Tim James: Thoughts about the second Strauss wine auction

By , 16 September 2019

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Auction house Strauss & Co held their second wine auction of the year, in conjunction with Wine Cellar and Higgo Jacobs. The main difference from the first one, held in Johannesburg in June, is that this one was twice as large in terms of number of lots on offer (376 lots versus 183), and had a small but significant component of foreign wines. There was undeniably a splendid array of wines.

Another difference, rather more worrying for the auctioneers and disappointing for the sellers, was that this one was substantially less successful (the results are posted on the auction website). While the first auction sold over 85% of the lots on offer, the success rate plummeted to just over 65% last Saturday in Cape Town, with over 130 lots going unsold. As worrying, 176 lots went for amounts below the low estimates given by the auctioneers, with only a handful surpassing expectations. (All the lots had been given low and high estimates of what the auctioneers expected: So, for example, the lot of 6 bottles of Rustenberg John X Merriman were expected to sell for R4000 to R6000; in fact, it went for R3600, possibly the reserve price set by the seller as the minimum acceptable. All prices quoted here are “hammer prices”, to which the auctioneer’s commission and VAT on that commission needs to be added for the final price paid by the purchaser.)

So, by my count, 308 of the 376 lots were either unsold or were sold below the low estimate. (There might be some post-auction sales still going through – in fact I’ve put in an offer for something.) This is not the sort of result that auction houses like. And not one that those seeking to establish a secondary market for South African wine will be pleased to see.

There is a consoling element for the latter group, however. It wasn’t only the modern Cape wines that performed weakly, but some of the classic names from the 20th century too (GS, Chateau Libertas, etc). Moreover, the foreign wines on offer, most of them with successful track-records in international auction houses, didn’t do well either – some unsold, some achieving less than their low estimates. Maybe South Africa just isn’t ready to spend a lot of money on wine – especially at auction – whatever sort of wine it is. Higgo Jacobs, putting a brave face on the results (“not a disaster … we’re definitely not disappointed”), points out that “the market is now as bad as it can be”; what did disappoint him was the small number of people in the room bidding.

Some of those who were there got great bargains, I’d say, whether for drinking now or keeping longer. A few at random: De Trafford Syrah 393 2010 for R800 a bottle (plus commission etc); Kanonkop Black Label Pinotage 2006 for very little more than the current release would cost; Mullineux Syrah 2010 for R600 per bottle….

But let me consider more the overall pattern of local wines’ performance at the auction. One thing I noticed was the preponderance of wines that were either genuinely old classics, up to 1982, or wines under 20 years old. While 20-35 year old wines would be important if they were, say, Bordeaux or Burgundy, here the Cape wines of that age were not. There were just 40 lots from between 1982 and 1999 – and 23 of them went unsold, a disproportionately large proportion. Does that mean anything? Perhaps that the 1980s and earlier 1990s don’t generally have a great reputation. Perhaps that most South African wine-drinkers simply prefer young wines and don’t appreciate the nuances that age brings. Perhaps that serious wine drinkers still don’t trust the majority of South African wines to age beneficially.

It would be interesting to know (but we can’t) how many of the 21st century wines sold will be drunk pretty immediately. I know that if I’d bought anything more than ten years old, I would consider drinking them soon, especially the whites. Were any of these wines bought as an investment, I wonder. What chance of them appearing on auction in five or ten years’ time and making a profit for today’s buyer? Perhaps, if it starts becoming clear to the serious wine-drinking market that the best Cape wines are going to mature (rather than just survive) 20 or 30 years.

It’s a big if. And on the answer to it depends, I’d say, whether a genuine secondary market will emerge here. Higgo Jacobs, speaking to me the day after the auction, insists that he and his partners in this auction initiative remain optimistic. But, he adds, progress could take time. “We are satisfied but not happy. We need to build on this. We have the right wines, the right partners, the right intentions, and a long-term view.”

xxx

The next dip into these turbid waters takes place on 18-19 October, at the Cape Fine & Rare Auction (descendant of the Nederburg Auction) in Stellenbosch. What’s on offer is pretty much the same sort of thing as at Strauss – but a somewhat reduced version (see the list here), it seems to me. Though the rhetoric is correspondingly more luridly excessive: The Cape Fine & Rare Wine Auction offers exclusive vintages from South African producers, selected by a panel of renowned and respected wine judges”. Etc. What are “exclusive vintages” one wonders? Are some renowned judges not respected? Anyway, my guess is that the organisers of that venture will be feeling rather nervous after seeing this weekend’s results.

Read more on the topic by Michael Fridjhon here.

  • Tim James is one of South Africa’s leading wine commentators, contributing to various local and international wine publications. He is a taster (and associate editor) for Platter’s. His book Wines of South Africa – Tradition and Revolution appeared in 2013.

Comments

2 comment(s)

  • Neil Tabraham16 September 2019

    While I would really like to see these auction events a success, I can’t help thinking that it’s all a little premature. For want of a better expression, for the secondary market to succeed, they need to get their ducks in a row first.

    Secondary markets are successful for two reasons, profit and rarity, and requires keen investors with willing buyers. The famous London/Hong Kong auctions can only happen because investors can buy wines at a low release price ‘en-primeur’; often before the wine is even bottled or, occasionally, before the grapes are even picked in a good vintage. This practice has been happening for centuries and has allowed producers to improve cash flow while investors profit by selling at a higher price when the wine is actually released.

    For those with a longer term view and a desire for greater return on investment, some age worthy wines can be cellared for many years until they become very rare and therefore extremely valuable to those with deep pockets. With South African wine not yet proven for long term ageing, there is inherent risk in buying Chateau Libertas vintages from the 1980’s, unless one is in the tiny minority that want to drink old wines. There are some investment schemes starting but these are not mature enough to show either serious returns for investors or value for buyers to get a bargain. Sure, Kanonkop Paul Sauer, 2015 might have nearly tripled in value after a remarkable score but most investment wines are barely four years old and have shown only moderate returns that rarely exceed current values for latest releases. A situation which is compounded by fantastic new wines being released each year (at a higher price due to inflation) which are often ready to drink. If they’re not ready, producers tend to hold on to wines until they are to maximise their own revenue. Something we’re now seeing in Bordeaux as top producers seek increased profits.

    Maybe in a few years, when these investments mature, there will the opportunity for sellers to cash in and buyers to get value. This will only happen because of rarity at a point in the future when these wines are practically impossible to get hold of. Maybe the value will not go up significantly in real value at all, after all, that is the risk of investment. Kanonkop, Paul Sauer 1986 is listed at R2944 after 35 years. How much of that is profit once you consider inflation, storage costs and management fees in an investment? Is there even a willing buyer?

    So, back to the ducks. The ones that have hatched are wandering around doing their own thing. Some are still ducklings that need time to prove their real worth. A few have been laid (the auction being one) but are yet to hatch, while others are yet to be laid. Whether they will is yet to be seen in a competitive and market driven South African wine trade.

  • Keith Prothero16 September 2019

    Yes I agree with Neil. As someone who is based in the UK, as well as here, and who buys a lot of wine at UK auctions, the two big issues for me are provenance and the value of the Rand .
    Not much point for overseas based collectors buying for investment when there is a very good chance that the rand will probably depreciate by 10% a year .
    So the market relies on local buyers which is relatively quite small.

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