After three years of very rapid growth — placing it among the top 15 fastest growing private companies in the SF Bay area from 2006 to 2008, Vinfolio experienced a much more difficult sales environment during 2009. A few weeks ago, we found ourselves in need of additional capital on a very near-term basis. The company investigated several options but new capital could not be obtained on a necessarily compressed timetable. Because of the situation, and to safeguard the interests of our customers and creditors (including for wine purchases, wine sales, and wine stored with Vinfolio), the board of directors and the shareholders of Vinfolio approved and undertook a form of restructuring known as an Assignment for the Benefit of Creditors (the “Assignment”) on Friday evening, January 15, to provide the business with the flexibility to develop the appropriate course of action going forward.

The San Francisco-based company had just raised $4.5 million in September, they said to fund an expansion in Asia. According to the same article, the company, founded in 2003, had raised $6.1 million in previous rounds of financing (both debt and equity).

The company sources fine wine from collectors, wineries and has an importer’s license. Their other offerings include VinCellar, a system for wine inventory management, both on computers and as an iPhone app. The company also has 17,000 square feet of temperature-controlled storage for customers. Last July, the company launched VinFolio Marketplace, an online marketplace where not only wineries and importers could list wines for sale, but individual collectors could sell wines from their collection to one another. When launched, the company proclaimed that it enabled “access to the $500+ million in wine” making it the “world’s largest fine wine marketplace.” At the time of launch, in any given Marketplace transaction, the seller incurred a fee but the buyer did not.

In his post, Bachmann said that operations will continue during Assignment, a state-level insolvency measure. But in the eBob forum, several commenters on eBob debated whether collectors with wine in storage should arrange for immediate pick-up of their wines.

SIPPED: place names
Chateau Montelena and other wineries in Calistoga will soon be able to put Calistoga on the label. After a protracted struggle over whether wineries with Calistoga in the name would have to use exclusively Calistoga fruit, federal authorities granted AVA status to the area in the north of Napa. Wineries with Calistoga in the name have three years to begin using grapes from Calistoga. [SF Chronicle]

SIPPED: lightening up
When you have a collection of 450,000 bottles, is it time to lighten up? If you’re the owners of the Tour d’Argent restaurant in Paris, the answer is yes to the tune of 18,000 bottles, including some 18th century cognac and Corton from 1895. The auction today and tomorrow is estimated fetch about $2 million, which will aid the restaurant’s bottom line as it feels the tourist slowdown. Apparently, during the occupation, the owners built a fake wall in the cellar to prevent the Nazis from finding some 20,000 bottles. NYT, Telegraph]

SIPPED: Craggy Range
I participated in a kiwi Pinot showdown over at Forbes.com Tower. Eric Arnold has the story.

SIPPED: Green certification
A national certification program on various environmental factors have been launched for Australian wine. Quotage from Stephen Strachan from the Winemakers Federation: “The retailers more and more are requiring the companies that are selling to them to be able to come to them with certain proof in terms of their environmental credentials.” [ABC, WFA]

Koch alleges that five bottles he purchased through Acker Merrall & Condit were fake. The bottles were: 1947 Château Pétrus, a bottle of 1945 Comte Georges de Vogüé Musigny Cuvée Vielles Vignes, 1949 Lafleur, and two bottles of 1934 Domaine de la Romanée-Conti. Koch paid Acker $77,925 for the five bottles, purchased through private sales and auctions. He now claims they all came from Kurianwan but that source was not stated at the time of purchase.

Koch maintains that Kurniawan was the source of two Acker auctions in 2006 hailed only as from “THE cellar.” The two auctions grossed over $35 million. The complaint points to this LA Times profile of Kurniawan, which describes his preferred wardrobe is jeans and gray tshrits but that he has a Bentely and a Ferrari. The article also says that he got into wine only in the year 2000 but had already amassed a cellar of 50,000 bottles and that, “Since he started buying, prices for rare wine have skyrocketed.”

In reference to the two 2006 auctions, the filing says, “Buying and selling the same wine at the same time could also be an effort to manipulate wine prices, a scheme to pump up the price and then dump wine into the inflated market.”

Koch’s filing also states that Kurniawan owed Acker and Acker clients $10.4 million as of a November 2008 court proceeding. Acker accepted fine art and wine as collateral. Emigrant Bank also lent Kurniawan $3 million, according to the filing, and sued Kurniawan to get it back.

