For those that read this space consistently, you’ve probably realized that I live in San Francisco’s East Bay. For those that are really familar with the area, you probably wonder what side of the hill. In essence the region is divided by two natural boundaries. First, as you come across the Bay Bridge from San Francisco you’re left with Oakland to the south and Berkeley and it’s suburbs to the north. We live to the north.
A more important divider though, is what side of the “hill” you live on. To the east you have more traditional suburbs that remind me much of where I grew up in San Diego. The side of the hill closer to San Francisco is more urban, densely populated and wonderfully messier in many ways.
In any case, Premier Cru isn’t exactly my local wine store, but it’s close enough that we pass it a couple of times a week. If you haven’t followed some of the sordid details of what went on there from the mid 90’s until the business was forced to close a year or so ago, Food and Wine has a pretty good summary.
I think one of the major issues of course is that, for about 15 years before the Ponzi scheme started Premier Cru had a good reputation among wine lovers, for allowing people to preorder French First Growth’s and other high end European wines, often at a significant discount, delivering them a few years later.
To me, that’s an interesting model and one that my wine of the month club has to fight some competitors with fairly similar models-at least in terms of the discounting factor. Here’s what no one tells you about the wine industry, the vast, vast majority of wines are sold to retailers at one of two price points. Most common is wholesale, which is a 33% discount from regular retail. Secondly, you see wine sold at FOB (basically if the winery does not have to market it to the retailer and the retailer takes care of picking it up, or paying for shipping) which is a 50% discount. Wine is sometimes sold at more significant discounts than that of course and we definitely get those offers in our email from random wineries and wine companies, but overall that’s going to be wine that you simply do not want to have to buy. It’s definitely not the type of wines that Premier Cru was known for selling.
Premier Cru at times was offering a 40% discount on French 1st Growth’s. Given the way that the industry is priced and structured, that’s simply not possible-unless they were planning on losing a bit of money on every bottle they sold.
I guess that’s what makes me a bit sad about the entire thing, if anyone had taken a hard look about what was happening here, they could have said something that would have stopped this, well before people were scammed out of at least 45 million dollars. There is an element, even with online sales, when too good to be true is truly too good.
If you’re interested in the ongoing story and scandal, which is unfortunately not the first in the wine world, Berkeleyside continues to be among the best online local news sources anywhere.