HSBC'22 Intra (IBA) Case, 1st Round

Dr. Minyi Huang prepared this case under the supervision of Professor Benjamin Yen for class discussion. This case is not intended
to show effective or ineffective handling of decision or business processes. The authors might have disguised certain information
to protect confidentiality. Cases are written in the past tense, this is not meant to imply that all practices, organizations, people,
places or fact mentioned in the case no longer occur, exist or apply.
© 2020 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be digitized, photocopied
or otherwise reproduced, posted or transmitted in any form or by any means without the permission of The University of Hong
Kong. This case was developed with support from HSBC.
Ref. 20/659C
Last edited: 2 June 2020
BENJAMIN YEN
MINYI HUANG
CAN BLOCKCHAIN HELP CHÂTEAU LAFITE
FIGHT COUNTERFEITS?
I have been plagued by the fact that following the inspection of a bottle, the
only findings which could be reported in any way that was transferable was a
counterfeit finding reported in a formal written report. Due to fact that
inspected authentic bottles can be refilled or altered after inspection, there has
been no way to positively report a bottle to be authentic and have that
authentication mean anything after I left the room beyond opaque “trust.”
- Maureen Downey, wine fraud specialist and CEO of the Chai Vault1
Château Lafite Rothschild produced some of the world’s most expensive wine. Rare bottles of
Lafite had sold for well over USD100,000,2
while even a regular bottle of Lafite cost around
USD1,000.3
It was therefore no surprise that Château Lafite had become an attractive target for
counterfeiters.
Though it had implemented some anti-counterfeiting measures, Lafite was urged by wine fraud
specialists and consumers to do more. With more technologies available for wineries to fight
counterfeiting, Lafite had to consider whether the technologies, such as RFID and blockchain,
would be indeed useful. The company needed to evaluate the advantages and disadvantages of
different approaches in order to come up with a feasible plan.
1
Maureen Downey, “How will blockchain technology change wine?,” Blockchain Expo, 16 October 2018,
https://www.blockchain-expo.com/2018/10/blockchain/how-will-blockchain-technology-change-wine/, accessed 25 September
2019.
2
Zachys, “Zachys’ Direct From Cellar Auction With Chateau Lafite – Rothschild Sets Unprecedented World Records,” PR
Newswire, 1 April 2019, https://www.prnewswire.com/news-releases/zachys-direct-from-cellar-auction-with-chateau-lafite-
rothschild-sets-unprecedented-world-records-300822210.html, accessed 29 January 2020.
3
Infolio, “Chateau Lafite-Rothschild,” https://www.vinfolio.com/producers/bordeaux-1st-growths-/lafite, accessed 29 January
2020.
This case is for use in the HSBC/HKU Asia Pacific Business Case Competition 2020 only.

20/659C Can Blockchain Help Château Lafite Fight Counterfeits?
2
The Wine Industry
Overview of the Wine Industry
Red wine dominated the wine industry, and the United States and Europe were the largest
regional markets [see EXHIBIT 1 for the top-10 wine consumption countries].4
But the focus
of the global wine industry was shifting to Asia. While wine consumption stabilized or even
decreased in Europe, there was a growing demand for wine among consumers in Asia, who had
become increasingly wine savvy. Wine sales in Asia reached 2.8 billion liters, with a total value
of USD54.9bn in 2018, of which, the sales in mainland China were 1.7 billion liters or
USD25.5bn. Between 2019 and 2023, the mainland market was expected to grow further at an
annual rate of 4.1% in value and 1.1% in volume.5
In comparison, the value of global wine
market was about USD302.2bn in 2017, which was expected to reach USD423.59bn in 2023.6
Rare fine wines were very expensive because of the uniqueness of wine-making, and Lafite
was among the best. [See EXHIBIT 2 for the top-five most expensive wines.] The wine
industry’s value chain started with growing grapes. [See EXHIBIT 3.] Fine wines needed high-
quality grapes, and their supply was limited. High-quality grapes required special soil, an
appropriate climate, and good crop conditions. Moreover, as it could take more than 10 years
from the moment a grapevine was planted until the harvest of quality grapes, growers needed
to be diligent and patient.7
Experience also impacted quality. For example, the harvest time was
a critical determinant in the taste of the wine. After the harvest, growers of grapes could choose
to make their own wine or sell their harvest to wineries.
The wine-making process normally included destemming, crushing, fermentation, clarification,
and storage. Wineries might make minor adjustments to the process to bring out the uniqueness
of their wines. For example, some chose to put some stems in the fermentation with the grapes
to improve the flavor and the structure of a wine.
