Grey Market wine sales and European import contracts - threat or menace

Let’s say some wine is allocated to a restaurant in Paris and they instead sell it to some grey market broker who sells it in the US. The only potential harms are that the producer’s wines aren’t in that particular restaurant so they in theory get less exposure and customers can’t drink them.

this isn’t a hypothetical though. this is deeply important to many, many domaines and wineries here in the US. if the restaurant does this, they lose the allocation. to make robert’s case for him, this is a major reason they work with certain distributors. further, i believe the distributors have an interest in placing more wines on premise than retail for the same reasons. of course, this lessens the available wines for retail which leaves open the grey market to fill the demand.

p.s. and they often look at the prices charged on lists! everyone has a strong opinion about everything in this industry and egos are what they are.

I don’t care, obviously. Half that other thread is about how I exclusively only cherry pick wines I want.

They lose the allocation if they get caught. I buy a lot of allocated wine from restaurants. Almost none of them have ever got in trouble for it.

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That is cool. To me wine is very personal and the connection with the winemakers is important to me and I would never want to do something that they did not approve of. I also have a ton of respect for importers and retailers that keep this industry afloat.

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The only reason grey markets can exist is because of market inefficiencies.

An easier way to think about it.

Hypothetically, let’s discuss a small grower with a production of say, 2000 cases. If some individual liked the wine and went to the grower and said they’d buy their entire production each year at a 25% premium to their current importer/wholesaler/distributor and were willing to sign a long term contract, how many would say no?

I think we’ve been in a market for awhile where demand exceeds supply but that isn’t guaranteed to be the case forever and we’re starting to see markets soften. It may be that grey markets are essential for producers to even sell through their stock, except for the most well-established producers.

Obviously many in Burgundy! And many who have respect for decades long relationships.

Perhaps. It wasn’t that long ago when the near entirety of burgundy was being sold to negotiants. There’s a reason why CLB and Charles Lachaux are trying to sell DTC, to claim a larger chunk of the money. Getting another 30% is basically like selling directly to US wholesalers. I’m sure some people feel strongly about controlling the distribution etc but a lot of producers may simply be happy to have a long term contract at a significantly higher price.

So, is the “grey market” basically distributors/importers in European countries selling their allocation of wines to U.S. grey marketers (who then sell direct to American consumers)? The ethical issue being the European distributors/importers are promising the producer they are only going to sell their wines within a specific country, but they are secretly selling it to a U.S. grey market retailer?

Do European restaurants or retail shops also get involved in the grey market?

Is this the reason Ulysses Collin is only selling wines to restaurants (to curtail this type of flipping on the secondary market)?

I think there are lots of sources. Probably less the importers than retailers and consumers selling into the secondary market, is my guess.

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you highlight a fundamental problem with this thread - defining “grey market”

In the USA at least, i think a good-enough working definition is any wine that is (a) currently represented in a state by a licensed wholesaler / distributor, and which (b) is also available for sale in that state via a source that isn’t the party in (a).

This is purposefully overbroad to include wines purchased at retail from another state that came from that state’s licensed channels but may not be the party / parties listed in (a) above. I admit this doesn’t fit the more colloquial definition of “grey market” but perhaps it should, as that wine may not have been intended to be sold in the purchaser’s state by the licensed third party in the source state and is inherently competitive to the party in (a).

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Not really. COLAs are national TTB. They’re primarily concerned that nothing illegal is on the label. State laws are what govern the exclusivity outside of an agreement for national exclusivity between the producer and importer.

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Yeah. Lots of sources. I used to buy up cellars from someone that…bought up cellars. Mostly it was (way) back vintage so it wasn’t competition with current importers but I did get plenty of current vintage Giacosa from him too.

There are some in the countries where the wine is produced who are not exactly upfront with the producer as to what their intentions are. Maybe they are offered more than they can sell locally but they’ll take all they can get and then make a quick flip with part of their allocation to a grey marketer. They know what they’re doing upfront but the supplier may not.

Hermes has been doing this for at least over 15 years. I interned at Hermes in 2013, and we had maybe 10-15 repeat customers that would come into the Madison Ave store once a week. All were probably ages between 20-30 and almost always from china here on a student visa. These woman would buy as many scarfs and belts as we would let them just to be offered a couple Kelly or birkin bags. They were purchasing well over 100 belts and scarfs per year, they told me they just sell them to their family/friends in china. Eventually we would allow them to purchase bags once you reached over $40k per year in accessories. $100k would get you three to five bags that year.
Totally blew my mind when I found out this loophole for getting the bags.

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While this thread is about allocated cherries, since it has slightly morphed, I will also say you all wouldn’t believe how many wines use multiple labels. No, not at the top, allocated level but there are lots of the same wines with different labels out there. I used to see buyers panning the same wine that they carried under a different label. It’s a crazy world out there.

Got it. I thought COLAs were also used at the state level to establish exclusivity.

TTB doesn’t ask questions about exclusivity when obtaining the COLA. At the state level, they also don’t ask questions when registering the wine. Importers change routinely. However, if someone has a dispute, it will surely show who obtained the COLA and/or registered the brand first.

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Do importers buy a producer’s portfolio from top to bottom because they genuinely want to? Would they not also “cherry pick” if the opportunity was available to them?

Re fairness and putting legwork to establish a producer/region/etc., should we all be buying Napa wines from Steve Spurrier approved channels because he put on a tasting in the 70s?

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European labels don’t have the same information that U.S. labels have. An “official” importer will generally have a back label specific to the U.S. (primarily the pregnancy warning, and they’ll translate any verbiage in English). I would assume that a grey marketer would need to submit a COLA for the bottle showing the separate “U.S. information” strip, along with the “Euro market” back label.

My beef is not that grey marketeers sell the wines, it’s that they steal allocations from drinkers and sell the wines at an unnecessarily large markup, thereby hurting the actual drinkers.

Case in point: just got a 22 Dujac offer from one of the usual grey market places.

MSD village is $165. I paid $54 on allocation.
Ech is $800. I paid $550 for the 21 from a 3 tier USA retail store, who paid $425 wholesale.

They have many bottles up to many cases of a lot of these wines, not all, but a lot. Are you telling me they paid $125 for the MSD and marked these up a standard 30%? They paid $615 for the Ech? No chance. They are stealing allocations and then gouging at the highest price they think the market can bear with three digit markups. The only beneficiaries are themselves, the drinkers get screwed.

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