good generalisation is that there is a thirst for knowledge from Asian wine buyers and they want to understand wine and trust their own palates. It is a myth that Asian wine buyers only drink the “label”: they taste the wines and will only buy what they enjoy drinking. I think this in-depth interest in learning about wine is the most exciting aspect of the wine market in Asia and this single factor makes me believe that we will see the most exciting growth in wine consumption in the next 10 to 20 years from Asia.

How about prices? Have some buyers in Hong Kong paid more at auction for equivalent lots in London or New York?

Yes, during the period from 2009 to 2013, Asian wine buyers were the least price sensitive, in the same way that American wine buyers were the least price sensitive from 1994 through 2008, when there was a huge transfer of wine from Europe to the US. From 2009 to 2014, there has been a similar transfer of wines from the US and Europe to Asia. While we have certainly seen the US market strengthen over the last year and the market has become more global, leading to similar pricing across the markets, in the long term we believe demand in Asia is likely to grow faster than other regions, which means that it remains the most exciting market for us.

(For more on the auction market and China’s wider wine market, download the second edition of The Little Red Book, which will be published next Friday, October 16.)

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