Fermentation was a natural process to generate alcohol, which occurred when the bacteria on
the skin of grapes interacted with wild yeasts in the air or the addition of a particular strain of
yeast. It required at least 10 days, sometimes even more than a month, for all the sugar of the
grapes to convert into alcohol. Then, the clarification process removed the solids, like the dead
cells, from the wine. Finally, storage involved aging and packaging. Aging could make the wine
richer and smoother, improving the quality of the wine. Packaging included bottle filling,
corking, capsuling, labeling, box filling, and placement on pallets, which involved other
stakeholders, such as cork suppliers, bottle suppliers, and printing houses.
As for distribution, very large wine estates normally controlled their value chain and sold wine
themselves, while smaller wineries depended on companies that specialized in promoting
different wineries to different markets, such as supermarkets, hypermarkets, restaurants, wine
bars, auction houses, convenience stores, online shops, and so on. 8
Supermarkets and
hypermarkets were expected to continue to dominate the global wine market.9
High-priced,
investment-level, fine wines were often sold through global auction houses, including Acker
4
Zion Market Research, “Wine Market by Colour (Red Wine, Rose Wine, White Wine, and Others), By Product Type and By
Distribution Channel: Global Industry Perspective, Comprehensive Analysis, and Forecast, 2017-2023,” Research Report,
2019.
5
HKTDC Research, “Wine Industry in Hong Kong,” 17 September 2019, http://hong-kong-economy-
research.hktdc.com/business-news/article/Hong-Kong-Industry-Profiles/Wine-Industry-in-Hong-
Kong/hkip/en/1/1X000000/1X07WNW7.htm, accessed 6 October 2019.
6
Zion Market Research, “Wine Market by Colour.”
7
Anatoliy G. Goncharuk, “Wine Value Chains: Challenges and Prospects,” Journal of Applied Management and Investment 6 ,
no. 1 (2017):11–27.
8
Ibid.
9
Zion Market Research, “Wine Market by Colour.”

3
Merrall & Condit, Sotheby’s, Christie’s, and Zachys. Hong Kong had been one of the largest
auction centers globally since 2009, and auction sales value reached USD133mn in 2018.10
Consumers bought wine for consumption or investment purposes [see EXHIBIT 4 for a
comparison of wine investment with other investments]. Consumers’ wine expertise
determined their behavior. Consumers with a high level of wine expertise were normally more
willing to spend more on wine, and wine education among the population helped to boost
sales.11
To allow consumers to taste before committing to buying full-sized 750ml bottles, more
high-quality wine was also offered in smaller bottles to attract new customers.12
At the same time, wine consumers were more conscious of their carbon footprint and
increasingly realized the industry’s negative impacts on the environment, including the water
footprint, creation of solid and liquid waste, and use of packaging materials and energy. The
industry itself had also suffered from climate change that caused less rainfall and extreme
weather conditions. Therefore, the wine industry was under growing pressure to improve its
environmental sustainability.13
Imported Wine Market in China
A country once famous for tea-drinking, China may soon become one of the
world’s largest wine consumers. And what consumers in the leading global
economy want is premium wine.
- Baudouin Havaux, Chairman of the CMB14
China was the largest red wine market in the world, and 80% of wine consumed in China was
red.15
According to Wine Intelligence,16
China’s wine consumer base grew only 7% from 2016
to 2019, compared to 26% from 2014 to 2016. Per capita consumption fell from 1.3 liters in
2017 to 1.2 liters in 2018. These indicated that the market in China was maturing, as the market
was no longer growing as fast.
Imported wine accounted for approximately 40% of the wine market in China. In terms of
volume, China’s imported wine increased by 93.96% from 2013 to 2017. 17
The volume of
imported wine was 729,677,000 liters in 2018, down by 8% from 2017,18
but the value increased
by 2.1%.19
This echoed the quality-over-quantity approach evident in many more-mature wine
markets in the West. Chinese consumers started trading up for better-quality wines and were
more knowledgeable and selective about what they were going to drink. Young millennial
drinkers, in particular, had high standards for wine quality. They visited vineyards to discover
wine brands directly, leading to the increasing popularity of wine tourism. They also studied
10 HKTDC Research, “Wine Industry in Hong Kong.”
11
T. E. Johnson and S. E. P. Bastian, “A preliminary study of the relationship between Australian wine consumers’ wine
expertise and their wine purchasing and consumption behavior,” Australian Journal of Grape and Wine Research 13, no. 3
(2017): 186–197.
12
HKTDC Research, “Wine Industry in Hong Kong.”
13
Goncharuk, “Wine Value Chains.”
