AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

URSULA HERMACINSKI

The Wine Lover’s Guide to Auctions. The Art and Science of Buying and Selling Wines
Square One, New York, 2007, 256 pp.
ISBN 978-0-757-00275-5
Paperback, $17.95

Reviewer: Mark Heil

My paddle shot upward following a brief pause of perhaps two seconds. “Too late, sir”, replied the auctioneer. “Last chance…and sold! The 2000 Chateau Leoville Las Cases to the gentleman in the back.” I had failed to react decisively when the opportunity struck. In this instance, I offered the same price as the high bidder, but was beaten to the punch by a split second. Fortunately, my rather inglorious initiation to wine auctions proved to be a learning experience.

In an age of convenience marked by instant access to everything through smart phones, GPS, and the web, it takes real powers of persuasion to inspire us to decamp from our sofas to tackle a new frontier. Yet, Ursula Hermacinski’s infectious enthusiasm for wine auctions compelled me to travel to New York to attend my first recently. That alone speaks volumes. Not only did the book pique my interest, it helped me to successfully navigate the auction and make it a fulfilling experience. I recommend this guide to anyone who seeks to participate in these events. While written at an introductory level, auction veterans may find useful nuggets as well.

Subsequently, I placed more decisive bids on other wines, but left the auction emptyhanded. Yet, this experience qualifies as a success, not a failure. Why? Apart from being outmaneuvered on the Leoville Las Cases, I never became the high bidder for any wines for one simple reason. The bidding prices rose beyond the prescribed limits I had set for myself. Had I bought other wines, I would have done so only by “overpaying” by my standards. This is not to say I wasn’t tempted, in the heat of the moment, to cast aside my spending limits. Ultimately, I attribute my success in avoiding “paddle fever” to Hermacinski’s levelheaded counsel to carefully research wines for sale and set strict price limits.

This book sets out to introduce wine lovers to the operational aspects of wine auctions. It also seeks to engage readers with chapters on the history of wine auctions, the basics of wines, and building collections. It succeeds impressively in its primary intent, but accomplishes less toward its secondary objectives. Still, the guide is mostly an enjoyable read, made more pleas-

ant by the many succinct sidebar comments, data tables, photos, and descriptive text boxes.

Ursula Hermacinski is an award-winning American auctioneer who has spent the bulk of her career in New York and California. She is currently marketing director for Screaming Eagle winery. Her auction and marketing experience at this leading cult winery give her a ground-level view of the world of high-stakes wine sales and the buyer frenzy surrounding coveted, limited production wines. Hermacinski is at her best when describing the dynamics of auctions, such as bidding strategies, learning idiosyncrasies of auctioneers, and “landing on the right foot”, a reference to properly aligning one’s own bidding with the auctioneer’s bid increments and steps.

The book is divided into four parts: understanding auctions; preparing for and buying wines at auctions; selling wines; and enjoying wines. Each part serves its intended purpose, although the concept of “less is more” could have been applied more conscientiously. The overall effect would have been enhanced had the book focused on the parts two and three and significantly reduced the others.

Part 1 includes chapters on the history of wine auctions, essential wine basics, and introduction to wine auctions. The first chapter, devoted to historic context, is a tad dry and perhaps unsuited to the task of deeply engaging the reader to win his commitment to read the full volume. Yet, some interesting facts emerge, such as that wine auctions began in the mid-18th century in Europe, but only arrived in the U.S. in 1969. New York law banned auctioning of alcohol until 1993, so the first wine auction there occurred only in 1994, a humble beginning for what is now considered the world’s premier wine auction city.

The essential wine basics chapter is informative, but it strikes me as superfluous for serious wine collectors reading a book on wine auctions. That audience is already familiar with the grape varietals, major wine regions, classified growths, etc. highlighted by the chapter. Those seeking a deeper introductory education on wines can find numerous volumes that cover the topic skillfully.

The author provides a useful overview of wine auctions in the following chapter, outlining their pros and cons, bidding formats, sales units (lots), etc. She states that gaining access to rare and coveted fine wines is the main motive for most participants and the lack of quality guarantee (buyer beware) is the greatest drawback. Buyers of bottles that turn out to be of poor quality have little recourse – even when the bad wines fetch thousands of dollars. Given the wealth of auction houses and the awareness of the seller’s identity, it seems a pity that compensation or private insurance for bad wine remains rarely available. Fortunately, this is not a common outcome.

The next chapter highlights the roles of each of the main auction players – the boss, the auctioneer, the marketers, and of course, the buyer and seller. The influence of wine critics receives special notice, as they help raise credibility and generate excitement around certain wines. Perhaps the most interesting role is that played by the auctioneer.

This individual has a surprising amount of discretion in running the auction, but must exercise it with caution, without favoring buyers or sellers. The auctioneer, for example, can elect to override a reserve price, ignore certain bids, or alter established bid increments. As a market facilitator, he strives to sell at the highest price the market is willing to pay. The auctioneer’s personality helps build momentum among bidders and the author sensibly advises them to take note of any tendencies that may tip off certain actions, especially an item’s final sale. I observed this directly at the auction I attended, noting that one auctioneer worked considerably faster, and dropped the hammer sooner, than the other.

Part 2 leads prospective buyers through chapters covering the auction catalog, bidder preparation for auctions, types of bidding, and receiving purchased wine.

