Robert Frank reveals in the New York Times that the collapse of Berkeley’s Premier Cru online wine futures incurred serious losses for a number of Chinese clients. But Frank also shows how the shifting tastes of Chinese buyers influenced Premier Cru’s prices and should have triggered warnings among the company’s customers:
Premier Cru’s collapse has sent a chill through the broader wine and collectibles market. As wine, art, classic cars and other collectibles have soared in value and transformed from status trophies into financial investments, they have also become more prone to fraud. Although fake vintage wine has dogged the industry for years, there are signs that wine fraud has reached a new “financialized” stage, where millions of dollars are lost without a single bottle changing hands.
Premier Cru started out as a low-price wine shop for high-income collectors. Founded in 1980 by Mr. Fox and other partners, it outgrew its store in Emeryville, Calif., and in 2011 opened its gigantic emporium on University Avenue in Berkeley.
Clients said Mr. Fox was the driving force behind Premier Cru. Tall, businesslike and better known for his taste in fast cars than fine wine, Mr. Fox often dealt with Premier Cru’s biggest clients and orders. Much of Premier Cru’s business came online. Clients say wine buyers often search the Internet for the best prices for top wines, and Premier Cru often undercut its competitors by 15 to 20 percent — significant savings for wines that may sell for more than $1,000 a bottle.
In the 2000s, Premier Cru started expanding its business of selling wine futures, according to clients. Futures allow customers to pay for wine (usually Bordeaux or Burgundy) while it is still in the barrel but is not yet bottled or sold in retail outlets. The wine is delivered more than a year later. If a wine increases in value while it’s aging, the buyer gets the wine at a discount. Some buyers can also use futures to buy wine they can later flip for a profit, making futures more like a financial investment.
Claims of a Ponzi Scheme in the Collapse of a Rare-Wine Seller (The New York Times)