14
Concours Mondial De Bruxelles, “Wine Trends in 2019,” company website, 22 January 2019,
https://concoursmondial.com/en/wine-industry-trends-in-2019/, accessed 25 September 2019.
15
Bernice Chan, “China wine market: millennial drinkers are buying online and moving away from established brands, Vinexpo
hears,” South China Morning Post, 30 May 2018.
16
Rachel Arthur, “China’s wine market: ‘The latest data is starting to show us what China will look like as a mature market,”
Beverage Daily, 14 June 2019.
17
Superwine, “Market Analysis of Chinese Wine Industry in 2019: Saturated Import Market Share and Upgraded Consumption
Promote the Rise of Domestic Brands,” company website, 11 March 2019, http://www.superwinechina.com/en/405.html,
accessed 25 September 2019.
18
Ibid.
19
Arthur, “China’s wine market.”

4
for qualifications through the Wine & Spirit Education Trust (WSET) or even took an MBA in
wine business.20
Among younger, wealthier, and well-educated Chinese consumers, wine was seen as a status
symbol. Nevertheless, most Chinese consumers only had relatively limited knowledge of wine
and used extrinsic cues, that is, brand and country of origin, in their wine purchase decisions.21
France had been the market leader, but Australian, Chilean, and Italian wines were gaining
popularity.
In 2019, China had over 5,000 wine importers and distributors located in Shanghai, Beijing,
Shenzhen, and Guangzhou.22
They used multiple channels to reach consumers, including
specialized retail shops, the Internet, social media platforms, and direct-to-consumer (DTC)
channels. Online buying became popular because of the wide range of wine brands and varieties
available. As shown in survey research,23
46% of consumers aged 40 to 54 said they bought
wines online. The percentage was higher than the average 40% across different product
segments. While consumers were likely to buy mainstream wines using JD.com and Tmall.com,
loyal consumers of niche and premium wines usually bought from WeChat stores operated by
specialist wineries.24
Online consumers considered word-of-mouth as the most important
source of information, including posts and online discussions with friends and family using
WeChat and Weibo.
Company Background25
Lafite has a soul, a beautiful, generous, kindly soul. Lafite turns bare earth
into heaven. Lafite is harmony, a harmony between man and nature, because
without our magnificent winegrowers, nothing would be accomplished.
- Baron Eric de Rothschild, Head of Château Lafite Rothschild26
Lafite gained its reputation as a famous wine-making estate in the 17th
century. It was the best
among the four wine-producing châteaux of Bordeaux awarded First Growth27
status in 1855.
In 1868, the Rothschild family acquired the first Château. Since then, Château Lafite Rothschild
symbolized the start of the Domaines Barons de Rothschild (Lafite) Group. The Rothschilds
had several generations of expertise and tradition in wine-making [see EXHIBIT 5 for the
range of Lafite’s brands]. This tradition and expertise were evident throughout the growth and
wine production process. For example, Château Lafite Rothschild used grapevines with an
average age of 45 years. It used little chemical fertilizers in farming, hand-picked grapes, and
20
Chan, “China wine market.” For more information on MBAs in the wine business, refer to: Find MBA, “Top MBA Programs
for Wine Business Management,” https://find-mba.com/lists/top-business-school-by-speciality/top-mba-programs-for-wine-
business-management, accessed 29 January 2020.
21
D. Menival and H. Han, “Wine Consumption in China,” in The Wine Value Chain in China, eds. Roberta Capitello, Steve
Charters, and David Menival (Oxford, UK: Chandos Publishing, 2017).
22
Superwine, “Market Analysis of Chinese Wine Industry in 2019.”
23
Arthur, “China’s wine market.”
24
E-commerce platforms like Tmall attract millions of users who are looking for bargains every day, so the wines sold are
normally popular brands and low-priced wines. Instead, WeChat is a social network used by over 800 million users to learn,
chat, and finalize purchases. Premium wines often have an official WeChat account and communicate directly with customers,
using word-of-mouth marketing to attract their targeted customers who are willing to pay a premium for high-quality wines.
25
Lafite, company website, www.lafite.com/en/, accessed 25 September 2019.
26
Lafite, “Château Lafite Rothschild,” company website, 2019, http://www.lafite.com/en/chateau-lafite-rothschild/the-
wines/chateau-lafite-rothschild/, accessed 25 September 2019.
27
The First Growth wine, known for quality and value, was the most expensive and famous wine produced in the Bordeaux wine
region. In 1787, Thomas Jefferson first created the list on his visit to Bordeaux, and the official 1855 Classification took place
at The Exposition Universelle de Paris and came up with five levels of classification covering 61 different chateaux.

