When it comes to luxury products, fraud is inevitable.

The temptation to create counterfeit items and sell them off as originals can sometimes seem too easy – after all, who can really tell the difference? The wine industry is particularly susceptible to fraud: the ability to tell the difference between differing grades of high-end wine is a skill that not every will possess, or be confident enough to declare.

Wine fraud is an expensive game to play. With the most expensive drop in Australia currently sitting at a cool $3,550 per bottle – Penfolds 50 Year Old Rare Tawny, 170th Anniversary Release – the profits to be made are certainly sky-high.

So, with Australia’s wine scene many oceans across from the ‘big players’ in Europe, does wine fraud happen often locally? And how could your business be affected?

 

What is wine fraud?

The description of ‘wine fraud’ can cover a number of offenses. Most commonly, it involves the resale of a vintage bottle using an alternative, cheaper wine inside. This can also entail counterfeiting and the relabelling of inferior and cheaper wines, or diluting an original wine to use the remainder elsewhere.

Wine fraud, however, can also refer to the meddling of a cheaper wine to make it taste more expensive. Fraudulent winemakers may use additives such as elderberry juice, cinnamon, or even food colouring to create a ‘vintage’ wine feel in both taste and appearance.

The rule of thumb is this: if you’ve bought a wine that’s been sold based on false attributes – be it brand, taste, vintage, location, or price – then it’s considered fraud.

Image credit: @joelandthepig

Protecting your business

Wine fraud feels like something far away, that happens to luxury restaurants across Europe – not on your doorstep here in Australia! But the facts are, it IS happening, and it COULD happen to you. So why should you care?

Aside from the criminal punishment of selling counterfeit wine (more on that below) there are endless repercussions for your business if you get involved, willingly or otherwise. Firstly, your business reputation would be unlikely to recover: once you are tarred with the brush of being dodgy, it’s hard to lose.

Secondly, customer faith in you as a business owner and a brand is also ruined for life. They are literally placing their trust in your hands to feed them, serve wine, and charge a fair and reasonable price. Taking advantage of that is the ultimate betrayal.

Image credit: @smallbarsydney

How common is it in Australia?

Unlike the burgeoning Chinese collector markets, or the existing European houses, there aren’t a lot of firm statistics on Australian wine fraud. However, it’s fair to say that the instances here in Australia are decidedly less newsworthy than some of the mega cases abroad.

That’s not to say these cases aren’t increasing. In 2014, The Australian Wine Research Institute reported a significant jump in reports of issues concerning fraudulent Australian wines overseas. They noted 19 queries concerning wine authenticity in that year alone, a significant increase on previous years.1

Australian journalist and wine writer Ben Canaider describes his own personal experience of wine fraud.

“About 15 years ago, a man came into a hotel front bar in Adelaide, where I was living at the time. (Adelaide, that is; not the front bar.) It was a quiet afternoon – an oddly wet Monday – and he had a black canvas carry-all bag, holding six empty wine bottles,” writes Canaider.

“They were all empty bottles from various old vintages of Grange – Australia’s most celebrated, celebrity red. The man was offering them to the front bar’s clientele for $50 a bottle. I professed interest and asked him where they’d come from.

“He was a straightforward businessman in this regard: “Magill Estate’s (Penfold’s Adelaide winery and posh restaurant) recycling bin. They just chuck them out. But it’s Grange. Or at least, it was…”

Simply put, the ‘salesman’ was selling empty bottles for the owner to fill with cheap wine, and sell off as Grange. Basic and stupid, yes – but still a criminal offence.

Image credit: @yvonne.m.beck

Are there any rules to avoiding wine fraud in your venue?

There are two situations in which you will be confronted with wine fraud: on in which you are aware it is happening, and one in which you will not.

In Canaider’s example given above, it would have been very easy for the proprietor to take the salesman up on his offer, and sell off six bottles of fake Penfolds Grange to his customers – earning a tidy profit of anywhere between $4,600 to $6,000 AUD. However, the penalties would be severe if he was caught: for the crime of counterfeiting and/or piracy, penalties include up to five years imprisonment and fines of up to $99,000 AUD.

So, in the instance of being aware of wine fraud, the easy answer is this: don’t get involved. It is simply not worth losing your business – and career – over.

In the instance of being unaware of wine fraud, however, it comes down to diligence and research. Keep your eye out for warning signs: are there oddly large quantities of a rare vintage for sale? Is the price too cheap? Are they too quick to offer tastings?

As with any luxury product, dealing with the larger and better-known houses brings certainty around the authenticity of the product. Beware of individual salesmen or estates from overseas.

Image credit: @croftport

The greatest wine heist of the 21st century

The name Rudy Kurniawan will go down in history as one of the greatest wine swindlers of all time. The Indonesian businessman had made his mark in LA society circles in the early 2000s thanks to his deep pockets and impressive wine collections.

“He bought so much Domaine de la Romanée-Conti (among the world’s most expensive burgundy wine) he became known as “Dr Conti”, which presumably later amused some of those he defrauded,” wrote The Guardian in an article on Kurniawan last year.

“In one auction at Acker Merrall & Condit in 2006, Kurniawan sold $24.7m of wine, beating the previous record by $10m.”

All was not as it seemed. Discrepancies in the wine market begun to show up, as bottles Kurniawan claimed to own turned up elsewhere.

To cut a (very long) story short, the case made its way through the American criminal system until it ended up in the hands of the FBI. Upon raiding Kurniawan’s home, they found an intricate counterfeiting setup, including corking tools, bottles, labels, tasting notes, and additives. Kurniawan had been taking cheaper wines – though still better than you will find in your average bottle shop – and putting them in more expensive bottles, or altering bottles to appear more valuable.

In 2014 he was sentenced to 10 years in a California prison, the first person to be convicted of wine fraud.

Image credit: @cellaraid

New technology and wine fraud

New technology is providing the leading edge when it comes to snagging counterfeit wine. With fraud in the global food industry costing somewhere between $10 to $15 billion dollars every year, it has become a priority to find new ways to solve the problem.

One emerging solution comes in the form of innovative packing techniques, where hidden codes and identifiers are being embedded into the glass, or tamper-proof seals are attached to the cork.

Analytical tests have also been developed to determine the origin of the wine, using chemical testing of the isotope ratios and trace metals present.

Perhaps most surprisingly, it’s the online currency of Bitcoin that’s proving to perhaps be most successful at curbing the fake wine market. London based startup Everledger has teamed up with IBM to transform the way fine wines are authenticated by replacing paper records with a tamper-proof digital ledger that follows each bottle down the ­supply chain and every time it changes hands.

Fraud of any variety is an age-old problem, and one that’s unlikely to end any time soon. However, our increasingly connected global markets and sharp new technology can help to spot the fakes when they emerge.

Be alert when investing in luxury wine, and always take the time to do your research. As they always say – if it seems too good to be true, it probably is!

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