Pondering The Record-Breaking Prices of 1869 Lafite Rothschild

Friday. 17 December. 2010. 9:41 am

Sotheby’s auction achieves new milestone for Lafite Rothschild.

“Crazy, insane, stratospheric, overpriced, ridiculous, shocking” were just some of the words used by merchants, collectors and other insiders in reaction to the record-breaking prices fetched by Lafite Rothschild bottles from the Sotheby auction held in late October 2010.
I personally won’t waste my time debating with them on whether or not there is a logic behind this phenomenon to fuel speculation around future prices of Lafite or any other of its closest peers like Latour, Mouton, Haut Brion or Margaux (most of them have already sent their best ambassadors for that purpose, like the young Thibault Pontallier for Margaux); however, I would simply draw a parallel between this event and what happened for this same Chateau back in 2006.
Around that time, nobody in Europe or the US understood why Lafite over a very short period of time (less than 3 months) commanded much higher prices than other First Growths or equivalent French wines. There were rumors that all this was dictated by some obscure forces from the East, centralized around Hong Kong, Singapore or possibly China. What the merchants, negociants and observers of Sotheby’s auctions thought was, “Great opportunity for us, let’s sell as much Lafite as possible to the Chinese! By the time they realize they’ve paid too high a price, we’ll have already unloaded such a quantity that we can decrease prices back down to lower/normal levels.” Well, they all lived to regret it since Lafite prices have never really retreated from that moment, not even with the mega-financial crisis that bankrupted Lehman Brothers, Bear Stearns and AIG. In fact, on the contrary, they kept going up and up to the disbelief of those in the industry.
I am no expert in behavioral trends in China but I would certainly not underestimate what happened in October by calling it an epiphenomenon triggered by some isolated case of some nouveau riche Chinese showing-off his wealth and getting caught up in auction fever. This is something that the East learned faster than the West with respect to traditions like wine – it has become a “must-have” beyond trophy, social success or wealth. By paying an apparent overprice, this Asian buyer has simply secured a cultural asset that could tomorrow disappear forever because, in Asia, wines – no matter how expensive – are bought to be drunk. This is also a lesson I have learned from advising our clients at Bacchus & Century. If you can demonstrate all of the unique qualities of a particular bottle, combined with the scarcity effect due to diverse reasons like specific vintage, micro-production and restricted cuvee, chances are high that the Asian client will front-run the Westerner who’s usually slower to react and appreciates its value.