5
controlled no-green harvest28
to ensure the production of “high quality wines full of fitness and
elegance,” that is, “The Lafite Spirit.”
Saskia de Rothschild, who was the sixth generation of the Rothschild family to manage wine
businesses, was in charge of Château Lafite and Domaines Barons de Rothschild (Lafite). Jean-
Guillaume Prats, President and CEO, was responsible for managing the Group in France and
overseas.
Lafite had a total of 1,200 hectares of vineyards, including the hillsides of the Château, near
Carruades plateau, and neighboring Saint Estèphe [see EXHIBIT 6 for a full list of Lafite’s
vineyards]. The soil was a mix of fine deep gravel with aeolian sand, and the vineyard was well
drained and exposed to the sun, which was very suitable for growing good-quality grapes.
Making wine here is a story of balance between cultures—the local knowledge
and traditions of the people of the Qiu Shan Valley, and the timeless wine-
making approaches of Lafite.
- Saskia de Rothschild, chairwoman of Domaines Barons de Rothschild29
Lafite started developing a vineyard in Penglai, Shangdong Province, in China in 2008. The
first winery in China, called Dong Lai, was formally opened on 19 September 2019 in Penglai.
The first bottles were shipped by the end of November 2019, with Pernod Richard as its
distributor.30
Lafite Distribution
Lafite relied on an international network of more than 80 distributors. In addition to auctions,
there were two main distribution channels, depending on the nature of the wine.
 The “Place de Bordeaux”:
The wines produced by the Châteaux, including Château Lafite Rothschild, Château Duhart-
Milon, Château L’Evangile, and Château Rieussec, were sold “en primeur” through the Place
de Bordeaux.
“En primeur” referred to wine futures. These wine transactions took place early when the wine
was still in the barrel. For wineries, the transactions ensured that their wines were sold out early.
They were able to collect the payment one year or 18 months before the official release of their
vintage. For buyers, wines were normally considerably cheaper when buying en primeur than
when they were bottled and released to the market. These wine futures were popular with UK
and European consumers, while Asian consumers preferred to buy bottled wine.
The Place de Bordeaux referred to a traditional and effective way of selling wines, rather than
a physical place. The system had been in place in Bordeaux since the early 17th
century. There
were around 100 brokers and 400 négociants, and about 70% of annual Bordeaux production
was sold via the Place de Bordeaux. 31
Its structure was similar to a pyramid: the leading
wineries were at the top, the brokers were the middle layer, and the négociants at the bottom.
28
Green harvest removes extra grape bunches from a vine to achieve better ripeness, while no-green harvest emphasizes a good
physiological balance.
29
Rupert Millar, “Lafite chooses ‘auspicious’ date to open Chinese winery,” The Drink Business, 19 September 2019,
https://magazine.thedrinksbusiness.com/2019/09/19/lafite-chooses-auspicious-date-to-open-chinese-winery/content.html,
30
Ibid.
31
Patrick Schmitt, “New World Wine Icons Bolster La Place de Bordeaux,” 6 September 2019,
https://www.thedrinksbusiness.com/2019/09/new-world-wine-icons-bolster-la-place-de-bordeaux/, accessed 6 October 2019.

6
Everyone could make a profit. The brokers added 2% on the price that the wineries asked for
and sold to négociants that would sell to retailers at a higher price [see EXHIBIT 7].32
In this way, wineries were able to sell their wines in entirety en primeur worldwide without
employing any salesperson, saving a lot of time and costs. Nevertheless, wineries had little
control of where their wines would end up. While this problem had been ignored in the past,
more recently they had started to require guarantees from négociants, for example, not selling
to discount shops.33
Brokers were those that knew the market very well, for example, the wineries that needed cash
and wanted to sell wine, and the négociants that wanted wine and had the cash. Brokers did not
hold stock, but the négociants did. If the wine for a particular year was good and its price was
expected to rise, the négociants would speculate and keep some stocks back for the future.
Otherwise, négociants would sell as quickly as possible.34
While some négociants continued to
hold stock in the traditional, expensive way, others just bought and sold to order without holding
any stocks. Some even sold directly to consumers.
