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Dealers Warn of Lafite Bubble as Auctions Double on Asia Demand

Chateau Lafite
Eight of the 69 bottles of Chateau Lafite ranging from 2003 to 1799. The wine sold for HK$2.6 million at an auction held by Acker Merrall & Condit in Hong Kong on March 26-27 -- the highest achieved by the New York-based auction house in 2010. Source: Acker Merrall & Condit via Bloomberg

Surging demand in Asia for Chateau Lafite and other prestige French wines may be causing a bubble, dealers said.

The warning for 2011 comes after the three biggest wine auctioneers had final sales figures of $258.3 million for 2010, more than double 2009, according to Bloomberg calculations.

“At first, the Asian average buyer was a consumer,” David Elswood, Christie’s International’s head of wine, said in an interview. “Over the last year we’ve seen the emergence of the Chinese speculator. There have been auctions where just two or three bidders have taken 80 percent of the top lots. Often the items are put on deposit and we store them on the buyers’ behalf for the foreseeable future.”

Asians have dominated the market after the Hong Kong government scrapped import duty on wine in February 2008 and newly wealthy Chinese acquired a taste for prestige Bordeaux and Burgundy. Prices for the top labels rose between 60 percent and 100 percent last year, according to Elswood.

The London-based merchants Wilkinson Vintners Ltd. sold two 12-bottle cases of Lafite 1982 in December for almost 48,000 pounds ($74,830) each that will be drunk during the Chinese New Year in February, said Paul Bowker, a director. In September 2008, two cases of the same wine fetched 18,400 pounds and 19,550 pounds at Sotheby’s London.

“Prices have escalated dramatically,” Bowker said in an interview. “Lafite is the biggest bubble. While it won’t burst, growth will slow when people realize you can buy a not dissimilar wine like Chateau Latour for half the price. It’s only the very top of the market that’s been affected.”

Acker Record

Acker Merrall & Condit reported a full-year grand total of $98.5 million of wine sold, a record for an auction house, the New York-based company said in an e-mailed statement. Two-thirds of sales were made at events in Hong Kong, it said.

Sotheby’s and Christie’s respective totals of $88.3 million and $71.5 million were both records for their wine departments.

Hart Davis Hart Wine Co.’s total increased 63 percent to $39.2 million, the company said in an emailed release.

Two-thirds of all the lots valued at more than 10,000 pounds at Christie’s auctions in the U.S., Europe and Hong Kong fell to Asian bidders, Elswood said. Demand from the Far East is concentrated on a limited range of fewer than 20 prestige labels with Pauillac’s Chateau Lafite at the top of the list.

“The Asian market is brand-driven,” he said. “If they can’t buy Lafite, they’re not going to buy Chateau Lynch Bages instead. They’d rather have a Rolex or a Ferrari.”

Lafite Vintage

In October, three bottles of Lafite’s 1869 vintage, sourced directly from the chateau, were sold by Sotheby’s Hong Kong for record prices of HK$1.8 million ($230,000) each. They had been estimated to fetch between HK$40,000 and HK$65,000 per bottle.

“For 200 years wine has been a stable and predictable market,” Elswood said. “Now, because of a small number of wealthy bidders, it’s unstable and unpredictable. Anything can happen at an Asian auction. Sales continue to be underpinned by consumers, though.”

Lafite was Acker’s top-seller in 2010. A lot containing single bottles from 69 vintages ranging from 2003 to 1799 fetched HK$2.6 million -- more than double the HK$1 million low estimate -- in Hong Kong in March.

“It’s a beast that can’t be tamed,” John Kapon, Acker’s president, said in an interview. “The market is as strong as it’s ever been. Every day we meet new buyers from China, and every day the wine gets consumed.”

Ever-rising prices may make top-name Bordeaux a liquid asset that owners are less and less inclined to consume.

“It’s becoming more and more difficult to drink top wines,” said Elswood. “If you’ve got a case that cost you 2,000 pounds two years ago and is now worth 15,000 pounds, you’re going to think twice about opening it. Everyone wants to do that in Asia.”

U.K. composer Andrew Lloyd Webber is the latest collector to be offering a major consignment in Asia. He will be selling 747 lots of Bordeaux and Burgundy at Sotheby’s Hong Kong on Jan. 22, valued at as much as HK$32 million.

(Scott Reyburn writes about the art market for Muse, the arts and culture section of Bloomberg News. Opinions expressed are his own.)

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