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The biggest wine auction house in the U.S. is right here

By Peter Frost
October 08, 2016

 


Photo by John R. Boehm

Michael Davis, left, Paul Hart, seated, and HDH President Ben Nelson in their warehouse.


With cellars in Wyoming and Vermont filled with thousands of bottles of red Burgundy and Bordeaux, Tom Evans is a collector wine auction houses covet. The former New York Stock Exchange specialist, who spent 40 years on Wall Street, knows markets and he knows wine. And he may be best to explain how an 11-year-old wine company from Chicago, Hart Davis Hart, was the top-grossing auction house in the nation five of the last six years and is on track to retain the title in 2016.

Evans, who started collecting wine in 1970, says none of his other wine sources around the world treats customers better than Hart Davis Hart. “Their vetting is first-rate and their service is very personal,” says Evans, who bids in dozens of major wine auctions each year and compares dealing with some other auction houses with “doing business with the government.”

Nearly a quarter of the $165 million of fine wine that went on the block in the U.S. in 2015 was sold through Hart Davis Hart, according to data collected by Wine Spectator magazine. The 45-employee company in an industrial zone of McKinley Park is on track to sell $48 million of wine via auction this year, a 17 percent jump over 2015. This year's results were bolstered by the high-profile auction of late oil tycoon Aubrey McClendon's wine cellar, which was completed last month and netted $8.4 million—topping expectations.

“Its track record, simply, is phenomenal,” says Peter Meltzer, the wine auction correspondent for Wine Spectator for more than 25 years. He points to the company's best-in-class auction sell-through rates, which stand at 99.26 percent since inception in 2005, according to Hart Davis Hart data, versus 85 to 90 percent for others. “What that means for a seller is you can be confident your wine is going to find a new home,” he says.

Though the company is much younger than the biggest auction houses, Sotheby's and Christie's, it has decades of experience in wine. Its principals, longtime wine experts Paul Hart and Michael Davis, have cultivated relationships with the world's top wine buyers and collectors over the better part of four decades and now have some 70,000 customers in their database. Their wine specialists, the in-the-trenches experts who inspect bottles and sellers' cellars to ensure quality, are among the most-tenured in the business and have been called upon by the FBI as expert witnesses in wine-fraud cases.

Some of its competitors are riding the hot market for fine wine, too. Sotheby's, for example, already has booked worldwide auction sales this year of about $57 million after selling a total of $60 million last year as it picks up market share, says Eli Rodriguez, its wine sales director in New York. A new wave of younger buyers from North and South America is pushing up prices of “older, more mature wines with impeccable provenance and condition,” Rodriguez says.

STARTING OUT AT CHRISTIE'S

Hart and Davis, who got their start opening a Chicago wine-auction branch of Christie's in the early 1980s and went on to build and sell another wine company to Sotheby's, partnered with Chicago wine retail giant John Hart (who is not related to Paul Hart) to start Hart Davis Hart in 2004. Their first full year, they sold $9.5 million at auction and another $4.5 million at retail. This year, the company is projecting total sales of $66 million.

While most of the big players have been based in or around New York or London, the company opted for lower-cost, centrally located Chicago. “We knew from experience that the venue or location of the auction didn't matter,” says Paul Hart, the company's chief executive. “The most important thing was assembling and keeping together a team that has the most experience in the industry and making sure we have the technology in place to reach a global marketplace.”

One example: Instead of filling a stuffy room full of 50- to 60-something mostly white men bidding against each other for three-bottle lots of Petrus, the company now pulls bidders from around the world via its mobile app and website. That's allowed it to attract buyers from Asia, an increasingly important segment of the market for fine wine, who now make up a quarter to a third of all bidders in Hart Davis Hart's auctions. And the bigger the pool of bidders, the higher prices an auction generally will fetch.

Technology has been a boon for the company's retail business, too, which is on pace to surpass $18 million this year without a single storefront. It's not the kind of place you go for an $8 bottle of Barefoot; its 17,000 retail selections, like the wine it puts on auction, are each inspected for quality and average $150 per bottle.

The company is also emerging as a go-to for fine-dining restaurants, which can access its stash through wholesalers. “You can't really be a restaurant with a serious wine cellar and not buy from them at some point,” says Nick Kokonas, co-owner of the Chicago restaurant group that operates Alinea, Aviary, Next and Roister. “If you're on the hunt for unique, well-kept, privately held wines, that's one of the top places you look.”

The one downside, says collector Evans, is that Hart Davis Hart's reputation for quality comes at a cost. “Despite being a great place to sell, it's a bad place to buy because they're often getting the highest prices in the marketplace. And that's only because they do such a good job.”

In today's competitive wine environment, that's a good problem to have.

 

Read this article directly from Crain's.