Until a few years ago, this was a concept that I had never had. Now, parts of the world is awash in it and uncertain about wine labels. What does this mean for profitability? First, let’s explore the problem of counterfeit wine together.
“Sour Grapes” is a documentary that explains the wine crimes of Rudy Kurniawan. Mr. Kurniawan counterfeited high end wines in small batches and was sentenced to 10 years in a California prison. In October of 2016, the New Yorker published a thoughtful well written article on Rudy Kurniawan, A True-Crime Documentary About the Con That Shook the World of Wine. “It turned out that scores of bottles from Kurniawan’s cellar had been produced not by the acclaimed châteaux on their labels but by Kurniawan himself.” It also says “Two years ago, he became the first person in the United States to be convicted of wine fraud. He’s currently serving a ten-year sentence in a California prison for what is thought to be the largest case of wine counterfeiting in history.” However, this is only the most well known case of wine fraud in America.
China, the largest wine export market, is another matter entirely. In 2012, James Suckling, a acclaimed wine critic, wrote about his personal experience of counterfeit wine in Shanghai. One comment in his article was that “I heard a story of a negociant blend from Bordeaux that went from 5,000 cases a year to 150,000 cases and none of the wines can be found in the Chinese market as they were labeled.”
Fake Wine in the News Online
There are seemingly endless articles in worldwide news of counterfeit wine in China. It is an alarming level of these reports spanning years.
“Liquor stores, restaurants and supermarkets in China, the world’s most populous nation and fifth-largest wine consumer, wage a constant battle against fake wines. The amount of knock-offs on the market may increase as Beijing investigates wine imports from the European Union, threatening anti-dumping tariffs or import curbs.”
“Police have busted two more production and supply rings operating in China’s thriving counterfeit alcohol market.
One ring was distributing fake wines and spirits worth almost $6million in the eastern Anhui province; while in Guangdong a ring was refilling empty bottles with cheap bulk wines and selling them as expensive wines, featuring convincing labels from famous wine brands.”
“Despite increased scrutiny from authorities, fake wines still litter the supply chain in China, undermining consumer confidence”
“The wine market has grown rapidly in China. Associated with middle-class consumption, imported top-end wine has increased in popularity, to the extent that China is now one of the largest wine consuming countries in the world. Where there is a high demand for branded wine, there is an incentive to produce fakes. While it is hard to gauge the scale of wine counterfeiting in China, journalistic and anecdotal sources estimate that 30% of all alcohol in China is counterfeit and 70% of wine is fake.”
“Most of the suspicious wines we’ve spotted so far were seen in the Kempinski and a couple at the main Chengdu wine fair.”
What’s particularly shocking about the fair is that these wines and their distributors are not exactly hiding from the spotlight. At the Kempinski, dbHK saw large posters of counterfeit wines or merchants carrying signs hawking doctored ‘Penfolds’ at the hotel entrance.”
Wine in China Can Be a Profitable Pairing
Oddly, this counterfeit tale is also a tale of Chinese demand. If there were no demand for wine, there would be no counterfeit activities.
Admittedly, this is a frustrating sign of wine being adopted into Chinese culture. An odd harbinger of a much larger market opening to the world’s vintages. The Chinese people are learning to spot these differences. Truly, those that believe they are getting a $10,000 bottle of wine for $100 aren’t the target market for the $10,000 bottle in the first place.
Nonetheless, honest business practices are best for consumers finances and safety. Governments are awakening to the need for regulation and oversight of this issue. The December 2016 article from Wine Intelligence listed above outlines two wine counterfeit rings being broken up in China. In the recent past, the European Union has taken steps to draw China’s attention to the fraud issue by adding extra tariffs to their imported Chinese products. Counterfeit wine has been an issue and it has obviously drawn the world’s attention. Now, this is being addressed more stringently.
Next week’s blog will focus on what is happening in response to these counterfeit wines and what people are doing to combat these challenges.