Restaurant owners and managers from across the country were excitedly waving their paddles at this year’s annual trade-only Premiere Napa Valley (PNV) auction in February, each looking to secure one-of-a-kind lots of rare wines for their lists or to showcase at exclusive wine dinners.
“It’s exciting to walk away having bought something,” says Jason Cooper, the owner of Velvet 48, a restaurant and wine bar in Burlingame, California. “This year, I bought one lot of rosé made together by Cathy Corison, Rosemary Cakebread, and Steve Matthiasson. I understand it’s only the second or third lot of rosé ever sold at this auction.”
Robert Rand, the owner of Archie’s Waeside, a steakhouse in Le Mars, Iowa, says he comes to Napa each year to bid for rare wines that serve as a prime attraction to his rural restaurant. “We’ve only about 9,000 people where we live in northwest Iowa,” says Rand, “but we draw customers from more than 100 miles away because of our wine list.”
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While most American restaurants purchase their wines from national or regional wholesalers as part of the three-tier system, some establishments are using rare wines bought at auction to build their restaurant brands. Some are trying to stand out in a competitive market, while others may be trying to drive sales by offering hard-to-find cult favorites and older vintages.
While bidding may be intense at trade-only auctions like PNV, many restaurateurs haven’t returned to major consumer auctions, where extensive private collections go on sale. “During the past two years, we’ve not seen as much action from restaurants at auctions,” says Nick Pegna, the global head of wine and spirits for Sotheby’s. As a result, restaurant owners are less likely to be bidding against each other for many rare wines.
The resale prices for most of the world’s collectible wines have also fallen considerably over the past two years. According to the 2023 annual report from Liv-ex, the London-based wine exchange, “The downturn that began in 2022 continued throughout 2023.” In short, wines being sold at auction are now relative bargains.
Types of Wine Auctions
While auctions can be exciting places to acquire important wines, experienced bidders such as Cooper and Rand have taken the time to understand the different types of auctions, which helps them maximize the benefits and avoid surprises.
There are two basic types of auctions. Consumer auctions allow anyone with the financial resources to bid, while trade auctions, such as PNV, are only open to professionals who make, buy, or sell wines. Consumer auctions usually consist of old and rare bottles from a collector’s cellar, although they sometimes include library wines that a producer has not yet released for sale.
Trade auctions, also known as barrel auctions, offer new vintages of unreleased wines still in barrel, which are often produced to support a local charity, or as a fundraiser for a regional association of wine producers. A successful bidder buys a lot of a predetermined number of cases, usually of a wine that’s exclusive to the bidder once pre-auction tastings have been completed. Although the bidder pays immediately, the wine won’t be bottled and shipped for months or years, depending on the wine.
Trade auctions often gather a wide array of industry professionals, including the winemakers who crafted the auction lots, making them good opportunities for networking and education. “Being able to do the barrel tastings and to talk with the producers is critical to our decision-making,” says Chan Cox, the owner of The Craft Bar gastropub in Destin, Florida.
Just as there are two major types of auctions—trade and consumer—there are two types of bidding: online and in person. Auctions can be strictly live or online, or a combination of both. For the latter, online bidding may begin a couple of weeks before the live event, then continue through the live event.
Bidding Basics
With any type of auction, bidders must register, which involves verifying the bidder’s credentials and ability to pay. Depending on the rules of the auction, payment is usually required as soon as the winning bidder is notified. In many cases, there are also additional expenses to consider, such as a buyer’s premium (a fee payable by the buyer), which is usually 10 to 25 percent of the bid price, taxes, and the shipping or storage costs for the wine.
It’s also important to understand issues around bottle condition and fraud. With large collections going under the gavel, experts from auction houses may spend days or weeks in the collector’s cellar gathering information on each wine’s condition and provenance to record for the auction catalog. The history of rare bottles, particularly ones that have been sold multiple times, will be thoroughly checked. Most auctions will provide photos of the exact bottle for sale, along with detailed notes on condition, fill levels, and label appearance, so buyers can plan their bids accordingly.
Issues around fraud present a more complex problem. Over the past decade, it’s become clear just how widespread this problem is. However, this knowledge has also led to more careful auction practices. “We train all our specialists to determine the authenticity of bottles, matched to appropriate provenance, and always have two or more senior specialists review high-value bottles,” says Pegna. “We use high-powered magnifying camera loupe to review labels and our internal library of resources to research authenticity issues. Provenance research can also involve contacting the producers.”
Only in rare cases can a purchased lot be returned for a refund.
Create an Auction Strategy
Before bidding at auction, be sure it’s legal to resell wine in your state. Some states, such as Texas and Pennsylvania, prohibit reselling wines purchased on the secondary market—at auction or otherwise. While doing so is legal in Illinois, Tim Sherlock, the area manager for Eddie Merlot’s, says, “You need to jump through hoops to do so.”
When creating an auction strategy, begin by matching your present inventory to what customers are buying, as demand may have shifted. Jeff Zacharia, the owner of Zachys auction house in New York, says that currently “restaurants are buying mature and old wines and Champagnes.”
Next, Rand says he does his homework. “I check out the wines being auctioned and their average prices before I get there,” he says, “then I look at what’s happening in online bidding.” Several sources track wine selling prices on the secondary market, including Liv-ex and Wine Market Journal.
Trade auctions also allow for doing business with competitors, tasting auction lots, and having private meetings with producers. It’s a good opportunity to score commitments for winemaker dinners and to taste non-auction wines that will soon be released for sale. Advance preparation pays off here, too.
Richard King, the owner and general manager of Ellerbe Fine Foods restaurant in Fort Worth, Texas, travels to trade events with a team of six employees and colleagues. “We will have highlighted 45 to 50 lots of interest that we may have a chance of winning,” he says. “Each of us will then taste eight or 10 wines to further narrow the list.”
When the auction begins, several restaurant owners say they want to get a feel for the room early on before deciding how aggressive to bid. “Even if I’m interested in a lot, I won’t bid early,” says Cox. “I want to get a sense of how it’s going and who else is bidding.” Aggressive bidding early may excite others to be competitive.
Go in knowing your limits. “If I sense things are getting too rich for my blood, I’ll quickly drop out,” says Cooper.
How to Maximize a Win
Not all wine purchased at auction has to make it to a printed wine list. “I’ll put some of it on the wine list, pointing out why the wine is unique,” says Cooper. “But, if the lot has several cases, I might highlight some of it by-the-glass and also make it a selection for my restaurant wine club members.”
The markup for auction wines is sometimes less than wines bought at retail, but Rand says that he always makes a profit. “They usually go on my lists at $300 to $600 a bottle.”
Even in states that don’t allow auction wines on restaurant wine lists, successful bidders may be able to feature wines at special dinners or as their contributions at local charity auctions.
“At trade auctions, the wines are still in barrels, so when they finally ship us the wines, I have them also send the barrel heads,” says Rand. “We keep them on the wall in one room of the restaurant. Our customers love it!”
Dispatch
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Roger Morris is a Delaware-based writer who for the past 20 years has contributed articles on wine, food, and popular culture to about a dozen publications in the U.S. and Europe. Currently, he writes for World of Fine Wine, Drinks Business, Meininger’s, VinePair, Wine & Spirits, and Global Drinks Intel, among others. In prior years, he taught writing at Arizona State University and the University of Delaware and was an industry marketing executive.
