Wine and Estates Revisited
When I last wrote about wine and estates it was 2019. A distant epoch. The Canadian situation has changed dramatically since then. Not only have I been drinking more and better wine (I’m not alone), but the secondary wine market has changed. It’s more liquid, if you will. This is helpful to wine collectors and executors.
What’s Changed?
The pandemic lock downs of 2020 disrupted long-held, post-prohibition rules around wine sales. While most provinces – especially Ontario – still have a monopoly wholesaler/retailer, urgent consumer demand changed the way wine is sold. While I will focus on the secondary market, let me digress and touch on everyday supply in uptight Ontario.
In 2020 two key markets opened-up. First, restaurants were free to sell wine for take-out, even, shockingly, without food. This not only provided a financial lifeline for eateries but paved the way for bottle shops. Some bottle shops are independent of restaurants and provide greater access to variety – including an explosion of local, natural, biodynamic and “pet nat” wines. Mark-up is often 30-40% over the LCBO price, instead of up to 200% for dining jn.
The second market is wine importers/agents. Previously they could only sell 6- or 12-bottle cases to consumers. Most of their business was wholesale to restaurants. Now agents can sell mixed cases to consumers. While it’s reportedly still a modest business, the options are expanding for wine lovers. Many Alberta retailers, such as granddaddy Opimian and top wine app Vivino, are now shipping nationally, even single bottles.
Estate Liquidity
Most relevant to the world of estates is the secondary wine market via auctions. While previously wine auctions were rare in Canada, it’s changing. The pioneer in Ontario, Waddington’s, is getting positive competition from upstart Irongate Auctions. In Quebec, there are a couple of auction houses crossing over from the fine art world. Tech is the driver. It’s all online.
The secondary market is regulated by provincial liquor boards, but there is an emerging critical mass of auctions that will build volume and diversity of wines. The secondary market is mostly at the top end – premier crus from Bordeaux and Bourgogne, super Californians and Italians – but more breadth is emerging. There is a lot of great wine that can age, but will its value appreciate without an established brand?
Commercial & Charity Auctions
There are two streams of auctions: commercial and charity. Both are helpful in selling a cellar from an estate. Commercial auctions charge a buyer’s premium (up to 20%). Charity auctions, which used to be live, typically do not. Irongate ran seven charity auctions in 2021 raising over $1 million. Many are quite modest, but successful. Charities take note.
The estate planning wrinkle with charity auctions is at the will drafting stage. The will would have to provide the estate trustee with the ability to make discretionary charitable gifts. This would be a helpful clause for serious wine collector clients, who tend to be male and older. Statistically speaking, these collectors are the first spouse to die, and their families may not have the same thirst. Monetizing the grape-based assets becomes a priority.
Time is Ripe
Finally, it’s possible that we will see more estate clients who are wine collectors after the pandemic. Wine purchases went up; home renovations did too – including wine cellars. Wine storage businesses are expanding. Climate change is making the industry nervous and fine vintages more valuable. It may be a perfect conditions for increased focus on fine wine estate planning.