China-based Jonathan Dahan recently posted a WeChat primer on dodgy wines in this country, including how to avoid them. Read on for both market insights and practical buying tips.
By Jonathan Dahan | As a wine exporter and importer in China since 2006, I have seen my share of dubious products labelled as imported wine–and an even more impressive amount of fake spirits. Even though as a professional I know the tricks to differentiate real from fake, it can be a challenge for those not in the alcoholic beverages industry.
First, letâ€™s review the different kinds of fakes:
I use “fake” and “counterfeit” and other terms without much differentiation. However, there are different kinds of products, which range in offense from petty crime to severely criminal and harmful to peopleâ€™s health.
Here, I will only focus on wines, since it is my expertise.
- Counterfeit. These are real wines with the wrong label. Basically, you pay a premium for cheap stuff. A good counterfeit can be hard to spot and some would even cheat a sommelier’s palate. Yes, it has indeed happened, and not only in China: the most famous case was in the U.S., with Burgundy Grand Cru. In this situation, you just got cheated out of your money.
- Lookalikes. These have labels that look like famous wine brands but are not. Usually the producers donâ€™t copy the label with total accuracy. Easy to spot in theory. Again, they took your money.
- Fakes. This is something of unknown origin with a weird-looking label. They often represent origins that do not exist. You could read something like “Chatel Lafeibateau appellation Libourne.” Easy to spot! Hopefully you are smarter than to buy these and they did not take your money.
- Fake alcohol. These are the worst of all. They can hide in any of the previous categories. This is a mix of high-proof white alcohol with chemical coloring and flavoring. Yes, it is possible. I saw some videos which made me seriously worried!
This involves serious health risks since it can lead to methanol poisoning–due to poor distilling skills–and can cause nausea, serious intoxication, blindness, or even death. The chemicals used for coloring and flavoring can also have hazardous effects since these criminals donâ€™t bother to check and they donâ€™t care anyway. It is because of this specific issue that I deem it very important to develop skills to identify real wines.
The vast majority of legitimate importers only import products through the standard Customs clearance channel i.e. they buy from a foreign producer, get delivery by boat or plane, go through the Customs process, pay taxes (varying from 30% to 60% according to the origin and type of alcohol) and deliver the wine to their warehouse before distributing to their networks.
As opposed to some three-tier-markets such as the U.S., where importers sell to distributors who in turn sell to the on and off trade, China-based importers are allowed to distribute the wines they import with the same license, an Import and Distribution License. It is a huge benefit for final customers since it means that they can buy directly from importers without the margins from multiple intermediate distributors. It also limits the risk of buying fakes since the product passes through fewer hands before reaching the consumer.
Then you have the cross-border business. This is not illegal, properly speaking, but it opens the door to fraudulent practices. Some sellers will say the wine went through cross-border process to justify that they cannot provide the tax invoice. In my opinion, the main advantage of this system is for personal, sampling, or tasting use. Its purpose is not for business since the quotas per person are quite low.
Third, you have smuggling. It is illegal, in case it needs to be said. There is a very high risk of counterfeit products here. The price will be attractive, since no duty has been paid. As well, when you buy from somebody who is doing illegal stuff, you donâ€™t get to cry foul if you buy fake. I would absolutely not recommend buying anything through this channel.
Then–and this is the main source of “fake” wine–you get the import of bulk wine, sent in a 24-ton container-size bag-in-box called a flexitank. These can come from Chile, Spain and even France, and their official uses are:
- Bottled wine labelled with country of origin and as bottled in China. This is perfectly legitimate and allowed.
- Blended with Chinese local production to round up a wine labelled as a product of China. Unfortunately, it also means it is very easy to produce fake wines out of this. These guys have the bottling line, the labeling line, maybe even a printer and a supply of genuine imported wine.
Most of the imported bulk wine is processed in Shandong, in Yantai, in the growing wine region of Penglai.
Finally, some wines are sent to China already bottled but without a final label. We call them mini-labels. They can come from any region but are mostly entry-level wines. The wines are kept in bonded warehouses, under Customs control, and will be labelled under private brands.
These end up on the shelves of dubious retailers in second- and third-tier cities. Even though there are controls re labeling, it is super easy to make fake wine using this supply. Once again, real wine but not necessarily what it is labelled as.
Now, letâ€™s have a look at where to buy real products in order to limit the risk of buying fake products.
Franchise convenience stores. They donâ€™t have a great range of wine and it is mostly on the entry-level side, but the stuff will very likely be genuine. These will do just fine for the non-connoisseur buyer looking for a reasonably priced wine.
International five-star hotels. Here as well, you are unlikely to find fakes. The reason is that the purchase policy is only to buy from a licensed importer and all products need to come with an authenticated set of import documents, plus a painstaking listing process that requires a minimum of five of the hotel management staff members to sign in any new product.
Foreign supermarket chains. Here (mostly) will be real wines but the large selection found in supermarkets leaves room for occasional honest human mistakes. Once in a while, I spot a lurking villain hiding between the innocent real wines and spirits. It can be explained by the fact that the buyers handle a lot of SKUs and sometimes they miss the little details that should alert them. Some fake sellers can be very convincing.
I would still consider this channel as generally safe, especially if you use the tool-kit I provide below to identify fake items.
Importerâ€™s licensed stores. I would consider these safe, but keep in mind such stores donâ€™t all belong to the importer. It means that local owners, even though there are controls, can always bring in some other dubious products.
Online platforms. While there are a lot of controls for platforms, there are quite a lot of fakes in online sales. Letâ€™s say “the more shops on the platform, the higher the risk,” and that customer-to-customer (C2C) involves more risk than business-to-customer (B2C).
