A matter of maturity: great deals pour forth at wine auctions.

Few things send a clearer signal that it's time to relax than sharing excellent wine with family, friends, colleagues or clients. But if your wine purchases are limited to a favorite bottle from a wine list, or picking up a cabernet from the shop in town, you're not getting the finest wines your money can buy. The best source--and value--can be found at wine auctions.

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Auctions are famous for selling the rarest and most coveted wines, like the case of 1989 Chateau Petrus that went for the record price of $24,675 this past April at Sotheby's in New York. But there is also a huge market of excellent wines available through auction that can sell for $100 per bottle or less, a price range that, in most restaurants, barely lets your palate dance with vintages more than a decade old.

Bob Dickinson, president and CEO of Carnival Cruise Lines, has been an avid wine collector for more than 30 years and has used wine auctions to build a prodigious cellar holding more than 18,000 bottles. "It's the equivalent of selling crack in the schoolyard," he says, referring to the mischievous pleasure he feels when selecting a fine case of wine from his cellar and donating it to a charity auction. "I sell to get others started."

Auction houses don't sell wine per se--they resell wine that's no longer in the mainstream market. "The beauty of a wine auction is that I'm able to acquire wines that are not available through any other method," says Dickinson. "These are typically older, and the advantage of buying older wines is one, I love them, and two, I'm buying a wine that in most cases is ready to drink." (Classic reds, including cabernets and Bordeaux, are not at their best until they've matured for 12 to 15 years--around the time it takes tannins to resolve and for the real character and complexity of the wine to shine through; they can continue to improve for much longer.)

"If I bought a 2000 Chateau Petrus, which is on the market now and readily available, by the time that's ready to drink I'd be in my eighties," says Dickinson. "The other beauty of the auctions is that many times these older wines are selling for far less than currently available California cabernets." In fact, says Jamie Ritchie, senior vice president of Sotheby's North American wine department, "auctions function at prices 30 percent lower than the retail market, on average."

There is, however, a bit more inherent risk involved in buying wine at auction than through more conventional methods. Most notably, wine purchased at auction can't be inspected until after it has been paid for, which means the reputation and expertise of the auction house are going to be critical to your success. Thankfully, auction houses like Sotheby's and Christie's, with sales in New York and London, and Edward Roberts International, with sales in Chicago and San Francisco, have staff specialists who can guide you through the purchase or creation of a temperature-controlled cellar or advise you on the types of wine you should be bidding on to broaden and balance your collection. A simple phone conversation will help them understand your tastes, affinities and budget in the hope of building a long-term relationship with you, just as a good stockbroker would.

Going Once ... Twice ... Sold!

There is real mystique and tangible excitement associated with attending an auction, but it needn't be intimidating. The learning curve for buying wine at auction isn't terribly steep when compared to more traditional investments, and the dividends can be far more intoxicating, literally and figuratively. Richard Brierley, head of North American Wine Sales for Christie's, works with novices and oenophiles alike to help them build their collections. "Some clients like to take the voyage of discovery themselves, while others want bullet points because they're busy," he says. "As they would in any other aspect of their business, they want to know the 10 things they should be looking for."

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Auctions often last an entire day, which is a significant time investment, but attending the entire event makes sense. A pre-auction tasting (typically for a $50 or $75 fee) will give you an opportunity to sample some of the best wines in the world while also offering the educational and social benefits of rubbing elbows with other wine lovers before the bidding starts. And committing to the whole auction puts you in a better position to snap up bargains; up to 200 lots per hour can be sold during a typical auction, and a single lot can be on the block for less than 30 seconds. That pre-auction tasting, along with the insight of an auction house specialist, can help you to decisively bid on a hidden gem.

If you can't spare the full day, you can for-go the live event and submit absentee bids prior to the event. This allows you time to research and preset your limits on any given lot of wine; bids can be submitted through email, fax or even via online forms in some cases. Simply state the top price you are willing to pay, and if the selling price comes in lower you will be awarded the wine at the next highest bid increment. For instance, if you bid $1,100 for a case of 1976 Beaulieu Vineyard Private Reserve and the final bid from all other sources is $900, you could take home the wine for $950. (Remember, all auction houses add a 15-20 percent buyer's premium to the final price of wine sold at auction.)