Not all the wineries were happy with this system. In 2012, first growth35
Pauillac Château
Latour quit the en primeur system. Nevertheless, cutting middlemen did not help to reduce the
prices for consumers. Wineries hoped their wines could be sold at a good price; in other words,
they did not wish their consumers to drink their wines more cheaply. If they cut the middlemen,
the objective was to capture more profits themselves. One of the reasons behind rising en
primeur prices was that some wineries saw the prices of their top vintages skyrocket. When the
market price was eventually not higher than the price demanded by the wineries, négociants
could end up holding wines that they could not sell.36
Négociants would normally not refuse to buy hard-to-sell wines because each of them had an
allocation. If they refused to buy in the current year, then their allocations would be given to
other négociants that were more supportive in the following years. Since the value of wine
depended on the weather and the harvest, it was possible that a bad year was followed by a
superb year. In this bundling system, négociants normally had to buy a number of unsalable
wines in order to buy those desirable wines. At the same time, wineries also found it very
difficult to reduce the number of négociants, because each of them had a speciality.37
Lately,
the négociants of Bordeaux had started handling more fine wine brands from outside the
Bordeaux region, as they saw the opportunity for fine wines from other parts of the world to
enter emerging markets like China.38
The Place de Bordeaux was mainly for the 9,000 châteaux in Bordeaux. But it was quite flexible.
Wineries were allowed to decide whether they wanted to sell en primeur each year. Of the 9,000,
only about 60 sold en primeur every year. Then, the number of châteaux to sell en primeur
would fluctuate every year. This number could rise to 400 in a good year when the demand for
wine was strong, and it could drop to 150 in a bad year when the demand was weak. 39
Since older wines could also circulate, some wineries preferred to release less wine en primeur,
or release several tranches, at a higher price each time. In 1996, for instance, Lafite released the
32
C. M. Rothschild, “Winning in the Place de Bordeaux,” 25 April 2018, https://www.wine-searcher.com/m/2018/04/winning-
in-the-place-de-bordeaux, accessed 6 October 2019.
33
Ibid.
34
Ibid..
35
In 1855, the best Bordeaux wines were classified into five categories, from first to fifth growths. First growth is the top status.
36
Rothschild, “Winning in the Place de Bordeaux.”
37
Ibid.
38
Schmitt, “New World Wine Icons Bolster La Place de Bordeaux.”
39
Rothschild, “Winning in the Place de Bordeaux.”

7
first traches at 399 francs, the second at 429, the third at 550, and the fourth at 700.40
Those that
sold everything in a single tranche using en primeur accused the remaining wineries of not
playing the game fairly, because the remaining wineries that sold wine in several tranches could
demand a higher price in the latter tranches when the market price ended up higher than
expected.
 A network of exclusive distributors:
The rest of Lafite’s wines, including Domaine d’Aussières, Viña Los Vascos, Bodegas Caro,
The Collection, and the unclassified Châteaux such as Château Paradis Casseuil and Château
Odilon, were distributed by an international network of exclusive importers.41
In China, Lafite had an exclusive distribution partnership with ASC Fine Wines from 2011 to
2019. In an effort to allow its multiple brands to expand the market in China, Lafite changed
its distribution system in China on 1 July 201942
:
1. ASC Fine Wines retained the exclusive distribution of Viña Los Vascos brand from Chile
and Domaine d’Aussieres from Languedoc in mainland China, Hong Kong, and Macau.
2. Pernod Richard became the exclusive distributor of its Légende R and SAGAR from its
“Collection” series, both of which were popular mainstream brands with a significant e-
commerce presence in China.
3. Beijing ABA Trading Co became the exclusive distributor of Bodegas CARO, which
Lafite was partnered with the Catena family in Mendoza.
4. Shanghai Bailian Youan Imported Food Supply Chain Management Company became the
distributor of Château Paradis Casseuil of Entre-Deux-Mers and Château Peyre-Lebade
of Haut-Médoc. The importer was under the Bailian Group, a Shanghai-based state-owned
enterprise in charge of several department stores and shopping centers.
 Auction houses:
Each vintage tells a different story: written by the hands of the people that
made them, through wars, frost attacks and recessions. Together with my
father, we chose vintages for which we wanted to find new homes, straight from
the Lafite cellars to yours.
- Saskia de Rothschild, chairwoman of Domaines Barons de Rothschild43
Occasionally, Lafite used auction houses. For example, to celebrate the 150th
anniversary of the
Rothschild family’s purchase of Château Lafite Rothschild, Lafite organized an unprecedented
auction with Zachy’s, a US and Hong Kong–based leading wine auction house, at Le Bernardin
Privé in New York City on 30 March 2019. All 691 lots, including more than 3,000 bottles of
wine, were sold for more than USD7.86mn. The top price was for a six-liter imperial from 1959,
sold for USD160,550. The bottles from 1868 and 1869 fetched USD123,500 each.44
40
Adam Pawtowski, “La Place de Bordeaux,” 11 September 2015, http://adampawlowskims.com/la-place-de-bordeaux-the-
weirdest-and-the-most-clever-way-of-selling-wines/, accessed 6 October 2019.