Below are some examples, organized by what I see as the decreasing level of safety, for some mainstream platforms (safest to least safe):
- JD: JD own stock
- JD: Stock sold by other companies
- TMall: TMall own stock
- TMall: Stock sold by other companies
- Taobao: Corporate sellers
- Taobao: Private sellers
It does not mean that all products are fake. Far from that. It just means that the risk is higher the more you go down the list.
Restaurants, bars and clubs, and non-franchised retail. China is too vast to generalize these categories. I would say that a lot of fakes are sold through these channels. I would take the reputation of the place into account; whether or not I know the owner, and so on.
Also keep in mind that it is very common to bring your own bottle (BYOB) to restaurants in China. Depending on the place, doing so will cost you between nothing and a corkage fee ranging from moderate to outrageous.
Specialist stores. These include non-franchise cellars. Some offer a great selection of wine at reasonable prices, with the owner usually managing the place and offering professional and friendly advice. I would say that if you have one of these close to home it is one of the best ways to buy your wine. The probability of fakes here is very low, once you have asserted the owner is a real wine lover and he or she is honest.
Direct purchase from importers. This would be safest of all and is a fast-growing market segment these days, especially through online channels, due to recent self-isolation measures [during the coronavirus pandemic]. BUT you need to be careful in selecting the importer you since some people and companies just pretend to be importers. Below are a few key elements:
- Does the importer have respectable visibility, or is he or she hiding?
- Do they have an office that can be easily found?
- Do they accept showing you their import license and import documents?
- Do they have a temperature-controlled warehouse?.
If the answer to any of these questions is no, then run away: either you are facing a cheater, or at least somebody who doesnâ€™t even know how to store their product properly.
Auctions. I originally did not intend to mention this channel since the target of this article is the layperson. However, several people I respect in the trade noted it it was missing.
You might think an auction is a very safe channel since it involves big money and there is professional verification and legal context involved. However, the truth is very different–there are still thousands of “Kurniawan” wines being funneled through auctions all over the world, especially in Asia.
Rudy Kurnawian is a guy who sold a lot of almost “perfect” counterfeits to connoisseurs in the U.S. marketâ€“many of these are still around. For more information about this case, I invite you to watch the documentary â€œSour Grapes.â€
Below is a non-exhaustive toolkit to help you identify and avoid fake wines:
1. Spelling. The first sensible thing to do is check for spelling mistakes if the label is in a language you can read. A label full of mistakes is obviously fake–if you havenâ€™t looked closely, youâ€™d be surprised how common this is! It is not 100% fail-safe as Iâ€™ve witnessed a few genuine wines with some little mistakes, either because the designer was careless or he / she was not proficient in English. (For instance, when French people write a back label in English.) However, I would suggest avoiding buying wine with mistakes unless being able to confirm that it is genuine. Guilty until proven innocent rule.
2. Internet. Another easy way is to check the internet. Type the wine name into a search engine and see what you find. If that wine exists on international browsers and you can verify that the one you want to buy matches 100 percent, then it is likely real. If you cannot find it, it does not mean it is not real, simply that it did not appear online. If you see it with a different label / packaging, check the legal information (bottler and zip code). If consistent, it might simply be that the wine has a few different labels.
3. Gencode and legal info. If the wine has a gencode–the vast majority do–check it. Gencodes carry various tracking information, the most relevant being the country number. It is the first number. For instance, for France it is 3. The following five numbers are the supplier code and the final numbers are the product number inside the supplierâ€™s portfolio.
Also, check if all the required legal bits are on the label. For instance, if the bottler name or zip code is missing, it can either be fake or not originally intended to be sold in China. (Note: not all countries and channels require a gencode. Iâ€™ve seen quite a few GCC labels without gencode since they are purchased by merchants who in turn sell back to final buyers.)
4. Chinese back label. Every imported wine, or imported food product for that matter, goes through the customs Clearance process and is required by law to have a Chinese back label stating particular information.
If you are not buying in duty free and there is no back label, you should ask why. For instance, there might be no back label in cases where a friend hand carried the bottle from a duty free store.
5. Region. Does the region stated on the label even exist? Some fakers will not even bother to try and copy real labels correctly. I saw my share of â€œAppellation Libourne Controleeâ€ (Libourne is the region of Saint-Emilion and Pomerol on the right-bank of Bordeaux but it is not a wine region) and â€œBordeaux Appellation Yantai Controleeâ€ (this one is obviously false).
6. Professional advice. If you have friends from the industry, it does not hurt to send them a picture of the wine you are planning to buy. They can check it out and confirm authenticity or at least tell you “I donâ€™t see any obvious problems.” For professional advice, the picture(s) should be clear enough for your friend to be able to read the front label AND the back label.
Recent developments: I will finish with an anecdote about the current China situation as of April 2020. As bad and saddening as Covid-19 is in every other aspect of life and business, it has had an interesting side consequence in the area of fine wines and high-end spirits.
The shutdown of borders means there is currently barely any possibility of smuggling at all. In recent weeks, I have been amazed at the abnormally high number of requests for premium products such as Chateau Lafite or Cognac Louis XIII, until I realized the backdoor channels were probably shut down.
This indeed helps in fighting the fakes since everyone knows the borders are closed. (Remember that many fakes are sold by alleged smugglers, especially on the high-end.)
Note: Jonathan Dahan has been working in imported wine and spirits in China and throughout Asia since 2006. He has trade experience at every level of the supply chain, from final distribution to import and export.
He is the Asia export director for French wine producer Domaine Francois Lurton, with estates in France, Spain, Chile and Argentina. Even now, while holding a few wine degrees, he keeps studying about wine every day.
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