HDH Wine

Auctions: Handle bottles and clients with equal care

By Michael Steinberger

Published: June 19 2009 16:04
Last updated: June 19 2009 16:04

The rise in fine wine prices that started this decade and ended after the implosion of Lehman Brothers in September 2008 also saw the balance of power in the wine auction market shift from Britain to the US.

In the good times, two New York area houses, Acker Merrall & Condit and Zachys, supplanted Sotheby’s and Christie’s. Acker, in particular, notched up some phenomenal years, mainly thanks to high-profile sales involving single sellers with legendary collections.

Business has held up fairly well during the downturn, but amid the crisis, another US auction house, Hart Davis Hart, has come to the fore.

With impeccable timing, the Chicago-based company signalled its arrival in the first division just days after Lehman Brothers went bust, unloading a single cellar for just over $11m, the biggest sale worldwide in 2008, and the fourth largest in wine auction history.

The centerpiece of the two-day sale was a huge cache of Château Lafite, which drew frenzied interest from mainland Chinese buyers, one of whom paid a record $59,000 for a case of 1982. Within weeks, the price of ‘82 Lafite tumbled nearly 70 percent, and fine wine prices in general were plummeting in tandem with global financial markets.
In retrospect, Hart’s September 2008 auction may have been the final, convulsive twitch of the bull market for fine wines, but the company itself has weathered the economic storm just fine and has, in recent months, consolidated its place among the elite auction houses.

It has been suggested that HDH has been too aggressive in slashing estimates in the face of the turmoil, but the company is in the business of selling wine, and the results speak for themselves: in three auctions since March, it has managed to sell 100 percent of the lots on offer.

HDH has been in the auction business only since 2005, but it was started by a trio with long experience in the fine wine market. John Hart has been a fixture on the Chicago scene since the early 1970s, running his own fine wine company and also serving for a time as a consultant to Christie’s. Paul Hart (no relation) and Michael Davis started a Chicago-based auction house called Davis and Company in 1993. Five years later, it was acquired by Sotheby’s.

HDH has also hired some experienced hands, notably Kevin Swersey and Ben Nelson, who both previously worked for Zachys. Mr Swersey is a consultant to HDH while Mr Nelson is a senior vice-president and the consignment director.

Mr Nelson says HDH has sought to distinguish itself not only by the quality of its consignments but also by its service – the founders felt the areas in which wine auction houses fell short were logistics and attention to detail.

In their view, it is not enough to be able to offer rare and highly desired Burgundies and Bordeaux; to win loyalty, it is vital that wines are catalogued accurately, that they be handled with meticulous care, and that they are shipped in accordance with the client’s specifications.

“These are simple things,” says Mr Nelson, “but they are harder to pull off than you might think.”

He says HDH has resisted joining other houses in establishing operations in Hong Kong because it does not want to lose its ability to micromanage. The company believes keeping everything in Chicago is vital to the customer care it aims to provide.

“Sure, there is something to be said for having a physical presence in Hong Kong,” says Mr Nelson, “but our idea is that we can best serve our clients from here.”

That said, HDH has been able to attract strong Asian interest and also draws on long-standing relationships with buyers and sellers in Europe and South America.

In keeping with the fashion, HDH holds its sales at a local restaurant, Tru. A buffet lunch is served and attendees can sample wines from the list during the afternoon.

Many sales also include dinners featuring suitably impressive wines. Prior to an auction in April, HDH held a dinner featuring a trio of legendary vintages: the 1961 Château Pétrus, the 1961 Château Latour-à-Pomerol, and the 1961 Château Palmer.

Although buyers can participate in auctions via the internet, HDH prefers them to attend in person.

On that front, it has also had success: the September 2008 auction brought a number of collectors to Chicago, as did an auction in May 2007 that featured the cellar of the late Steve Verlin, a renowned oenophile and a founding partner of the New York restaurant Veritas.

In fact, Mr Nelson credits the Verlin sale – a two-day auction that grossed more than $7m – with bringing HDH to the attention of collectors around the world.

For HDH and the other auction houses, 2009 has been noticeably lacking in such mega-sales, which is hardly surprising, given the continued economic uncertainty and the sharp decline in wine prices.

But Mr Nelson says the market has rallied strongly in recent months; prices have recovered about 50 percent of the ground lost since late last year, and HDH, at least, is once again seeing lots selling for 30-40 percent above their low estimates, versus 10-15 percent at the start of the year.

Assuming the signs pointing to a bottoming-out of the US economy are not false indicators, Mr Nelson thinks the wine auction market might have gained a bit of swagger by the autumn.

Copyright The Financial Times Limited 2009