It’s fitting that Sotheby’s held a fine-wine auction in Hong Kong on the holiday weekend in October that marks the founding of the People’s Republic of China.
Having raised HK$107 million (US$13.7 million) with a two-day, two-part sale, the auction house has reason to celebrate the rise of demand in China, and in Asia.
The wine auction is one of four Sotheby’s will hold in Hong Kong during October alone. Acker Merrall & Condit, which started wine auctions in Hong Kong in 2008, will hold six sales this year
“Right now, without a doubt, it is the most important market in the world,” says Robert Sleigh, the head of wine for Asia at Sotheby’s.
The auction house expects sales of $40 million in Hong Kong, versus $20 million in London and $15 million in New York.
Christie’s also expects Hong Kong sales to surpass those for New York and London, combined, this year. Hong Kong “is without a doubt the fine-wine auction capital of the world right now,” says David Elswood, the firms top wine executive.
All the major auction houses are now organizing sales in the city. Spectrum Wine Auctions is beginning to ship wines in from its California base.
“It has surpassed London to be one of the biggest auction markets and is just slightly behind New York,” adds Daniel Lam, the wine department manager at the auction house Bonhams, said. “We are expecting this year that Hong Kong will be the No. 1 market in the world.”
In May, Acker Merrall & Condit held the largest sale ever held in Asia, selling 19,000 bottles from one of the world's best-known wine collections, the cellar of Internet entrepreneur Eric Greenberg. The sale raised HK$152 million, or $19.6 million), the second-biggest wine auction ever worldwide. (VIDEO: Go inside a collector's 36,000-bottle wine cellar.)
"The auction is a true indiction that Hong Kong is the future of fine wine," says Greenberg.
Rising sales in Hong Kong and the rest of the Asia-Pacific region are part of a global boom. Sales for the top-three largest auction houses—Sotheby’s, Christie’s and Acker Merrall & Condit—are on track to cross $200 million for the year, double that of 2009.
Hong Kong's ascension partly reflects the aftermath of the global financial crisis, which has seen Asian economies emerge faster and in better shape than their Western counterparts.
The driving force, however, has been regulatory, namely the removal of wine-import duties in early 2008, when the government unexpectedly the 40-percent tax.
Since then, growth in wine imports has been sudden and dramatic; sales rose 80 percent to $367 million in 2008 and another 41 percent in 2009 to $517 million.
“It’s unstoppable, really— Hong Kong is now the talking point of the international wine community,” says Simon Tam, a wine consultant and commentator, who runs the Independent Wine Centre,
“It is now cheaper to drink a fine wine in Hong Kong than in France,” adds Gregory Brossard, a wine buyer at Platinum Wines, noting that the price of wine in France includes the standard 19.6-percent value-added tax on goods and services. “I have a big collection in France but I have a bigger collection in Hong Kong.”
The surge in sales has been accompanied by the growth of fine-wine services. The Hong Kong Quality Assurance Agency set up a new program at the end of last year, the Wine Storage Management Systems Certification Scheme, that has so far approved a dozen companies providing top-class facilities.
Sleigh moved to Hong Kong in August after 13 years with Sotheby’s in New York, marking the first time the auction house has had senior wine staff in Asia.
“The real story is who is buying the wine,” says Sleigh. “Sixty to 70 percent of the value of the wines we sold in New York has been to Asian buyers.”
Now the sales have come to them, with Hong Kong’s move successfully positioning the city as the hub for Asia, where most nations levy heavy imports on alcohol.
The boom in auctions has been centered around the very finest wines, typically first-growth Bordeaux and occasional Burgundy wines. France accounted for more than half the wine shipped into Hong Kong last year—HK$2.3 billion out of HK$4.0 billion in imports, Britain was a distant second at HK$556 million, mostly because those shipments were French wines that had already been shipped to and stored in London.
The same wines keep cropping up at auction—the Chateaux Lafite, Latour, Haut-Brion, Margaux, Mouton-Rothschild. Prices of the very best vintages of the very best wines have skyrocketed. The 1982 vintage of Chateau Lafite, for instance, has increased from US$4,500 per case a decade ago to US$50,000 per case now.
“That’s just a function of the fact that mainland China has taken up Lafite as exactly what they want,” notes Sleigh. “It is an anomaly compared to the rest of the market. The market is buying in a very narrow band, the blue chips from the best vintages.”
Even more alarmingly, prices of key vintages such as ’82, ’86 and ’96 Lafite have leaped 50 percent to 80 percent in the last six months.
Although the ranks of speculators are growing, wine experts say most buyers in Hong Kong are consumers first and investors second; buyers are very likely financing their drinking habits by buying five cases with the intent of reserving two for their own use and while selling the other three.
“The price is escalating very significantly,” says Lam. “When you ask me can the prices be sustained, I’m not sure. They're already very, very high.”