Thoughts on the gray market

As someone who takes great pride in representing my growers ONLY with their blessing to do so, I have always found the gray market for resale to be ethically problematic and a bit dirty, the product of back door dealings that all parties involved KNOW to be a no-no. My common sense rule of thumb: if you were put into a room with the grower whose life is entwined with making said wine, and you can’t look them in the eye and say, “I buy and sell your wine” without being reprimanded, you are a dirty bird, and you MUST know this inside…to then have the unmitigated audacity (as Frank Zappa would perhaps say) to pose as though you have a relationship with said grower adds even more tasteless insult to injury, as I see it.
Whilst I can acknowledge that some slippery slope ethics folks may call me “too simplistic” or “childish” for such a stance, I am curious to hear from Berserkers about their thoughts on the matter.
With the collapse of the Premier Cru, the fallen king of gray market shenanigans that has Pied Piper-ed its crowd of bottom dollar lemmings off of a multi million dollar cliff, hundreds if not thousands of people have gotten karmic fiscal enemas for dipping their toes in such murky waters. I cannot say that I was surprised by the entire fiasco.
There are a handful of US merchants who continue such practices, some of which are championed by many members of this board.
To those folks I ask: what makes it ok to support the gray market? Is bottom dollar always the only bottom line?
Fwiw, I work with ZERO gray market goods, and I NEVER will.
Reap what you sow.
[cheers.gif]

In what way was PCs undoing related to selling gray market?
As a consumer, I have no problem buying wines from a retailer that have been acquired through a gray channel provided they have a track record of good provenance. To my knowledge gray market transactions are not illegal. The market exists only because of inefficiencies in the established import/distribution structures. Should producers and importers live up to their business agreements? Absolutely. But as a consumer that is not my cross to bear.

One could argue that gray market commerce forces greater efficiency into the formal sales channel. It is basically regulatory arbitrage.

Not half as dirty and unethical as smuggling weapons, endangered animal parts, ivory, corporate trade secrets, government sponsored hacking, clearing tropical rainforests, illegal fishing and so on and so forth. I think there are many other, more important issues to get worked up about and that would have a much greater impact you tried to overcome them. The thing is, when it comes to something that people want and there is money to be made, it will be made.

I would try to avoid dealing with any dealer who wasn’t selling gray market wines. I want my dealer to effectively get me the best deals possible - he should be on the customer’s side, not the producer’s. Any illusion that there are any ethics in this business other than the bottom dollar probably went out the window when nearly every wine region in the world doubled its prices in about half a decade. They take what the market will give them, and we should take what the winemakers will give us.

An understandable position, Kelly. So as a consumer, your position is : it isn’t illegal, I will buy if I think provenance is good; bottom dollar is best as long as the goods aren’t spoiled and you don’t think that you will get hosed. Is that a fair summation?
I’d say that the related PC/gray tie in is that by being disconnected from the actual producer by virtually always working at the shady perimeter of the secondary supply chain, there was no oversight or actual accountability. If they were working directly with growers, red flags would have gone off, relationships severed, and the relatively small circles of the world of fine wine would allow for such transparency to get the word out. Reduced to commodities arbitrage trading from secretive and shifting sources doesn’t allow for anyone to speak up as a whistle blower, as the cover of the shady supplier would be blown as well.
If relationships are built upon integrity and transparency, such epic deception isn’t possible in the long run.

Right, but this is a wine website, not a global political website. Indeed, there are a million global issues more important than fine wine distribution.
I am also a wine merchant, not a politician, and am curious about wine market dynamics.

I would expect no less from you, David.

Robert,
Are you the official importer of Roumier? Is it ok for importers to sell at retail rare wines?

I don’t think that there would be an argument. It is a fact. But that doesn’t address any of my questions about ethics, and why people make the choices that they make.

Robert,
It is wrong for me to purchase magnums of Armand Rousseau from an agent in France because Frederick Wildman is the official importer? In what way, shape, or form?

There are twenty pages of similar examples.

Patrick

Most of the recent vintage grey market wines are from various European importers who can’t sell in their own countries. Not all importers bring the wines via temp controlled.

I am not, and never have posed to be.
When I worked with Roumier’s wines, it was through Diageo, hand in hand. I have visited with Christophe for 10 straight years. I know him, he knows me.
I don’t think that I have proposed that retailing rare wines is a no-no, have I?

Robert - I think in cases where “exclusive” importation rights are given to certain parties, and those parties (or the other tiers behind them) partake of very high mark-ups that Gray Market is the only way to keep those prices in check for the consumer. The one that impacts me the most is on Piemonte wines - the prices of Giuseppe Rinaldi and Bartolo Mascarello are crazy and it’s NOT coming from the producer. I’m sure Burgundy is the same way. Personally I think the model works better when there are multiple importers who can help to keep each other in check - at least on the high-end wines.

As an importer, what do you think is “fair” on pricing on highly desirable wines?

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Using my common sense test: You are standing in Gevrey with Monsieur Rousseau. You introduce yourself as Patrick Albright, arbitrage commodities goon extraordinaire who sources gray not for personal consumption but for resale because a) Wildman won’t sell to you or b) won’t sell “enough” to you.
As the guy whose family is responsible for creating such magnum, the literal fruit of his family’s labor, you’re telling me that if he disapproves of your activities that that means nothing to you?

Dollars and senselessness to me.

I could be wrong but you criticized crazy mark ups yet you did the same with some of the rarest wines. The reason why the grey market exists is that the final price to the consumers are often 3 to 5X of what the producers charge. I don’t quite get the ethical argument. Is the big mark up by importers/wholesalers/retailers unethical?

“hundreds if not thousands of people have gotten karmic fiscal enemas for dipping their toes in such murky waters.”

Thank you for giving me a reason to never give you any money. Saying the equivalent of, “people got what they deserved” with respect to Premier Cru. What an arrogant and self-righteous view you possess. Good day sir.

Robert,
You try to take the high road and then you delve into personal insults.

You just lost all of your credibility.

Patrick

The US importers/wholesalers use the cherries to sell their other wines at high mark up. This sort of behavior eventually results in higher wine prices.

Indeed, exclusivities are often abused for perceived trophy darlings, with egregious gouging on behalf of the intermediaries.
This is not cool whatsoever in my book.
Yes, I agree that the gray market can keep prices in check for such abuses.
I also think that you’re onto something about the market correcting itself in producer sanctioned fashion when there are multiple importers, as is the case in all countries, not just the US.

I am not too interested in the fetish gouging and parallel markets for “blue chips”- the DRC/Roumier/Petrus of the wine world. Those seem to attract the shittiest of high end vultures.
I am moreso interested in the Bruno Claveliers, Olivier Lamys, JM Pavelots of the world, who aren’t blue chips awash in money, but working class farmers who have enough interest to attract the marginal market busters.

Fair to me is not just a matter of “economic theory” of supply and demand.
There is more than that…