The filing also elaborates on sales of magnums of 1982 Le Pin and 122 bottles of red Burgundy from Domaine Ponsot. However, both sets of wines were withdrawn after winery principals raised doubts about the authenticity of the wines. Jancis Robinson has since called Laurent Ponsot “Burgundy’s Sherlock Holmes.” But where Kruniawan got those bottles remains unknown.

And to think that the movie rights for The Bilionaire’s Vinegar have already been sold! Looks like they’d better get working on the sequel already…

The wine auction market followed other asset prices in a sharp descent over the past six months. The theory that wine was a different type of asset class, immune from corrections, has suffered.

But in three auctions last weekend, the market showed signs of stabilizing. In Chicago, Hart Davis Hart sold 100% of lots for $2.2 million, toward the high end of estimates. In New York, Christie’s sold 95% of lots for an aggregate of $1.27 million. In Hong Kong, Acker Merrall boasted over 95% of lots sold for $4.36 million gross. Press releases for all three talked about how “it seems the wine market has sprung to life” (Christie’s), how it “sizzled” (Acker), and “it’s been a long
time since I’ve seen such spirited competition as we saw today” (Hart Davis Hart).

In my casual observation of a catalog, it seemed to me that the estimates were priced according to the recent sell-off, that is to say, lower. I even submitted a couple of low-ball bids, below the low estimates, and was not successful.

So has the wine auction market touched bottom? While it was the first place to pick up deals in the fall as the economy took a nose dive, it seems to be perking up now. But is this a false dawn? My guess is that it pretty much follows the equities markets and the macroeconomy.

Prices of all kinds of assets have declined precipitously since last December. Wine appeared somewhat immune as recently as September but evidence is now emerging that prices for collectible wines are entering a correction after many years of strong growth. The Liv-ex 100 Fine Wine Index fell 12.4 percent in October.

A close observer of auctions told me yesterday that two recent sales only sold 35 and 43 percent of lots. And some lots are going for well below the low price estimate. At another auction, someone else told me that a case of 1998 Grand Cru Chablis sold for $60. Even though there’s a risk of premature oxidation with that wine, $5 a bottle certainly seems like it’s worth a flier. Such a low selling price indicates that there was no reserve.

While many shops may have locked in higher costs, making them unwilling or unable to discount, some specialty shops do broker private collections too and can have faster turnarounds than auction houses. Provenance is always an issue with mature wine, so feel free to ask where the wines came from.

But some sellers at auction may be eager to liquidate making the secondary market may be the best place for wine deals this fall. Of course, if the global economic malaise continues into next year or beyond, declines in fine wine prices could continue. So you may not want to step in and catch too many falling magnums.

Some upcoming auctions: Zachys, Nov 6-8; Acker, Merrall Nov 7; Christie’s Nov 17 and 21; Sotheby’s Nov 22; Hart Davis Hart Dec 5.

Christie’s Wine Department had $71 million in sales worldwide last year, the bulk coming in Europe. On November 29, they will resume live auctions in Hong Kong. For the complete calendar, see the Christie’s Wine Department web site.

1. How is the financial turmoil affecting the fine wine market?
Like all industry leaders, Christie’s is watchful of the unfolding situation in the financial markets, particularly as it relates to our clients and business.

As regards the current financial malaise, it is important to note that the wine market has traditionally had little direct correlation to the financial markets, so we are cautiously optimistic that our business will continue to be strong throughout the fall season and beyond based on the quality of property we have scheduled for sale.

Recent sales results, healthy consignment levels for forthcoming sales, as well as the depth and breadth of our global client base, continue to support the long-standing axiom that passionate collectors seek rare and important objects based on their availability, not on external economic factors.

Our recent sale of 2000 Bordeaux in London is a prime examples of the strength of the current wine market in spite of the above mentioned trading conditions. The sale was 98% sold by value, with particularly robust results for Lafite and Latour as well as the signature 59 case superlot that closed the sale. Results from our competitors are also consistent with this view.

If difficulties on Wall Street occasionally serve to bring long-horded collections to market, there are always buyers for those collections. I have recently spoken with several individuals seeking to expand their position in fine wine on the assumption that this fall’s offer will be exceptionally rich.

2. Which categories or properties are particularly in favor right now?
The current market is somewhat polarized at present, with collectors favoring the top wine in mint condition. This includes Bordeaux’s “super eight”: the five first growths + Petrus, Ausone and Cheval; DRC and other top Burgundies such as Rousseau, Roumier, and Ponsot; and a limited number of iconic wines from producers in other regions, such as Screaming Eagle and Grange Hermitage. For this client, condition is of the utmost importance, and top dollar goes to full cases of wine in their original wood case.

