China's Love of Fine Wine Lures Frauds

POSTED ON 12/04/2012

I was chatting over dinner at the Bottega del Vino in Verona with Italian wine producers from six different regions when a call came through from London. My editor at The Independent said ‘I want you to head straight to Bergerac in France to cover a scandal brewing about contaminated wine’. I returned to the table and apologised to the assembled Italians, saying I had to leave as my newspaper wanted me to cover a wine scandal that had just broken. “Do you mean the one in my region?” each one asked.

Apart from the unfortunate victims involved, the world loves a scandal and there are few juicier ones than wine frauds. Who would have thought that the respectable Cruse Brothers would have brought Bordeaux to its knees in 1973 by passing off cheap southern French wine as Bordeaux? Or that in the 1980s a group of upright Austrians would set their export market back by a generation by using so-called anti-freeze in their wines.

Today’s big wine fraud issue is counterfeit wines. The problem was brought home by the arrest in March of a high-rolling California-based wine dealer called Rudy Kurniawan. Well-known in wine circles for buying and selling millions of pounds worth of the world’s most sought-after wines, the high-flying Kurniawan crashed to earth when he was arrested on charges of selling fake wines priced at over $1million.

According to the charge sheet, Kurniawan obtained empty bottles from a New York sommelier and refilled the empty with a wine of inferior quality or stuck soaked-off or forged labels onto less expensive bottles. Police found a wealth of incriminating evidence: inkpads, warm white Ingres drawing paper, printed wine labels, corks, foil wrappers, wax, glue, rubber stamps and a device for inserting corks into bottles.

If Kurniawan were acting alone, the problem would be serious enough, but many believe that it is far more widespread. Among them, one prominent American collector, Russell H.Frye, is so convinced that this is the case that he’s started his own website, which is devoted to uncovering fake bottles and fraudulent conduct.

Is fraud so surprising when the price of fine wines has risen to the point where the liquid in the bottle plays second fiddle to the value of the label? This March for example, a bottle of Henri Jayer 1990 Vosne–Romanée Cros Parantoux sold at auction for US$22,260 and of 1996 Romanée-Conti for US$12,000. A 1990 Château Pétrus made US$5,500 and a 1982 Château Lafite US$3,800. Wines at these astronomical prices lose their identity as wines and become precious objects mostly traded for investment purposes. Temptation is bound to follow.

Counterfeiting has become a major headache in China too. Because of few high quality domestic wines and the cachet of an imported label, China’s burgeoning middle classes have developed a taste for the fine wines of Bordeaux and Burgundy. Thanks in part to the government’s promotion of wine as a healthy alternative to baijiu, or white spirits, collectors’ cellars are groaning with high end wines. Given a combustible combination of high prices and the Chinese consumer’s relative lack of sophistication, it’s boom time for counterfeiters too.

In the Changli scandal of 2010, investigations by the Chinese authorities, the AQSIQ (General Administration of Quality Supervision, Inspection and Quarantine) and the SAIC (State Administration for Industry and Commerce) uncovered an extensive ring of counterfeiters involving bottlers, wine importers, distributors, and even a case of a product labelled as wine that turned out to be a blend of chemical components.

Thomas Jullien of Pilot Fish, a consultancy specialising in wine and spirits brand protection in Asia, suggests that Changli was a wake-up call with life sentences sending a message to counterfeiters. Extraordinary measures are being taken to prevent such frauds. Christie’s for instance concludes its pre-sale tastings in Hong Kong by smashing the empty bottles with a hammer (whether it’s the auctioneer’s hammer is not known) to prevent the spread of empty bottles for use by counterfeiters.

Nonetheless, according to a recent report in the Los Angeles Times, impostors are selling fakes cheek-by-jowl with legitimate stands at wine exhibitions and in wholesale alcohol markets. The LA Times’ David Pierson says that a cottage industry of bottle scavengers has even sprung up to serve the trade. One broker for instance, who calls himself a ‘professional bottle recycler’, offers up to £200 for an empty Château Lafite bottle, depending on the vintage. Not surprisingly, such illegal activity has dealt a blow to confidence and the 20% fall in the cost of high end wines in the early part of the year may reflect this.

According to Thomas Jullien, the best way to avoid counterfeit wines is for purchasers to make sure they buy from legitimate avenues of international supermarket chains, high-end restaurants, five star hotels, and famous wine shops chains. He advises purchasers to pay realistic prices rather than look for bargains, claiming that bargain hunting for prestige wines is ‘’Russian roulette with a loaded gun”. Advantage should also be taken where possible of provenance, of identification devices and security measures taken by wineries to prevent fraud such as Château Lafite's new Prooftag "Bubble Seal”.

In the long run however, the best way to avoid being taken for a ride is to know, understand and appreciate the wines that you’re buying. It’s likely to prove a long hard slog still for China, but a commitment by the authorities to clean things up and China’s insatiable thirst for wine and appetite for knowledge will stand it in good stead in the battle to defeat the counterfeiters.

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