Fake liquor trade booms as China's thirst grows

Some foreign producers have decided to pull out of an emerging market as counterfeit brands raise health concerns.

Beijing // Massimo Masili came to China three years ago with his brother from Milan and opened L'Isola, an upscale Italian restaurant in Beijing. His wine list boasts an impressive selection of imported Italian brands and a selection of cognacs, whiskeys, rums and gins just as spectacular. Although he says his wines are of good quality - he tasted all of them when he bought them from the importer - he simply prefers to ask his clients to stay clear of the spirits.

"As far as I am concerned all spirits in Beijing are fake. I advise my clients not to drink cocktails. I cannot guarantee their quality. I don't even know if my 2,000-yuan bottle of cognac is real when I buy it," Mr Masili said. "The only way I can tell if the product is good is by tasting it." Although it is difficult to estimate the quantity of fake wines and spirits in circulation, it seems the amount increases on par with Chinese consumption of better quality alcohols, most of them imported.

The fakes are likely to grow as the market becomes more lucrative. The wine market is expected to grow by US$9.9 million (Dh36m) over the next five years, according to Euromonitor International, a research firm. The market for spirits will grow by $22.7 billion. This represents a wine market growth of 60.2 per cent by 2013, and 64 per cent growth for spirits. Fakes wines are common and cut across vintage, terroir and price range: expensive French wines, such as Mouton Rothschild selling at more than 2,000 yuan (Dh1,075), and more popular, less expensive ones such as Mouton Cadet - at 148 yuan it is China's best-selling wine - can be altered.

Spirits, on the other hand, because they are enjoying a much faster growth rate among alcohol drinkers, are more problematic. "A lot of spirits are shipped here in bulk and bottled in China. It is very easy in that case to alter the quality of the product before bottling it," Mr Masili said. Another common practice is to change the label of the bottle while it is being shipped from Europe. A standard whisky can arrive in China transformed with a new label boasting a 25-year-old vintage and be sold for 1,000 yuan.

Aline Conus, chief executive and founder of Luxury Brands in Shanghai, has worked in the wine industry in China for four years. "I have come across many fakes," she said. "Once, for example, a client sent me back six bottles asking to be reimbursed. It was only by chance I noticed that the bottles had been drunk and refilled. The seal had a minor spelling mistake on it. "In most cases the bottles of real wines or spirits are recycled by bars or nightclubs, sent to a local distillery and then come back on the shelf." The consequences are obviously damaging for overseas alcohol producers eager to tap in to the growing market and there is concern the issue will grow as the consumption of top wines and spirits spreads from its niche market today to second-tier cities and the rising middle class. Representatives of major alcohol brands would not comment on how much the illegal trade is costing them, but there have been reports that foreign producers have simply left the market because their products are being copied and their brand name sullied.

Fake alcohol is also a health issue. Alcohol samples were tested by The National and in two cases small amounts of methanol - not enough to cause severe damage - were found. Methanol is often used in cheap alcohols and can cause blindness and severe damage to the nervous system. The tests also showed abnormal amounts of ethanol in imported vodka and in three samples of gin. All the samples tested showed imported spirits had been adulterated.

Companies selling fake alcohol or misusing a registered name, such as Champagne, are being shut down under threat of legal action. "The law exists," Ms Conus said. "Once I saw a Mouton Rothchild selling for the same price as a Mouton Rothschild. We sued the company and won. But who knows if the week after they were selling their stock in a second-tier city or if they just launched a new company the next day."

China, eager to meet international standards and rid itself of the maligned "Made in China" brand, is stepping up efforts to fight illegal distilleries and impose quality controls and classifications on wines and spirits similar to those in the US or Europe. Standards for wine fall under the responsibility of the administration of quality and supervision, inspection and quarantine. In 2005, the government adjusted its regulations but they remained far from western standards. Industry insiders say bribes and corruption are still common practice among local officials who turn a blind eye on illegal practices.

"The problem is not the law," Ms Conus said, "but more a question of mentalities. Fakes are common in every industry. It is just the way the Chinese do things. And this may take a very long time to change." * The National