The trade, on the other hand, has been focusing on “value” lots, such as the “super second” chateaux in Bordeaux, 1er cru Burgundy from early-maturing vintages such as ’01, ’00, ’98; Champagne, and new world wines from up-and-coming producers such as Sloan in California, Quilceda Creek in Washington, and Chris Ringland in Australia. Here condition and provenance are still very important, but buyers will more easily tolerate cases that are not complete.

3. Can you go short Lafite?
To the best of my knowledge, no one has profited from shorting a wine, and such an effort would certainly be risky. Theoretically, though, if one expected the market to decline, one could offer the wine for sale at a given price on a set date and hope to purchase it prior to that date at a lower price from a motivated seller. So while theoretically it might be possible to short Lafite, this is certainly not a gamble that I would feel comfortable taking in the present climate. Lafite is just the sort of blue-chip property that has held its value very well in the present climate, since investors see it as a hedge against volatility.

4. How are wine investment funds changing the fine wine landscape?
Wine investment funds have more of an impact in the U.K. than they do here in the U.S., but their influence is beginning to be felt. Since the managers of these funds tend to have fixed, somewhat conservative portfolios of wine that they try to acquire it has meant that there are in some cases more dollars chasing a diminishing amount of wine, ultimately fueling recent increase in prices. It is impossible, however, to separate this from the another type of new demand coming on line – the new wealth from rapidly growing economies such as those in Russia, China, India, Brazil and other countries.

5. What are some categories right now that represent accessible entry points for people just getting in to collecting or consuming mature wine?
The best way to participate in a wine auction is as follows:

A. Decide the type of wine that you will pursue and the amount of money that you’d like to invest. Remember that top wines from top vintages command a healthy premium, but have the best resale value.

Value categories include second growth Bordeaux, particularly from the less sought after years. 1996 red Bordeaux is a great one to target, since there’s plenty of stock, and while prices have risen, they’re far from the top end. The 1995 vintage is also very attractively priced, and the wines should mature more quickly.

The top wines from California still attain very generous prices, but there are a host of classic properties behind the five or so top cult wines that are extraordinary values.

There are also great bargains to be had, as there have been for the past several years, in white Burgundy and in Italian wines. Look for ’96 white Burgs (which are holding up better than previously thought) and for Barolos from the ‘80s.

B. Identify relevant lots in upcoming sales
C. Understand the market for the wines that you covet – how much are they “worth”? How rare are they? What should they sell for? What constitutes a bargain in this category?
D. Formulate a bidding guideline for yourself – where will you start? Where will you drop out
E. By all means, attend the sale to watch the ebb and flow, meet the participants, and drink a glass of champagne. Be certain to meet the specialists, who will be very happy to offer you their take on the sale at hand and the market in general.

The wine of the moment, everyone agrees, is 1982 Chateau Lafite-Rothschild. Jamie Ritchie, Sotheby’s North American wine department head, observes that “it now regularly brings $25,000 to $30,000 a case. The rise shows the strength of Asian buyers.” Last year you could have purchased a case for only $11,000. [Bloomberg]

Will 2008 be kind to the wine auction market? Have your say in the latest poll! (Check prices for a bottle of Lafite 1982 at retailers)

poll now closed

Now, the WSJ goes back to the well and reported on p. A16 on yesterday that Bill Koch has sued Zachys and collector Eric Greenberg in federal court in New York. Koch bought $3.7 million from a Zachys auction on October 28, 2005 that was sourced to Greenberg’s cellar and now alleges that 11 of those bottles were fakes. Zachys declined to comment and Greenberg’s attorney called the allegations “absolutely false.”

But now Howard “wine under $20″ Goldberg rides in with the revelation on Decanter.com that it was Eric Greenberg’s cellar that was auctioned this past weekend by Acker, Merrall. Acker had previously not named the collector who was selling, instead referring to it as “the man with the golden cellar.” It fetched $15.6 million including commissions.

Related: “Has the wine auction market peaked?” [Dr. V]
See the official court papers via scribd.com

We’ll do one marathon session at the University of Chicago on Sep 29. (details and registration)

Starting on September 25, we’ll spread it out over three Tuesday evenings at New York University’s Torch Club. (details and registration)

Only five spots are left in Chicago and a few more in NY so sign up now or never! Hope to see you there.

