A wine auction to know about
There are nearly 400 lots of fine and rare wines that will come under the hammer this week when the second Strauss & Co Fine Wine Auction gets under way
Looking for something special to add to your wine cellar? How about a rare bottle of the 1966 GS cabernet, or a Chateau Libertas 1957? Or if you’re into more modern icons, might a Boekenhoutskloof syrah from 1997 or Mvemve Raats de Compostella 2007 tempt you?
These fine and rare wines are just a handful of the nearly 400 lots that will come under the hammer this week when the second Strauss & Co Fine Wine Auction gets under way in Cape Town.
The auction is a partnership between art auctioneers Strauss & Co, fine wine merchants Wine Cellar and sommelier Higgo Jacobs. At a similar auction in Johannesburg in June, 183 lots were sold for a shade over R1.3m; the average price a bottle was R1,500.
"We believe the time is right to elevate SA wines to the same degree of collectability as the visual and decorative arts," says Frank Kilbourn, executive chair of Strauss & Co, about the segue into liquid creations.
The amount of R1.3m is relatively small change, but the auctions are an important reflection of the state of the fine wine trade in SA: small and niche, though showing real potential.
For Roland Peens, director of Wine Cellar, it’s all about potential, especially when it comes to establishing a robust secondary market for SA fine wine.
"No fine wine industry in the world operates without a secondary market," says Peens. "Overseas it dictates prices for each winery. We feel there are a lot of incorrectly priced wines out there, and an auction can resolve some of those [issues]."
It’s also a useful bellwether of demand for fine wines, and "the very fact that there’s a new auction indicates a desire for high-end SA wines that has been lacking in the past", says Mike Ratcliffe, co-founder and managing partner of premium Paarl producer Vilafonté, whose cabernet-driven Series C sells out within days of release.
But wine auctions aren’t just about creating a marketplace for collectors.
Wine brokerages already exist; Wine Cellar has been selling private collections since 2001, and competitors offer similar services. But the benefit of selling wines on auction is that it offers the opportunity to gauge a wine’s market value accurately.
"Already from our first auction we’re starting to see where our pricing was too high or too low," says Peens. "And we’re certainly not trying to push an agenda of high prices. We’re trying to create a platform where the market can truly decide the price. If the reserve price is too high and the wine does not sell, so be it."
Along with benchmarking true market prices, the recent Joburg auction had the welcome side-effect of encouraging wine collectors to clear out their cellars and put vintage bottles on the market. Provenance and quality of what are, in effect, second-hand goods can be a concern, but reputable brokers will taste and test wines to ensure they have not spoilt due to poor storage. It pays to do business with the right people.
Auctions can also provide interesting insight into the equity a brand holds in the market. At the June auction the Meerlust lots sold for higher prices than expected, while the Vergelegen wines sold poorly. While that could easily be put down to the whims of the buyers present on the day, Peens says it’s because Vergelegen has "taken its foot off the pedal" in the past few years, losing brand status in the market.
But what’s so different about the Strauss & Co auction?
Vintage wines are also offered at the Cape Fine & Rare Wine Auction — formerly known as the Nederburg Auction — but its rules about minimum stock levels exclude many producers or special vintages.
The annual Cape Winemakers Guild Auction is another highlight of the winelands calendar, but it offers only the wines of the guild’s members. That excludes some of the country’s most respected winemakers, including the likes of superstar Eben Sadie.
These auctions are "simply not reflective of the top wines in the industry", says Peens. "And we felt that neither of them is able to service the private seller. If you’re a private customer and have fine wine you need to sell, there simply hasn’t been an opportunity to sell them on auction in this country."
Whether you’re buying on auction or through a merchant, fine wine can certainly make for a savvy investment, regularly outperforming global equity markets. Admittedly, that applies largely to the most sought-after French producers; but SA fine wines are also showing their mettle as an asset class worth investing in.
"Producers are routinely adding up to 10% to their prices each year, to account for inflation and weakening exchange rates, so just by holding wine and selling it down the line you’re automatically beating inflation," says Peens. "We believe a return of 15% a year, compounded, is feasible. Over the long term that’s a serious return. It outpaces almost every single index around the world."
To make investing in wine more accessible, in 2018 Wine Cellar launched a pair of investment portfolios that allows investors to buy a unitised collection of wines. Both the Vintage Investment Portfolio (R100,000) and the Alternative Investment Portfolio (R40,000) quickly sold out.
The Cabernet Investment Portfolio (R50,000), launched in March 2019, did the same.
An alternative approach is Fine Diamond Wine Investment Holdings, a wine investment fund run by Ken Kinsey-Quick, former partner at Thames River Capital in London. The fund requires a minimum investment of R100,000. Investors buy shares in a private company, rather than physical bottles. The company then invests in a portfolio of wines, cellared in bonded London warehouses. Fine Diamond invests roughly one-third of its assets in SA wines and the remainder in international producers, predominantly age-worthy Bordeaux.
"Whether you’re a wine lover or not, fine wine is a good diversifier in any investment portfolio," says Kinsey-Quick.
Growing interest in a secondary market for SA fine wine hinges on a renewed respect for premium producers in the local winelands. That has been driven both at home and abroad for reasons ranging from the freewheeling winemakers of the Swartland creating a buzz about old vines to international critics such as Jancis Robinson and Tim Atkin making regular visits to the country.
"That attention has really snowballed into a fine wine revolution in SA, and the number of producers focusing on fine wine has increased rapidly over the past 10 years," says Peens.
Not everyone’s convinced, though. London-based wine columnist Jamie Goode caused something of a flurry on social media this year when he tweeted: "You’d be bonkers to invest in SA wine. No secondary market, no fluidity. Very few develop positively with extended ageing."
Greg Sherwood MW, owner of London wine merchant Handford Wines, disagrees. "The fine wine secondary market is definitely growing," he says. "In the UK demand is strong, contrary to a lot of commentary to the opposite. The more successful the category, the more people will hold back archive stock … [and] as allocations tighten, demand grows, as everybody wants what they can’t have. So consumers look to alternatives, and a bit broader, which expands the range of wines people follow and chase."
With quality and respect for SA wine on the rise, the issue now is volume.
"The very top end of fine wine in SA is made in impossibly small quantities," says Ratcliffe. "To play in the global fine wine market we simply can’t be selling one-barrel lots. We need to have brands that are able to supply the market in Tokyo, Shanghai, New York, London and Paris."
And growing SA’s premium wine sector isn’t just about making the icon producers more profitable, adds Ratcliffe: "A rising tide does raise all ships, so if we could get to a point where 10 or 20 wineries produce high-end wines at volume, it would be good for the entire industry."
Going once! Dates for your diary
Strauss & Co. Fine Wine Auction
Where: The Westin Hotel, Cape Town When: 14 September 14 2019 straussart.co.za/strausswine
Nedbank Cape Winemakers Guild Auction
Where: Spier Wine Estate, Stellenbosch When: 5 October 5
Cape Fine & Rare Wine Auction
Where: Rupert Museum, Stellenbosch When: 18-19 October 18-19 2019