Local Tastes: Is it time to rethink Napa Valley wine auctions?

Charity wine auctions have become synonymous with the Napa Valley’s wine culture. These auctions often support worthy causes and are portrayed as a wonderful act of generosity and an indication of strong community values.

“To date, Napa Valley Vintners has invested $170 million in the local community as a result (of their auctions),” said Patsy McGaughy, communications director at the NVV. “We believe that the beneficiaries who depend on this philanthropy see tremendous value in it continuing. We’re also very proud that we have maintained a consistent level of contributions to our local nonprofit partners over the past several years, regardless of fluctuations in total auction proceeds.”

And that’s good because some vintners and auction-goers report having tired of the game, and the recent numbers may reflect a new reality — one in which giving away free goods and money has become less attractive to donors. There may also be a growing desire for increased scrutiny and transparency for how those generated funds are used.

No records set in 2017

Given that the economy appears to be doing very well, with the Dow reaching new peaks, up over 22,000 at one point, and corporate profits humming along, one would have expected this year’s wine auctions to have brought in record numbers. But they haven’t. Four of the most popular auctions – Napa Valley Vintners’ Premiere Napa Valley and their Auction Napa Valley, the cancer research’s V Foundation Wine Celebration and the relatively new animal-lovers’ WineaPAWlooza held by the Jameson Animal Rescue Ranch — have each brought in significantly less than at their peaks.

In millions:

NVV’s Auction Napa Valley 2017: $15.7, peak year 2014: $18.7

NVV’s Premiere Napa Valley 2017: $4.2, peak year 2015: $6

JARR’s WineaPAWlooza 2017: $1.3, peak year 2016: $1.75

V Foundation 2017: $8.8, peak year 2016: $13.2

What are the possible reasons for these declines? Through conversations with several people — most of whom did not want their names used, which also says something — three possibilities emerged as most likely: participant fatigue, fear of a changing economy and fewer attractive or unique offerings.

Back when Auction Napa Valley started in 1981 wine auctions were rare. At that first auction Louis Martini served as honorary chair and raised $141,000 for two local hospitals. At that time there were arguably only one or two wine auctions in America. But today you can’t go a couple of days without hearing about the next wine auction, be it here in wine country — Napa Valley and Sonoma — or elsewhere around the country, often in non-wine-growing locations such as Naples, Florida; Houston; New Orleans; and beyond.

Mixed crowds

At those first events the wealthy and well-connected joined together in intimate settings where they might commune with old friends and hear tales from storied vintners. Today’s auctions have become massive gatherings of what a wealthy acquaintance referred to as containing “mixed crowds,” by which he meant those who have lots of money and those who are pretending to have lots of money.

“People seem to get so worked up at these events now,” he said, “which was not the case back then when they were more dignified.”

My ultra-rich acquaintance no longer attends such gatherings, opting instead to donate his money in more intimate and status-preserving locations such as Boston and Palo Alto — since his children have entered their college-age years, he joked.

Star power dimming?

That this year’s chairs for Auction Napa Valley, the famous Coppolas, brought in $3 million less than at the peak of only a few years ago might give us pause, but according to the Napa Valley Vintners they see this as just a part of the natural cycle.

“Like the economy, housing prices or the stock market, wine-auction results ebb and flow,” McGaughy said. “Charity events especially can be driven by something we’ve come to call ‘irrational generosity’ often creating unpredictable results. These factors are beyond the control of any event organizer.”

She may be right, but if so then you might expect more randomness between auctions this year, and that’s not what we are seeing.

Perhaps it’s fear of a changing economy that has had an impact on this year’s numbers, but that seems odd, given that the stock market has reached record highs, estimates of second-quarter GDP growth show 2.6 percent and the U.S. economy has had 96 months of growth, making this period the third-longest economic expansion in U.S. history (1990s: 120 months; 1960s: 106 months). However, based on my conversation with a local financial analyst, this might be exactly the right time for people who are well-off enough to shell out hundreds of thousands at a charity auction to begin to pull back and reassess how, where and when they spend their money.