Indeed it is. That was billionaire Bill Koch as quoted in the fantastic New Yorker story about potential fraud in the fine and rare auction market. The story surrounds Koch’s four bottles of 1787 Lafitte (sic) allegedly from the cellar of Thomas Jefferson. He acquired them for $500,000 total and, upon learning that their origins could not be verified, he has now spent $1 million in investigative and legal action.

Great stuff–consider the article by Patrick Radden Keefe an absolute must read. It’s got a great cast of characters ranging from a dead president, the billionaire sheriff, the possibly gullible and definitely eager auctioneer, the gumshoe, the man with a hidden past, prone to excess going by the name of Hardy Rodenstock…All written in the classic, thorough, and engaging style of the New Yorker. Pass the popcorn and savor it like a glass of 45 Lafite–a real one.

There’s a fascinating section about just how easy it is to perpetrate fraud in high-end wine since many of the wines are never opened, instead simply displayed. And when they are opened, a lot of times those pulling the corks don’t know what a certain wine should taste like, thus they can easily be defrauded, or it is many years after purchase, and the statute of limitations has passed.

Oh yeah, the rest of the issue is “the Food Issue.” Might as well pick it up and read the whole thing over the holiday weekend.

(image)

How does this affect the auction market for collectibles? Billionaire Eli Broad recently told Bloomberg that he thinks prices will decline for the high-end art market. As the fall auction season kicks into high gear, auctioneers must be wondering if the same fate awaits them for wine.

I think not for three reasons. First, there’s gotta be a pretty limited number of people who would pay $100 million for Damien Hirst’s diamond skull, while fifty cases of 1982 Lafite can be broken down to 50 different buyers if need be. Even 25 percent of last year’s bonus still buys a lot of wine. Ferrari? Maybe that gets the ax, but wine stays.

Size matters too: total US wine auction sales last year were $162 million, strong growth year over year, but at the rate of a skull, that doesn’t even add up to an entire diamond encrusted skeleton should Hirst ever do one of those. The $1.7 trillion hedge fund industry may be down, but it’s by no means out. And if you’re trading down from big ticket art, why not shift into lower-ticket but still investment-grade wine? There are a lot of new empty cellars in Greenwich, CT and beyond just waiting to be filled up.

Finally, it’s tangible. At the end of a day trading, going home and sitting in the 55 degree cellar and looking at the wine is fun. It’s there. It’s real, unlike many mortgage backed securities or derivatives thereof. And alluring. It might even make you want to uncork a bottle. As Napoleon is reputed to have said, “Champagne. In victory you deserve it; in defeat, you need it.”

What do you think about the market for collectible wines this fall? Have your say in the comments below.

Select wine auctions fall 2007: (after the jump)
September 8, New York City, Sotheby’s
September 12, London, Sotheby’s
September 14-15, NYC (Daniel), Zachys
September 15, Chicago (Tru), Hart Davis Hart
September 15 NYC (20 Rockefeller Plaza), Christie’s
September 17, London, Christie’s
September 28, NYC (Daniel), Zachys (the Stormby cellar)
October 10, London, Sotheby’s
October 12, Los Angeles (Peninsula), Zachys
October 13, NYC, Christie’s
October 25, LA, Christie’s
October 27, Chicago, Hart Davis Hart
October 29, NYC, Sotheby’s
October 30, NYC, Christie’s (the Mähler-Besse cellar)
November 3, LA, Christie’s (the Christen Sveaas collection)
November 8, NYC (Daniel), Zachys
November 30-Dec 1, NYC (Daniel), Zachys
December 1, Chicago, Hart Davis Hart
December 8, NYC, Christie’s

(image)

Bordeaux sighs in relief
After getting damned and slammed by Jancis Robinson, Bordeaux catches a break from Robert Parker for the 2006 vintage. He hails it as “superior to 2004.” The Medoc lives to see another day, St. Emilion can raise their head in public but Pomerol is the belle of the ball since the wines from there are “excellent across the board.” Dry white Bordeaux bounces back from irrelevancy as the Parkermeister joins J Ro in praising the wines this vintage. But RP only hands out three potential top scores, to Mouton Rothschild, La Mission Haut Brion, and Bellevue Mondotte of St. Emilion. Needless to say, none of those were on the Jancis short list.