41
Lafite, “Distribution network,” http://www.lafite.com/en/distribution-network/, accessed 6 October 2019.
42
Sylvia Wu, “DBR Lafite to split China distribution four ways,” Decanter, 9 April 2019, https://www.decanter.com/wine-
news/dbr-lafite-split-distribution-china-four-ways-411852/, accessed 6 October 2019.
43
Lauren Mowery, “Château Lafite Rothschild To Auction Rare Wines Of Perfect Provenance,” Forbes, 25 February 2019,
https://www.forbes.com/sites/lmowery/2019/02/25/chateau-lafite-rothschild-to-auction-rare-wines-of-perfect-
provenance/#388ca8c02f8b, accessed 6 October 2019.
44
Ben Lasman, “Record-Breaking Lafite Rothschild Auction Brings in $7.86 Million,” Wine Spectator, 2 April 2019,
https://www.winespectator.com/articles/record-breaking-lafite-rothschild-auction, accessed 6 October 2019.

8
Wine Counterfeiting
People, of course, want to know what they’re eating and drinking is what it
claims to be, and that it comes from a reputable source, but adulterated wine,
or fake labels on wine bottles, are major issues for the industry. In Italy alone
wine sellers lose €2b of revenue because of it.
- Giuseppe Perrone, Advisory Senior Manager of Ernst & Young45
A major challenge to all the stakeholders, including wineries, auction houses, wine collectors,
and consumers was to prove the authority and provenance of fine wine. Since the early 1990s,
with the fast rise in wine prices, wine counterfeiting problems also increased rapidly. Fake wine
in 2017 was valued at about USD15bn,46
and global food and beverage fraud reached USD40bn
in 2019.47
According to the Interprofessional Council of Bordeaux Wine, 30,000 bottles of
counterfeit imported wine were sold every hour in China alone.48
Lafite also implemented measures to deal with counterfeiting. Starting in February 2012, it
placed an authentication seal on all caps of the bottles of Château Lafite Rothschild and
Carruades de Lafite as a way to guarantee their authenticity. The seal had a unique “bubble
code” that could not be reproduced and was associated with an alphanumeric code [see
EXHIBIT 8]. The code could be checked on Lafite’s website to verify whether the wine was
authentic. However, wine anti-counterfeiting was becoming more complicated.
Consumers
It is ok if the wine costs more. I just don’t want any fakes. If the cost goes up,
I’d still buy wine, though some people wouldn’t—the price makes a difference.
But the quality is more important; it’s a health issue.
- Ms. Helen Nie, a housewife in Beijing49
Consumers were expected to be knowledgeable and vigilant to defend against wine counterfeits.
In reality, this was difficult to achieve. Most antifraud measures required consumers, collectors,
or their agents to closely inspect the bottles. However, normally vendors only allowed this to
take place after the purchase. Even though Lafite installed tamper-proof tags on its bottles,
consumers might not be able to identify the fakes and were even unaware of this anti-counterfeit
measure. This was often the case in the second- and third-tier cities in China, where there was
fast growth in the number of wine consumers. These consumers did not know the difference
between luxury and generic brands, and most of them could not recognize the names because
they were unable to read French or English. Christophe Salin, head of Domaines Barons de
Rothschild, once said the biggest challenge was that some Chinese sellers marketed their bottles
with similar names “Légende Lafite” or “Châtelet Lafite.”50
45
Giuseppe Perrone, “Restoring trust in the wine industry, from grape to glass,” Ernst & Young, 2018,
https://www.ey.com/en_gl/global-review/2018/restoring-trust-in-the-wine-industry, accessed 25 September 2019.
46
Kamanashis Biswas,Vallipuram Muthukkumarasamy, and Wee Lum Tan. “Blockchain based Wine Supply Chain Traceability
System,” presented at the Future Technologies Conference (FTC) 2017, 29–30 November 2017, Vancouver, Canada.
47
Ryan Smith, “No One Is Safe From Counterfeit Wine,” 27 January 2019, https://vinepair.com/articles/counterfeit-wine-
protection/, accessed 6 October 2019.
48
Ibid.
49
Terril Yue Jones, “Amid China’s Boom, Fake Wines Proliferate,” New York Times, 10 June 2013,
https://www.nytimes.com/2013/06/10/business/global/amid-chinas-boom-fake-wines-proliferate.html, accessed 25 September
2019.
50
Lily Kuo, “At least half of all Château Lafite sold in China is fake,” Quartz, 15 May 2014, https://qz.com/209851/at-least-half-
of-all-chateau-lafite-sold-in-china-is-fake/, accessed 6 October 2019.

