Fake Bottles Infiltrating the Fine Wine Market
„Trafficking in fake wine has always existed a little, but it’s definitely amplified with the rising prices of fine wines“
Sylvain BoivertDirector of the Association of Bordeaux Wines
As the fine wine market continues to prosper in times of economic uncertainty, there is new cause for concern as the number of fake wine bottles is on the rise. It is a problem that holds serious consequences for the chateaux, the fine wine consumers and producers, the collectors and investors; the repercussions will surely reverberate across the entire Bordeaux wine market and needs to be addressed as this alternative investment slowly moves into the mainstream.
The Emergence of Wine as an Investment
Ironically, the increase in trafficking of fake bottles and wine scams is somewhat of a tribute to the proven success and increasing popularity of this relatively new alternative investment. Although investing in fine wines only truly blossomed since the turn of the millennium, the potentiality for immense returns coupled with the unquenchable demand for this luxury investment has fast tracked its recognition and market evolution around the world. Emerging economies like China and India, in addition to the usual heavyweights are showing great interest in the possession of the most prestigious Bordeaux wines; without a doubt, it is an immeasurable sign of status and success.
China is undoubtedly one of the premier wine hubs, ranked 5th in the world in terms of wine consumption, having doubled in the last five years. To put matters into perspective one must evaluate the numbers of China’s wine trade. China buys around 100 million cases of wine annually and forecasters predict a 54% growth by the year 2015*, which equates to over a billion more bottles. Wine and Spirits alone are about 85% of the total agricultural exports from the EU to China, and it remains the number one export destination for Bordeaux wines. Much of the meteoric rise in popularity can be put down to Hong Kong abolishing all taxes on wine and beer in 2008; similarly, India is contemplating a softening of the tax laws regarding wine imports – a move that is being closely followed by the market analysts.
Fake Wine Bottles and Wine Investment Scams
Due to the global fine wine trade of such colossal economic magnitude, it is attracting all kinds of fraudsters looking to cash in through this highly lucrative market. There are many types of wine investment fraud, such as the fraudulent peddling of “wine futures”, wines in their infancy that are yet to be bottled. This is a popular ruse for scammers as it can be years before the scam is unearthed, seeing as the physical end-product is not due for quite some time. Moreover, one must always be aware of illegitimate companies who have no other intention than to take your money and run; hence it is highly advisable to verify the credibility of the investment house before initiating any business, and only deal with reputable, trusted companies.
Nevertheless, the primary threat to the fine wine trade is the increase in number of fake bottles. Most commonly targeted are the Bordeaux first growths – Lafite Rothschild, Margaux, Mouton Rothschild, Haut Brion, Latour, as well as some high profile Burgundy like Domaine de la Romanee Conti; hardly surprising given they consistently produce the world’s most highly rated wines, regularly trading at tens of thousands of Euros.
Faking these bottles can be done in a variety of ways, restricted only by the creativity of the crooks in question; reproducing labels, corks, and even bottles to imitate superior stock. Fraudsters have also been known to go as far as filling, blending or topping up an expensive bottle with an inferior wine, with use of a syringe. Even reproducing engravings on the glass bottle is not out of question. There are numerous ways to counterfeit these highly rated investment wines, and therefore the utmost vigilance is necessary when dealing with fine wine stocks. Things to look out for are the labels, corks, fill levels and ideally the stock comes with certificates of authenticity, with verified provenance.
Fake Bottle Scams Exposed
There have been numerous cases where fraudulent bottles of fine wine have been exposed, most notably the case involving Rudy Kurniawan in 2012; a high profile wine connoisseur, known for holding private wine tastings with his investors and clients, reportedly spending up to one million USD($) a month on fine wine. In two auctions in 2006, Rudy sold around $35 million worth of private stock. It so turned out that Kurniawan was counterfeiting his inventory by using old bottles, photocopied labels, reproduced corks and such. He was eventually arrested, yet the damage had already been done.
Further cases of fake bottle scams:
- Hardy Rodenstock sold over $500,000 worth of rare wine believed to have been owned by Thomas Jefferson. The bottles were exposed as fake, and after lengthy legal battles the story turned novel is now being produced into a Hollywood film called “A Billionaires Vinegar”.
- Acker Merrall Auction house was preparing to sell bottles of Domaine Ponsot Clos Saint-Denis from the vintage 1945 to 1971, procured from a private collector. However, Chateau Ponsot did not start producing those wines until 1982, as pointed out by the owner, Laurent Ponsot, who flew in to New York to halt the auction.
- The commerce ministry announcing in June 2012, the discovery by the authorities of more than 4,000 fake bottles of Chateau Lafite Rothschild in Shanghai.
There are numerous cases involving fake bottles and China seems to be a haven for scammers. It is estimated about 2-3 million bottles of Lafite Rothschild (China’s most popular Bordeaux wine) are traded annually, with an overwhelming majority of the bottles not of genuine heritage. Experts estimate the number of fraudulent bottles of Lafite Rothschild at anywhere between 50% and 90%. So what are the repercussions of the fake bottles flooding the fine wine market?
The Consequences of Fake Bottles Flooding the Market
The impact of the fake bottles in the fine wine industry is felt from the Chateaux and producers all the way down to the consumers and investors.
Bordeaux Traders - The Fine Wine Investment Brokerage GmbH
Mooslackengasse 17, 1190 Vienna
Phone: +43 676 490 51 19