Top collectors often follow auctions closely via phone, which allows them to participate in the live event from anywhere--the lunch party, the golf course, the yacht or the driver's seat. Sotheby's and Christie's have yet to enable online bidding because of the significant obstacles to high-speed, real-time bidding, but Edward Roberts International has found their system works well.

Defining the Market

So where is all this great wine coming from? The three D's--death, divorce and debt--supply the bulk of the market. Prices are determined by type, vintage, rarity and condition. Most auctioned wines of any age have a known provenance, which means there is a record of when the wine was purchased and by whom, so that prospective buyers know how it has been stored and cared for.

Between subjective tastes and rich, historical details, collecting wines can easily become an addictive passion, but for many it is also an investment. As Brierley of Christie's explains, there are three main markets in wine: "There are the tradable commodity wines, '82 and younger, usually California cabernet, Bordeaux and some Burgundy." These wines form a market that can be analyzed. Like stocks there are identifiable trends, and prices can be affected both by the emergence of newer vintages as well as by reports and reviews of how the older wines are aging.

"The rare wine market runs from '45 to '82 and is made up of mature vintages from a handful of chateaus: Bordeaux, Burgundy and the sweet whites of France," says Brierley. This somewhat more volatile market is based almost entirely on provenance, he adds, making trends harder to predict.

Pre-'45 wines are considered to have historical value, he says, and are generally sold in smaller lots or single bottles. "We recently sold [deceased heiress] Doris Duke's estate collection, featuring wines from 1921 to 1935," notes Brierley. "The prices were very unpredictable, and the estimates were irrelevant, but it brought out collectors who want the best."

Bear in mind that at the top end, wines can increase in value from 5 to 7 percent annually, says Brierley, and may even double their value within a decade. With that kind of return, you could purchase three cases of a given wine, drink one and re-auction the other two at a later date, basically drinking your superb wines for free.

So whether you're looking at wine as an investment or as a passion play, there's no better deals to be found than at wine auctions ... unless you're planning to buy your own vineyard. Hmmm ...

RELATED ARTICLE: Spin the Bottle

IF YOU'RE INTERESTED in building a wine collection but uncomfortable justifying the frivolous costs of sheer pleasure, approach it from a different angle--think of it purely as an investment. That's right. Many street-savvy oenophiles are building wine cellars by incorporating wine futures into their investment portfolios, and you can, too, if you can stomach the inherent risk.

Far dicier than money market accounts and 30-year Treasury bonds, buying wine options is similar to buying call options on the stock exchange--you're speculating on future value while absorbing considerable risk as a wine matures and comes to market. The only difference is that you get to drink the assets in the end unless you decide to sell them.

Here's how it works: Once a vintner's grapes have been harvested and the wine has been casked, wine journalists and wholesale buyers are invited in to taste the vintage. The perceived potential of that wine sets the price on the futures market; many of the wines won't be bottled and shipped for another two years.

In theory, when purchased, wine futures should offer the best (or lowest) price the wine will ever sell at. The risk is that demand for the wine, when it becomes available for mainstream sale, will fall short of expectations, and prices will drop. (The web site wine-searcher.com details how vintages from certain Bordeaux chateaus have increased in value by 25 percent or more by the time they ship.)

Brokers play a key role in establishing the value of wine futures, so a good relationship with one who has his or her finger on the market's pulse is critical, second only to personal knowledge. But if you can't find a broker and don't want to wait, wine futures can be thoroughly researched online or through established outlets like Morrell-Wine.com and Sherry-Lehmann.com.

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RELATED ARTICLE: Next Auctions

* Christie's

christies.com

Sept. 15 London

Sept. 24 New York

* Sotheby's

sothebys.com

Sept. 16 New York

Sept. 21 London

* Edward Roberts International

eriwine.com

Sept. 24 Chicago

Oct. 15 San Francisco