Grand Theft Bordeaux
In England last week, a man named Paul Craven, managing director of Bordeaux Wine Trading Ltd., was convicted of fraud. In the three-week criminal trial he was charged with taking £1.2 million of wine lovers’ money and, instead of buying bottles of first growth Bordeaux from the highly lauded 2005 vintage, Craven spent the money on fancy watches, expensive holidays and Bolivian marching powder. All that’s left of the £1.2 million customers gave to Craven is a mere £12,200.
As brash as Craven seems, he’s not terribly original. Many a small-time wine merchant before him has been convicted of being a big-time crook, bilking well-heeled wine lovers out of millions in the promise of Bordeaux futures.
While the obvious thing to ask is, “How could wealthy wine shoppers be so dumb?” the better question is, “Who can I trust if I want to invest in a few bottles of Bordeaux for myself?” In my opinion, fewer people than you’d think.
Even many established brick-and-mortar retailers can frustrate when it comes to futures. The reason why is that wine futures are all about margins: Selling wines from producer to négociant to importer to retailer to you, with each person in the chain getting a cut of the cash long before the wines even arrive. Ideally, the customer secures a better price on the wines by paying cash two years ahead of the bottles’ delivery. But when demand goes up, each person in the chain gets greedier – especially the end retailer, who could, potentially, hold your wine hostage.
Back when the market for 2005 Bordeaux futures was burning up in the rosy, pre-crash glow of mid-2007, it was rumored that customers who paid $12,000 for a case of Mouton or Lafite on the first price announcement, a few months later were being offered twice that amount by the retailers they bought from simply to walk away. The retailers were anticipating that demand and prices would continue to rise during the two-year wait for the wine to arrive, so it was worth offering a customer a $12,000 profit – thus valuing the case at $24,000 – for the chance to sell it to someone else later for $50,000.
If these stories are true, that kind of gamble has yet to pay off (thanks, stagnant economy), but that doesn’t mean it won’t someday. And, worse, it hints that the retailer might play similar games with wines that cost $100, not $1,000. Here’s why I believe this:
When prices for the 2008 Bordeaux were released as futures, in early 2009, they were the lowest they’d been in several years. A magnum of a particular wine I love cost a mere $80 (a regular-size bottle from 2005 runs about $250). I forked over money for a magnum from a retailer in San Francisco, and one from a retailer in New York, where I live.
Since then, demand has pushed the price of a magnum up to $120. A month ago, the retailer in San Francisco sent me the bottle; the retailer in New York, however, is insisting that the bottle I ordered has arrived, but has yet to be unloaded at the warehouse.
Forgive me for smelling a $40 rat. My two bottles likely left the château on the same day, and it seems clear that a bottle of wine that can make it from Bordeaux to San Francisco to New York can make it from Bordeaux to New York to…New York.
I’m not asserting that this particular retailer has zeroed in on me in the hope that I’ll give up waiting and ask for a refund, so that the bottle can be sold at the current market price. But it does suggest a broader policy of hold, wait and potentially profit; a few years ago, on a different order, the same retailer did offer me my money back on a wine that had increased significantly in price after I placed the order. I should also note that this retailer will charge me a monthly storage fee for my one magnum if I somehow miss the letter or email alerting me that the bottle is ready for pickup.
What invites such practices is that each year when critics and buyers visit France to taste the latest vintage, the wine press salivates and speculates. Media hype rockets prices into the stratosphere, and it becomes easy to forget there’s a whole other world of great-tasting wine largely untouched by avarice-fueled adulation.
Yet my current wait for a bottle of Bordeaux serves as a reminder that some of the best-tasting, best priced wines are available at my local store or on my computer screen. Honest people who care about delivering high-quality wine at a fair price sell these bottles – and yet they rarely get the attention they deserve for this.
Maybe what this will take is a powerful voice in the wine press stating what is probably more true than we want to believe: that the liberties established retailers may take with their customers’ future orders aren’t illegal, but ethically, the line separating their practices and those of a Paul Craven may be much thinner than we all think.