9
Lafite was a popular brand for counterfeiting. A case of 1982 Lafite cost more than USD1,000,
and there were more cases of 1982 Lafite in China than had ever been previously produced.51
Empty wine bottles in restaurants, pubs, or households were collected and sold to counterfeiters
for about USD2each, and premier brands could fetch a higher price.52
Empty Lafite bottles were
also available on eBay outside China, costing at least USD20 or more per bottle. Counterfeiters
refilled the bottles with low-quality wines, even adding some water, and attached fake labels
and caps. Most fake wines appeared in bars or karaoke television bars (KTVs). Unlike
supermarkets with alcohol sales licenses whose wine transactions were under strict
governmental supervision, specialized shops, and shopping malls, KTVs, and bars were not
always well regulated and monitored in terms of wine transactions. Consumers normally went
to wine bars or KTVs at night, after they had a few drinks at dinner with friends. This made it
easier to sell them fake wines. Many consumers had also never tasted authentic Lafite and were
unable to tell the difference.53
Additionally, there was a market for fake wine. Since some fake
wine was sold at a much lower price than the real one, some consumers who realized the wine
was fake were still willing to pay for it.
Wineries
Wineries were aware of the negative impacts of counterfeits on brand images and income, but
they preferred to put more effort into improving the quality of wine than into fighting
counterfeits. Top wineries normally had their own antifraud measures, which they believed
were sufficient. Because they did not like to reveal their solutions to others, consumers often
had no idea how to verify the authenticity of their bottles.54
Fake wines could appear in different
conditions, including original bottles filled with a different vintage without refilling, original
bottles refilled with an inferior wine, a fake bottle with an original label, and a fake bottle with
a fake label and fake caps and cork.55
Wineries focused on preventing counterfeiters breaking into the supply chain. They required
high-end restaurants, hotels, auction houses, collectors, and so on to smash empty bottles to
avoid their illegal reentry into the marketplace. They also used advanced technologies, such as
laser etching of trademarks on bottles to identify their provenance. The estimated value of the
global anticounterfeit packing market for food and beverages reached USD62.5bn by 2020.56
Nevertheless, those antifraud features that gave visual reassurance could be replicated; for
example, proof tags could be reapplied using 3-D printing.
51
Ibid.
52
CYN15 ≈ USD2.
53
China Network Television (CNTV), “315 Investigation: Fake Wine really profiteering, what you drink is wine or prestige?,”
http://jingji.cntv.cn/special/wine/shouye/index.shtml, in Chinese, accessed 25 September 2019.
54
Richard Procter, “Wine fraud expert uncorks blockchain technology to protect integrity of expensive vintages,” San Francisco
Business Times, 12 April 2018.
55
Jeannie Cho Lee, “Tips on Identifying Fake Wines,” 31 July 2013, https://www.jeanniecholee.com/my_views/tips-on-
identifying-fake-wines-2/, accessed 9 February 2020.
56
Matt Nichol, “How wine makers can beat the counterfeiters,” 17 January 2016, https://blog.matthews.com.au/how-wine-
makers-can-beat-the-counterfeiters/, accessed 6 October 2019.

10
Auction Houses
(I)f collectors have purchased fine and rare wine in the secondary market—at
auction or from retailers and brokers who use a secondary market source for
the wine—in the last 20 years, they very likely have purchased counterfeit
bottles. Especially if they have been purchasing trophy wines in the secondary
market, or if they are clients of the worst offenders. The face value of
counterfeit wines in circulation easily exceeds several billion dollars.
- Maureen Downey, expert on wine fraud57
Acker Merrall & Condit, an America auction house with the highest sales figures in 2007, had
to withdraw 107 bottles of red Burgundy in the middle of its auction in 2008. They were listed
in the catalogue as rarities from the prestigious Domaine Ponsot, with an estimated value of
USD603,000.58
This one is very obvious. Clos Saint-Denis, and it says 1945. This cannot exist.
And a label from Nicolas? We never sold to Nicolas. And a Clos de la Roche
1929? They only began bottling in the 1930s.
- Mr. Laurent Ponsot, Domaine Ponsot59
The rising trophy wine prices had already put auction houses, high-end retailers, wine collectors,
and consumers on high alert, but the best fakes were still hard to detect. Counterfeiters relabeled
cheap wine as rare and collectible wine and forged a story in order to sell through various
auctions. Wine collectors had no choice but to judge whether the story was true or not. Those
wine bottles that had a story backed up could fetch millions of dollars at the auctions.