“As soon as the masses start buying a stock is exactly the time I start thinking about selling it,” he said.

Can’t make enough wine to give away

It’s not that the auction lots have become less valuable, but for many attendees there is only so much wine and so many wine-related events one can consume. Many of these auction-goers are satiated with hard-to-find expensive wines and they don’t have the desire or time to go on some adventure to a European castle with a group because they’ve been there and done that, often flying there on their own private plane. Couple this with the fact that many of the donating vintners are also tapped out, having become slightly cynical about the whole process.

As one prominent Napa Valley vintner told me, “We can’t make enough wine to give away — no matter how much we give they’ll just come ask for more. What these well-intentioned organizations don’t seem to understand is that we’re running a business here.

“It used to be we got requests for free wine once in a while, but now we can get requests nearly every day. And the requests have grown over time, too,” she said. “Now they just don’t want a couple bottles, they want a hosted dinner, a magnum vertical lot of 20 vintages and a trip to Belize thrown in for good measure.”

The benefit of giving away wine

The rationale for vintners to give wine away to these events has been as a charitable donation for themselves but also as a way to generate direct-to-consumer customers. However, when you are one of 100 vintners pouring wine at an event packed shoulder-to-shoulder with other wineries, it’s hard to imagine you’re going to build a lasting relationship. Perhaps donating a trip or a private dinner might help? According to my vintner friend, that would be a negative.

“A few of the people might end up buying some wine from us directly at one of those donated dinners,” she said, “but most of them think they’ve spent enough already.”

Rating charities

Beyond the potential reasons for a dip in auction revenues, the public is just beginning to inquire into how many of these funds are being used. Some of the purely charitable organizations, such as the V Foundation that held their first auction in the Napa Valley in 1999, are rated highly through services such as Charity Navigator who assess the quality of charitable organizations based on a variety of criteria. However, because of the tax status of organizations, such as the Napa Valley Vintners and the fact that JARR has not yet received the minimum revenue threshold to be included, many other organizations with wine auctions are not rated on Charity Navigator, making them hard to compare.

Many people also do not seem to understand that the proceeds for Premiere Napa Valley go to support the Napa Valley Vintners and not directly to charitable causes. As one donor to this year’s auction admitted, “I have no idea what the money is used for, but now that you mention it, I should probably look into that.”

“I’ve stopped giving to most auctions and instead just give to groups like Jameson Animal Rescue Ranch’s WineaPAWlooza every year,” said another Napa Valley vintner. “They’re small and focused. I know where the money’s going and that most of it is spent on the animals. The other ones seem to be doing good work, too, but I just don’t know what exactly they are up to.”

There are other potential reasons for this dip, including a weakly perceived 2014 vintage being highlighted in some of this year’s events, uncertainty about the future as a result of the many current administration’s blunders or just the natural and normal cycle of charity auctions.

Don’t get me wrong: Having money given to charitable causes is often a good thing. Regardless, as the number of events and the competition for auction-goers and donating vintners increases and the amount of money tops multimillions of dollars, many of these events have become businesses in their own right. It may be time to have another look at what is working and what is not.

“We want to reassure the community that we’re in this for the long haul,” McGaughy said. “While we regularly refresh Auction Napa Valley to maximize its impact, this long-standing, iconic event is here to stay.”

I look forward to seeing how the NVV and other organizations with wine auctions evolve, and I encourage them to explore how they might increase the transparency of how the funds are used and share that information with their guests, donors and the public.

They might also consider a return to smaller and more intimate settings that are a respite from the frenetic and often pressure-filled experiences that seem to have grown, at least in some cases, into what one former auction-goer called, “glorified Black-Friday events for the rich and well-off.”

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Originally published in the Napa Register, August 2017