In this episode, we learn about the wine auction market from Jaime Ritchie, Worldwide Head of Wine at Sotheby’s, one of the leaders in the space.  We discuss how wine auctions work, how finding in-demand wines to sell is the current challenge, and the increasing digitization and diversification of the space.  From moving to more online auctions, younger buyers from more diverse backgrounds and geographies, to how tariffs and taxes and reshaped the wine auction landscape, this episode is a must-listen if you have any interest in the world of fine and rare wines. Detailed Show Notes: Sotheby’s founded in 1744, wine division in 1970 - started with wine auctions in LondonExpanded wine auctions to New York and London, which also has retailSpirits getting to be a bigger part of their business, 3% in 2018, up to 19% in 2020How auctions workFind the wine and collectionsCreate auction estimates (low - high estimates) and suggested reserve (confidential between auction house and seller)Logistics - go-to wines, photograph, and shipTerms & consignment agreement with seller signedData entry and presentation of the collection to maximize valuePublish auction catalog and marketingLive auctionInvoicing The auction process normally takes 6 weeks - 3 months. Large collections often require 6 months - 2 years lead timeAuction vs. retail - auctions for rare wines or full cases, retail more for futures, latest vintages, more diverse way to buy wines (by the bottle or by the case)The wine auction market - ~$500M / yearSotheby’s had record sales in 2019 ($118M), up 20% from the prior yearThe average lot size is ~$7,500 / lot (2019)Covid impact - fewer wines on the market, makes operations more difficult -> lower overall sales value and volumesMarket pricing still strong, likely due to stock market strength and low volumes, unlike during the Great Recession where prices fell 40%The buyer set is expandingAge - buyers getting youngerGeographically - more Asian and South American buyersLong-term - the price of wine will rise as more people want to drink, and a relatively fixed supply of the best winesAsia market - Sotheby’s started in 2009 - $40M, $55M in 2010Asian buyers are the least price-sensitive, used to be US marketWines now go from EU/US -> Asia vs EU -> US beforeLargely influenced by Hong Kong wine import tax rate going to 0%The only cost to get wine there is to ship containers (~$6-10k / container)UK market - less competitive auction market, more competitive fine wine market; Brexit impact - trying to find ways to mitigate the impact, expecting a minimal overall impactUS market - most competitive auction market, w/ tariffs, no collections being shipped to the USLogistics - offer shipments from NY to Hong Kong 3x / yearOverall, it depends on the laws and customs of each country or stateIn general, it is the buyer’s responsibility to move the wine after purchaseDigital transitionPlanned only 6 online auctions and 20 in-person ones in 2020, ended up being mostly onlineNew digital Sotheby’s auction platform - was planning 3-5 year transition, did it in 3 monthsOnline to be the common marketplace with live auctions for special collectionsCan still do events with online auctions - Robert Drouhin auction - dinner in Hong Kong with a live auction in LondonBusiness ModelOnline still costs the same to process wines vs. live auctionsBuyer’s premiums rising because the main issue is sourcing the winesIn 1990 - used to be a 10% sales commission with no buyer’s premium, now no commission and all buyer’s premiumGrowth areas after the price of Burgundy has skyrocketed - Rhone, Italy (Tuscany, Piedmont), Champagne, German Wines; CA and Bordeaux have been flatInvestable vs. Auctionable wines - investable wine have a belief that they will increase in value, auctionable just need a secondary market value, may not need to appreciate, be in good condition, and authenticThe provenance of wines can drive big premiumsLafite direct from Chateau auction (2010) - $7M sal