Wine auction market shrinking, Lafite bubble bursts

"Bordeaux accounts for 50 percent of the (auction) market, Burgundy 35 percent, which means that Italians, Californians, cults make up the rest," John Kapon, auctioneer for Acker Merrall & Condit, explained.

"Now, Bordeaux is down 30 percent (in price), in some cases 50 percent - the Lafite bubble has burst," he added.

Chateau Lafite-Rothschild, one of the five Premiere Cru Bordeaux, has seen its 12-bottle cases of 1982 that regularly sold at auction for $60,000 and even $80,000 as recently as two years ago, drop to $40,000 or less.

The Wine Spectator Magazine Auction Index, which tracks fine wine auctions in the United States, fell nearly 3 percent in the third quarter. The average price per lot in the quarter was $2,300 compared to $3,616 for the same period a year earlier.

Jamie Ritchie of Sotheby's believes prices will flatten out before resuming a slow but steady rise.

"Not only do you have to sell more to maintain the same sales levels, there is also less wine coming onto the market," he explained.

Charles Curtis of Christie's was more optimistic. He said significant price gains for top Burgundy have erased some of the losses in Bordeaux and other categories, particularly wines from Italy and the Rhone, are also showing more strength.

Ritchie agreed the top Burgundies are very strong, particularly Domaine de la Romanee-Conti, but said supply is the problem.

"There is simply not enough supply. They don't produce enough to make up for any shortfall from Bordeaux sales in real dollar terms," he said, adding he had seen prices rise for some cult wines from California, as well as for some top Italians.

For Kapon diversity seemed to be the buzz word as Asian collectors branched out from Bordeaux and Burgundy.

His last sale in Hong Kong netted nearly $8 million, and included a prominent Champagne collection, as well as wines from the Rhone, California and Italy.

"As collectors become more sophisticated, they also become more adventurous and want to try new things and that's what will keep the market vibrant," Kapon explained.

(Editing by Patricia Reaney and James Dalgleish)