What Wine Drinkers Need to Know About the SLA's Decision to Drop the Private Collections Proposal

In culture and the arts, the great strength of New York City has been the great wealth of inhabitants who serve as patrons for these causes. A trip through The Metropolitan Museum of Art serves as a quick reminder of what that world class collection is built upon: the contributions of private benefactors. At The Met, this is announced on explanatory placards and in the naming of various wings and halls of the museum. In the museum context, when art has been sourced from a private collection, public mention is made. Less well known is how important private collectors have become to building great restaurant wine lists today. This fact is underacknowledged and probably wouldn’t be generally noticed at all if the NY State Liquor Authority hadn’t proposed late last year to radically restructure the mechanism through which collectors contribute to wine programs here. In good news for drinkers, the NY SLA recently announced that it would not proceed with the advisory that would have been a significant setback for restaurants and wine fans.

Private collections have assumed an important role in restaurant programs largely because other options for sommeliers have disappeared. Wine distributors that sell to restaurants have largely abandoned the once-prevalent model of holding on to aging stock. Whereas a wholesale company like Chateau & Estate Wines used to specifically purchase large quantities of wine to later resell at a mature age to restaurants, wholesalers today would generally rather offer current vintages only, and not pay to warehouse older wines.

As pricing of classic wines has substantially escalated, auction houses have stayed focused on blue chip regions and producers, placing the majority of their business outside the realm of what is accessible for many restaurants to resell to diners at a profit. Where it has been true that auctions have embraced wines where hammer prices often skew lower (older domestic Cabernet and Tuscan Brunello di Montalcino are both good examples of this), in fact sommeliers have followed suit with purchases at auction. But where the auctions have shied away for handling wines from certain regions (for example, wines from the Loire Valley, the Jura, many areas of Italy, and elsewhere), sommeliers have sought alternative sources. This follows a trend where what are thought of as collectible wines are moving more towards retail sale and auction (where there is price transparency via Winesearcher.com and other tools), while many restaurants focus their attention on the undiscovered, the undervalued, and the new in the market.

A Nielsen report released in January disclosed that wine sales in American restaurants have declined as a percentage of both value and volume in every year since 2008, a seven year drop. And while restaurant wine sales have declined in the market, Nielsen also notes that wine sold over the internet (up over 15 percent in 2015), and wine sold direct to consumers by wineries (up 8 percent), have experienced substantial market share growth. Especially notable amidst those numbers is that the average bottle sale at both internet retail and at direct to consumer has been above $30 a bottle – in other words, at the price level that is traditionally the bread and butter segment for restaurants.This shift cannot be overstated in its importance to restaurants, because it underlines why another source of back vintages (those coming direct from winery cellars) has dried up, and it shows that the grand bargain that really powered the growth of America’s wine lists is no longer in place.

Firstly, the wineries would rather offer back vintages to loyal direct customers as enticements to their own winery clubs, and secondly, the allocation model has changed in a way that has really hurt restaurants. Where the cult wines and the highly sought after bottlings used to be sold exclusively to restaurants, eschewing availability at retail for a greater prestige through association with top chefs, now the internet retail segment is being powered by collectors looking for the lowest price for in demand wine. Where in the past a consumer was often compelled to purchase a highly praised and highly scored wine at a restaurant, or not at all, this is no longer the case. Restaurants have lost their exclusive access to the wines, and they have lost the ability to bring in the high profit margins for those wines as well. Witness the intense competition among New York restaurants today to offer wine at lower margins, which is a big part of their attempt to lure wine knowledgeable collectors back to their tables.

So back vintages are rarely today available at wholesale, they are often price prohibitive at auction, and they are generally not available from wineries. The last remaining source for the sommelier looking for them is private collections, and interest in those has soared in the wine community over the last decade. This is in keeping with the demographic trends of the country as a whole: a large number of Baby Boomer collectors are looking at their wine purchases and realizing that they own too much wine, or that their wine drinking interests have shifted. Sometimes this is due to the health concerns of aging drinkers who are no longer interested in consuming the amount of alcohol that they once might have, and partly this is due to the frequency with which collectors tend to over purchase wine or find their taste changing over the years. As these aficionados have decided that they should prune their collections back, restaurants have proven willing outlets for aged wine, especially for the kinds of wines that might be under the price thresholds that auction houses consider. Sommeliers have developed a lot of expertise in these areas, and it is no surprise that the hunt for private collections is partly being driven by ex-sommeliers on the lookout for a cellar purchase.

These changes are against a backdrop where the SLA regulated allocations from wholesalers to restaurants in a way that was intended to level the playing field amongst buyers and prevent preferential treatment, but which in actuality has meant exacerbated scarcity of the wines that sommeliers most want and are most able to sell. Where the recently halted proposal from the SLA would have been been really damaging would have been in kicking out the last leg that restaurant buyers have to stand on in a time of increased costs for restaurants and declining cellar inventories. The harm wouldn’t have just been felt by a limited set of wine lovers, it would have been a real loss of revenue for restaurants that rely on capturing tourist dollars by selling hard to find wines, and it would have meant a significantly diminished wine scene as sommeliers here lost their expertise with aged wine. That kind of knowledge is something that can’t be known without tasting.

Without the lure of old wines for sale, the influx of talented sommeliers who have been enticed to make New York their home over the years would likely have come to an end. And something more important would have been endangered: like museums, restaurant wine lists serve as libraries for the general public. The great benefit of restaurant programs is to the non-collector, to the regular customer who wants to have an amazing bottle with which to toast their anniversary, a special occasion, or just life in general. The presence of tremendous wine lists in this city allows for everyone to experience something extraordinary. As wine lists shrink, this is an opportunity that is available to fewer and fewer people. It isn’t actually the private wine collector who loses out on the ability to taste great wine (they already own the wines), it is everybody else. At the same time, private owners of wines who wanted to resell them would have been presented with a dead end.

If, as some suspect, the SLA has withdrawn the proposed advisory on private collections in order to substantially rework the framework into another proposal (the SLA did not return a request for comment on this matter), they would greatly benefit restaurants by making the market more efficient and open, rather than less. It is entirely possible that wines that will never be sold or consumed are hiding in a cellar somewhere. By allowing for more access to what is already out there, and easing restrictions, the state would allow sommeliers to make even more compelling lists. Restaurants would benefit from the increased sales as a result, and become stronger and more stable customers for both wholesalers and wineries. Restaurant defaults from closed establishments represent a significant drain on wholesaler revenue, and they don’t have to occur as often as they do. At a time when restaurateurs are facing substantially higher costs of doing business, this could be the helping hand they need to maintain profitability.