The auction catalog offers indispensible information and may be the single most important preparatory item. The means by which “lots” are assembled and sold receives ample attention. Lots are the units offered at auction, and range from a single rare bottle to many cases. All bidding aims at buying a lot. Usually collectors prefer to buy full cases of a wine in its original wooden case, but sometimes auction houses organize mixed lots around a theme, like California reds or Bordeaux of a particular vintage.

The catalog includes sales price range estimates based on prior auctions and market conditions. Typically an auction house price range brackets the likely sales price, but sometimes outlier results fall beyond it. This occurs with extremely rare bottles where low sales volumes provide limited historic guideposts and at the beginning of new market shifts. During the 1990s when growing private wealth and rising popularity of wine collection met with the emergence of scarce and coveted cult wines in the U.S., auctions repeatedly saw price breakthroughs. More recently, a growing fraction of wines have sold below their estimates as the global economic downturn dampens prices. Near the nadir of the recession, a review of a Christie’s auction in New York (December 2008) shows that a significant share of first growth Bordeaux lots sold below their estimated price range.

Much of the guidance provided is more common-sense oriented than revelatory. Still, it is helpful to hear it from a seasoned veteran of auctions. For example, she advises bidders to study the list of lots for sale in advance, select those worthy of bidding upon, set maximum price limits, and stick to them. Hermacinski encourages those lacking the discipline to remain within their own price limits during the heat of the auction battle to consider using absentee written-order bidding submitted prior to the auction instead.

Coverage of the auction itself is a veritable “how-to” manual, with information on what to expect, when to arrive, and even how to dress and where to sit. This chapter is excellent preparation for neophytes like me seeking to avoid common missteps while plunging into the world of auctions. The author’s characterization of different bidding styles (the “earlyaction bidder” and the “late-entry bidder”) offers insight into the dynamics of auctions and the role personality may play in the bidding. Perhaps most comforting, the book encourages participants to ask questions and interact freely with the auctioneer if they are confused or need help. This helps to humanize an environment that can seem intimidating.

Part 3 details steps and strategies for selling wine at auctions. While only a minority of consumers buys wine at auctions, even fewer sell at auctions. As such, this information may be of limited practical interest to most, but it offers important glimpses into auction economics.

A major element of selling wines is selection of an auction house. Numerous auction companies deal in wines, and some may be better suited for particular types of collections than others. The author advises prospective sellers (consignors) to examine competing auction houses, and follows with a suggested approach to researching them. She sensibly suggests proposing the same list of wines to be sold to more than one auction company in order to compare their estimated sales prices and reserves. This method allows the consignor to gauge each auction house’s selling philosophy, professionalism, and willingness to negotiate. Selling philosophy refers to the approach taken in attracting bids from buyers. Some houses may set low reserve prices and let the bidding escalate in hopes that momentum built through starting at lower levels translates into higher final hammer prices. Others start with higher reserves – but run a greater risk of bidders failing to reach the reserve price, and items going unsold. The bottom line for sellers is selecting the auction company that will provide the best financial outcome, net of service charges and other fees. This is not an easy task, and the book illuminates the process and raises the likelihood of satisfying results.

Some auction houses are more willing to negotiate terms with consignors than others, particularly when valuable collections are at stake (worth in excess of $500,000 or so). Commonly, the vendor’s commission charged to sellers falls in the range of 15 percent of the entire collection (the buyer’s premium is in the same range). Additionally, insurance, shipping, handling, and other fees apply to sellers. Auction companies prefer not to negotiate these fees, but in the end, they may be willing to adjust or waive some of them, depending on total value and other factors.

Chapter 11 details the operative elements of selling wines. Prospective sellers submit a list of their wines to an auction house, which evaluates it and returns an appraisal of wine values and charges. If both parties agree to proceed with an auction, the auction house provides a detailed contract. Hermacinski provides helpful insights regarding the contract, providing plain English translations of typical legal language. Above all, she urges, read the contract carefully and consider having an attorney review it.

Part 4 covers the basics of wine collecting, charity auctions, and wine tasting. While this content may be of interest to some, I find it to be of limited use since it strays from the central subject of guiding readers through wine auctions. Others cover these subjects more thoroughly, and I refrain from reviewing them here.

The economics literature on auction theory offers useful insights. A number of interesting questions have been posed by economists. Do different auction bidding formats result in distinct outcomes regarding efficiency or distribution of surplus between buyers and sellers? Why do hammer prices at a given wine auction frequently vary substantially for the same wine? Is the popular English auction format the most practical approach? Which format maximizes gains for sellers? For buyers? By offering details of how auctions intend to function, and how they actually work, the book may stimulate further thought by econo-

mists on these and related questions.

In closing, The Wine Lover’s Guide to Auctions fully accomplishes its core mission of preparing prospective (and current) wine auction attendees to participate successfully in these events. Happily, the author emphasizes personal enjoyment as a key part of the auction experience, and helps to elevate it beyond merely a forum for economic transactions. The book capably addresses its secondary objective of providing basic background on wine types and regions, collecting, and tasting, although these sections are burdened by their attempt to cover deep subjects with great brevity. Overall, the book is an important, userfriendly contribution in an area of rapidly growing interest, and undoubtedly will assist numerous wine lovers to engage favorably the intriguing world of wine auctions. I consider myself among those who have been thus informed by Hermacinski. Armed with the book’s insights, now augmented by my recent auction experience, I feel well-equipped to lay claim to my own case of Leoville Las Cases at a future auction – but only if the price is right.

Mark Heil
U.S. Department of the Treasury, Washington, DC

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