Napa Wine Gains 49% From `Abyss' as Auction Raises $8.5 Million

Napa Valley vintners who saw prices plunge in the past year raised $8.5 million at their annual charity auction as bidding returned for super-premium wine.

The total rose 49 percent from last year, according to Napa Valley Vintners, a St. Helena, California-based trade group. Still, the tally was 19 percent less than the peak $10.5 million raised in 2005 and down from $10.35 million in 2008.

“Last year everything was depressed, but this year the spirits are higher,” said Jose Luis Nazar, 62, founder of Lexicon Marketing in Los Angeles. Nazar spent $105,000 on two lots, a quarter of what he spent in previous years.

The weekend event at the Meadowood Napa Valley resort may signal a rebound and not a complete recovery for the region that produces the highest-priced U.S. wines, according to Rabobank Nederland NV, a Utrecht, Netherlands-based bank that finances agricultural businesses. Sales of ultra-premium bottles, defined as $30 and over, fell at least 15 percent last year as luxury consumers sought value after the financial crisis, the bank said in a first-quarter report.

“The high end is still soft,” Stephen Rannekleiv, lead analyst on the Rabobank report, said in a May 28 interview. “Some people say it’s a new reality and if you want to move product, you have to sacrifice your margins a little bit.”

Retail stores in the U.S. show price erosion for Napa wines. A 2006 Groth Reserve Oakville cabernet sauvignon rated 95 points out of 100 by Wine Spectator magazine lists for $90, down from $140, at K&L Wine Merchants in California. The 2006 Dominus Estate Napa Valley Bordeaux blend is $100, off from the original $130, at Web retailer Wine.com.

Price Cutting

“Discounting is not a figment of your imagination,” Santa Clara, California-based Silicon Valley Bank said in its annual wine industry report released last month. “We do not believe the improving consumer climate will catapult fine wine sales to the high point of the past decade anytime soon.”

Inventories remain high, and it will take at least six months for wineries to work off the excess, Rannekleiv forecasts.

“Let’s be honest, you can’t ignore what’s happened in the economy overall,” John W. Thompson, 61, chairman of Symantec Corp., said in an interview after paying $240,000 for a lot of 18 magnums of Shafer Vineyards cabernet sauvignon.

The industry’s tough time didn’t result in a frugal event, though, as renowned vintners and chefs including Thomas Keller, of Yountville’s French Laundry restaurant, donated their talents. The auction has raised about $100 million for health care, youth services and affordable housing in Napa County since it was founded by the late winemaker Robert Mondavi and others in 1981.

Squirt Guns

Guests at the post-auction dinner sat on long tables with unassigned seating on the Meadowood golf course fairway and ate duck confit salad, porcini mushroom and onion tart, braised beef cheeks and strawberry trifle. Squirt guns were given out to encourage “fun” in the 85-degree heat, said event co- chairwoman Beth Novak Milliken, 49, president of Spottswoode Estate Vineyard in St. Helena.

The auction had fewer “mega-lots,” said Garen Staglin, 65, owner of Staglin Family Vineyard in Rutherford, whose offerings in 2006 and 2007 fetched more than $1 million for French and Italian vacations, winery tours in Bordeaux and Barolo and restaurant meals in Paris and Venice.

The Staglin lot this year sold for $170,000 and included three 3-liter bottles of estate cabernet sauvignon, a 12-day luxury cruise and 5-night New York City hotel package with tickets to the New York Yankees and an event of your choice at Madison Square Garden.

Charity Prices

The highest price for a single lot was $350,000 for 10 magnums from 10 consecutive vintages of Harlan Estate Proprietary Red, according to the vintners association. A lot of eight 1.5-liter bottles of Colgin Cellars cabernet sauvignon from eight vintages sold to four separate bidders at $250,000 each.

A 6-liter bottle of Screaming Eagle cabernet sauvignon sold for $200,000 to M.K. Koo, chairman of Shenzen, China-based Nam Tai Electronics Inc. That lot, the 10th out of 41, “kicked things off” after a slow start, Milliken said.

Prices paid at charity auctions reflect what buyers can afford to pay, their desire to give and personal tastes, not necessarily the value of the wines, Nazar said.

“We all overpay, but this is charity,” he said.

Milliken said she originally wanted to book Tom Petty and the Heartbreakers as the evening entertainment until she realized the rocker’s $500,000 minimum fee was too expensive. Guests instead were treated to the Bangles, the ‘80s girl band, hired for about 10 percent the cost. They brought vintners and their guests onto a grassy dance floor beneath oaks trees with hits including “Walk Like an Egyptian” and “Manic Monday.”

The auction ended with the fifth-highest total in its history, below the $9.8 million tally in 2007 and $9.5 million in 2000, the vintners association said.

“Last year felt like the economy was looking over the abyss,” Milliken said. “I was just hoping we’d do better this time.”

To contact the reporters on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net; Ryan Flinn in San Francisco at rflinn@bloomberg.net.

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