Caution: fragile. May be fake
Have you ever objected when the sommelier at a fancy restaurant uncorks your wine and tests a sample himself? Then don’t buy wines from the 18th century, which now post-Rodenstock, are getting downright molested. Quote: “A combination of nuclear isotope analysis and gamma radiation and proton beam tests conducted by experts from the universities of Bordeaux and Manchester will be used to confirm the age of each glass bottle in the Antique Wine Company collection. The wine itself � extracted by hypodermic needle through the cork – will be subjected to molecular and chemical analysis.” [Decanter]

Cameron Hughes, in the house
Yesterday’s post about American negociant Cameron Hughes sparked a comment frenzy–including several by Cameron himself. He elaborates on the differences between his wines and private labels at grocery stores, his sales techniques, and even offers readers of this site 50 % off shipping using a discount code. See the comments.

Ordinary wine lovers, even those who buy a few cases of great wines each year, are unlikely to be affected by scammers, unless they buy old wines or buy their wines from secondary sources, like brokers or through Internet auctions. [NYT]

Also:

• Wine Cops, on the Case [Newsweek]
• Winemakers Deploy Chips, Codes to Battle Fake Bottles [Elin McCoy, Bloomberg]
• What You Need to Know When Buying Wine at Auction [John Mariani, Bloomberg]

I told this to a friend the other day and he said, “But are there any good names there? It might be worth a chance.” Then we devised a business idea for Caveat Emptor Wine Co., specializing in wines of unknown provenance. “The wines weren’t ours, but the risk is yours” could be the tag line. Needless to say, we have not contacted an an attorney to start the corporate filing yet.

But some other notable collectors have contacted their attorneys. And they’re not looking to start an LLC. They’re looking to stop fraud in wine auctions and have the wine’s seller or a broker accept responsibility. Needless to say, the main auction houses do a better job at assessing provenance than Caveat Emptor Wine Co. But how much they should stand behind their lots (and cases of wines sold through fine wine stores) is a question that is now getting a public airing before a grand jury in New York City.

The Wall Street Journal reports on page one that federal prosecutors have issued subpoenas to Christie’s, Zachys and some rare wine collectors in a probe into wine fraud at auction. In what might cool off the red-hot secondary market for fine wine sales, successful businessmen and wine collectors Russell Frye and William Koch are also taking action. Roll the tape:

Mr. Koch filed a civil suit last year in federal court in New York, alleging that a German wine merchant, Hardy Rodenstock, forged bottles of wine he claimed had belonged to Thomas Jefferson and had been discovered in a bricked-up cellar in Paris. Mr. Rodenstock also claimed to have other extremely rare wines, including a cache belonging to Czar Nicholas II of Russia, Mr. Koch alleged. Those allegations were detailed in September in a page-one story in The Wall Street Journal. In a Jan. 19 court motion, an attorney for Mr. Rodenstock denied the claims and deflected responsibility to the merchants who sold them directly to Mr. Koch.

“It’s not just Rodenstock,” Mr. Frye continued in the WSJ article. “Counterfeiting is a big problem, especially in the high end. These networks need to be exposed,” and merchants must be accountable, he said.

But fraud is just one problem, estimated at five percent in the WSJ story. So add to that, say, five percent corked, x percent improperly stored, y percent drunk too late–and small wonder the excellent old wines are just so…excellent!

Related:
“U.S. Investigates Counterfeiting Of Rare Wines” [WSJ, sub]
“WSJ: fund with wine” [Dr. V]
“Wine heist, part trois” [Dr. V]

tags: wine | wine collecting

The Wall Street Journal had a big story on page B1 over the weekend about the new phenomenon of wine investing (no free link to the story, “Fine Wines No Longer Just Tempt Collectors”). In London, the Fine Wine Fund has been set up with the goal of investing in wine. They charge fees similar to a regular fund for alternate investments with a two percent annual management fee and 15 percent of the profits.

Is making money out of wine a panacea? Post your thoughts in the comments! One thing is for sure: while the story doesn’t mention the size of the Fine Wine Fund, if a lot of money sloshes into the relatively small market for investment-grade wine, prices will likely go to even more eye-popping levels. Let’s just hope that some corks get popped along the way too.

* * *

Steve Bachmann was quoted in the story talking about inefficiencies in the wine market. You can check out his thoughts on how to value wines on his blog, The Wine Collector. He’s also the CEO of Vinfolio, a fine wine retailer.

tags: wine | wine collecting