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Pricey counterfeit labels proliferate as China wine market booms


This news story was published on January 20, 2012.
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By David Pierson, Los Angeles Times –

BEIJING — The lamb chops were cooked to perfection. Fine wines flowed. Then came the piece de resistance — a 1997 Chateau Petrus Pomerol that can fetch about $2,000 a bottle.

Wine consultant Frankie Zhao was dining with a group of well-to-do Chinese businessmen at an exclusive private club in the capital. Their host was eager to share — and show off — the prized French merlot.

But after the first sip, veteran taster Zhao knew the collector had been duped.

“I could tell immediately it was a fake,” said Zhao, who kept silent rather than embarrass his unwitting friend. “It was too fresh and soft and didn’t have any complexity.”

Seizing on exploding demand, China’s ever-resourceful knock-off artists have uncorked a lucrative new business: phony high-end wines.

Bootleggers are dousing the market with fakes using tactics so bold they would make a sommelier blush, including refilling empty bottles from famous chateaux with inferior vintages.

The problem is so widespread that auction house Christie’s concludes its tasting events in Hong Kong and China by smashing empties with a hammer, lest the glass containers end up on the black market.

“We have to protect provenance,” said Simon Tam, head of wine in China for Christie’s. “Even if you scrape off the label, there are still channels for the bottles to be misused. It’s really about being responsible.”

As recently as a decade ago, such precautions weren’t necessary; Chinese largely stuck to fiery grain alcohol. But upwardly mobile Chinese, eager to display their wealth and sophistication, have since developed a taste for imported wine along with other foreign luxuries.

Wine consumption here has more than doubled since 2005 to about 100 million cases a year currently, making China the seventh-largest market in the world, according to Vinexpo, a French wine industry organization.

Though cheaper, domestically produced wine commands three-quarters of the market, Chinese brands such as Great Wall and Dragon Seal lack the quality and prestige to satisfy local connoisseurs.

That has created an opening for foreign producers who are increasingly counting on China for growth. Hong Kong was the third-largest foreign market for California wine in 2010 with $116 million in shipments, according to the San Francisco-based Wine Institute. Mainland China ranked fifth at $45.2 million.

Former NBA hoops star Yao Ming recently announced that he was jumping into the wine business by importing a Napa Valley Cabernet Sauvignon that retails in China for $289 a bottle, including taxes and duties.

But the real clamor in China is for high-end French reds, which enjoy unparalleled cachet. A Chinese buyer spent an astonishing $540,000 on a single lot of 300 bottles of Chateau Lafite Rothschild at a Christie’s auction in Hong Kong in September.

Prices like that have proved irresistible for counterfeiters. Knock-off hooch can be found almost anywhere in the world where alcohol is sold, but China is fast becoming the market of choice for pirates.

“China’s where the big-money wine boom has moved,” said Benjamin Wallace, author of “The Billionaire’s Vinegar,” which delves into the underworld of wine forgery.

At a wholesale alcohol market in the northern Beijing suburb of Huilongguan, buyers can easily find sellers of purported Chateau Lafite Rothschild. The real deal can cost $8,000 a bottle, but even fakes aren’t cheap.

“A good one can cost ($160) because they use an original bottle,” said a storekeeper who gave only his surname, Zhou.

Indeed, a cottage industry of bottle scavengers has sprung up to serve the trade. One broker solicits online as a “professional bottle recycler,” offering up to $320 for an empty Lafite depending on the vintage.

Copycat producers benefit from the relatively undeveloped palates of many local consumers. For some businesspeople and government officials, the value of sharing a Lafite lies in how much face it bestows, not how well it pairs with a meal.

“It’s an immature market,” said Zhao, the consultant. “The first thing people care about is the label on the bottle, not the taste of the wine.”

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