Wine fraud, a still fashionable (and profitable) practice

07 Oct, 2020

Illicit markets are, for their nature, difficult to analyze. The one involving fake wine makes no exception. In fact, all the available statistics that can be found on the subject are based on estimates and often comprehend the whole “food and beverage” sector. Keeping that in mind, we can report some numbers. According to a study conducted by the EUIPO (European Union Intellectual Property Right Office), counterfeit spirits and wine cost the European economy € 2.7 billion a year. (1) Additionally, it is estimated that legitimate wine and spirits sales are reduced by almost 7% due to counterfeit goods, with illicit trade in wine and spirits resulting in the loss of over 7,000 jobs and € 2.2 billion in tax revenues. (2)

Given the huge numbers we can say with confidence that wine fraud is an extensive issue and it can be put in practice at different levels of the supply chain. Professor Lars Holmberg, in his review published on the International Journal of Wine Research in 2010, divides the problem in two different forms: consumption fraud and collector fraud. (3) The first one is destined to the wine market in general, while the second addresses at the very top of it. Setting apart tax and duties evasion frauds, both cited practices are addressed at buyer’s level and attempt to mislead the drinker or the collector that what he/she bought is a better product than what it really is.

Normally, consumption frauds involve general consumers and large quantities of wine. Clear examples are adulteration and mislabeling. The first can be done via dilution with water, addition of alcohol, sugar or low-quality wine into a higher quality one. This type of fraud increases the products’ commercial value and/ or volume and it has been done by retailers and producers themselves for a long time now. In 1327, king Edward III, in a letter to the major of London complains that he ”is given to understand that vintners and their taverners, are selling wine by retail in the City and suburbs, mixing weak and corrupt wine with other wine and selling the mixture at the same price as good and pure wine”. (4) Recent examples of wine adulteration bring us to Italy in the late 80s’ when some wine brands from Piedmont tainted their wines with poisonous quantities of methanol, in order to increase their total alcohol content, causing the death of 17 people and the hospitalization of more than 60. (5)

Mislabeling, instead, is when a cheaper product is sold with name, reference or denomination of another one, usually of recognized quality and therefore more expensive. In 2007, German and Italian police forces have discovered an international fraudulent scheme across Italy and Germany. Unlabeled wine from Puglia, and Piedmont was sent to Germany. There it was given false DOC and DOCG certifications and counterfeited labels of famous wineries to be passed off as Barolo, Amarone and Chianti. (6) The counterfeited bottles containing low quality wine were destined to supermarkets, restaurants and online stores and have been sold for over € 100 each.

While consumption fraud can be associated both to producers and retailers, collector fraud is always linked to third parties and secondary markets and rarely to the wineries themselves. Within the last 40 years in fact, the demand for old and rare vintages of specific wines has increased enormously. Not always buyers are real wine connoisseurs and often the purchased wine is not drunk but it represents just a simple whim or an investment. This expanding market have made the prices raise and, in turn, the practice of counterfeiting single bottles a profitable practice. This is usually achieved in different ways. One is exchanging the label of a great wine of minor vintage with that of a better one while another is to re-create bottles to look like the authentic version they represent. The third and most common one is for sure the refilling of authentic bottles of expensive wines with a cheaper one in substitution.

These practices are the ones that made “the fortune” of Rudy Kurniawan, a major player at Burgundy auctions in the early 2000s. In one auction at Acker Merrall & Condit in 2006, Kurniawan sold $24.7m of wine, beating the previous record by $10m. (7) Because of some discrepancies on specific vintages some doubts raised about the authenticity of the sold wines and an FBI investigation was carried out. This led to the discovery of a fully equipped counterfeiting kit in Kurniawan’s house, composted by materials such as corking tools, labels and empty bottles.

Despite his arrest and the confirmation of his conviction, still this kind of frauds seem on fashion. Today, selling empty bottles of expensive wine is a huge business on eBay. Many restaurants and hotels that sell very high-end wine do not ensure the bottles are destroyed once emptied. Without this happening, disreputable staff can make a considerable side income selling the used bottles. This is exactly what the Italian NAS Carabinieri of Florence, supported by Europol, discovered in June 2020 when taking down a network of counterfeiters selling online fake premium Italian wines. Empty authentic bottles were gathered from restaurants, refilled with cheap wines from different origins and sold online or at hard discount stores. (8)

Keeping out of consideration outlaw producers, which are regrettably present in all sectors, many others are experimenting with different security measures to prevent their wine to be counterfeited. Some Bordeaux wineries now mark their labels with a special ink that is only visible through ultraviolet light, making it very hard to reproduce their labels. This measure, however, only protects the packaging and not its content. Here, different kinds of seals and tags seem more promising. In this case the platform developed by Authena comes in support. Its innovative tag works through NFC technology and can be read by any modern smartphone. It detects the open/close state of the bottle and contains a unique digital passport encrypted via blockchain that grants authenticity and full traceability on the wine provenience. It also enables a two-way communication between producers and consumer, offering marketing opportunities to the firsts and reestablishing trust in the lasts.

Alessandro Tacconelli