Therefore, auction houses were expected to carry out due diligence before offering high-value
wines. Auctioneers usually checked bottles for signs of authenticity, and sometimes cut the foils
in order to see the branding on the corks. They might even ask clients to pull certain bottles for
them and invited some of their biggest clients to taste together with a dozen or more old bottles
at marathon dinners. However, cunning counterfeiters ensured that the wine in the bottle did
not taste incorrect. The Domaine Ponsot case was such an example. It was so difficult to identify
the fake because the wine in the bottle was also old wine but from other wineries in the same
region.
I believe that whoever did this actually found old bottles of wine from Morey
St-Denis, maybe even from Clos de la Roche or Clos St-Denis. But it wasn’t
ours.
- Mr. Laurent Ponsot, Domaine Ponsot60
The wine forger in this case was Rudy Kurnianwan, who had also sold fake wines at other
famous auction houses such as Christie’s and Acker Merrall & Condit. Other famous fake wine
cases included the “Swedish Nobleman’s Cellar” at Dragon8 in Hong Kong in 2015, the
withdrawal from Spectrum/Vanquish auction in 2012, and the “Billionaire’s Vinegar” sold by
57
Joseph V. Micallef, “What’s In Your Cellar? Counterfeit Wines Are A Multi-Billion Dollar Problem,” Forbes, 1 December
2018, https://www.forbes.com/sites/joemicallef/2018/12/01/whats-in-your-cellar-counterfeit-wines-are-a-multi-billion-dollar-
problem/#206e58e91c83, accessed 25 September 2019.
58
Peter Hellman, “Domaine Ponsot Proprietor Halts Sale of Fake Bottles,” Wine Spectator, 16 May 2018,
https://www.winespectator.com/articles/domaine-ponsot-proprietor-halts-sale-of-fake-bottles-4131, accessed 6 October 2019.
59
Lucy Shaw, “Ponsot and De Villaine Testify in Kurniawan Trial,” The Drinks Business, 13 December 2013,
https://www.thedrinksbusiness.com/2013/12/ponsot-and-de-villaine-testify-in-kurniawan-trial/, accessed 25 September 2019.
60
Peter Hellman, “Domaine Ponsot Proprietor Halts Sale of Fake Bottles,” Wine Spectator, 16 May 2018,
https://www.winespectator.com/articles/domaine-ponsot-proprietor-halts-sale-of-fake-bottles-4131, accessed 6 October 2019.

11
Christie. In fact, fake wines were not limited to famous auction houses, old wines, and fine
wines.61
Government Authorities
Government authorities had been fighting counterfeits for decades. In China, the government
made efforts to improve laws and regulations. For example, the Chinese government registered
Champagne as an official label in 2013 in order to make it illegal for wine not produced in the
region to use the name Champagne to market itself. New phone apps were also available for
consumers to trace a wine’s origin.62
The police had made efforts to catch counterfeiters for more than two decades. However,
counterfeiters were still attracted by the high profit margins. In November 2018, for example,
the police caught a fake wine producer in Henan province and found over CNY7m (USD1mn)
worth of fake Penfolds, the flagship brand from Australia and over CNY6m (USD 865,000)
fake Changyu wines, a famous wine brand in China.63
On 18 April 2019, the police in
Guangzhou raided the home of a family making fake wine. The market value of counterfeit
goods found was roughly CNY60m. The cost of making their fake wine was about CNY20 per
liter, which was sold at around CNY1,000 per liter.64
China was the largest importer of Bordeaux. Chinese officials had been working with their
counterparts in Europe, especially those in France, to fight counterfeit wines. Some Chinese
investors even bought wine estates in France and made their own wines, which also considered
counterfeiters as a threat.
Technical Options Available
Traceability was critical to prevent fake wines from entering the wine supply chain. There were
a number of technologies available to enable everyone on the supply chain to verify the whole
supply chain of wine production from raw materials, transport and storage conditions,
processing, distribution, and sales.
Barcodes
Barcodes had existed for a few decades. Wineries could have barcodes on their labels. Barcodes
could help retailers to track their stock and facilitate the sales process. Wine bottles usually had
13-digit “EAN-13” barcodes on them. Products with different price tags needed different
barcodes.
Even though barcodes could be used to identify a source, it was very difficult for consumers to
understand them. Consumers normally did not have a barcode reader or understand the
complicated barcode systems. Though there were several online barcode databases for the wine
industry, none of them was complete.65
Additionally, as barcodes were normally printed on
labels, they could not be read if damaged.
61
Siobhan Turner, “Myths and Reality of the Current State of Counterfeit Wine,” 8 April 2019,
https://www.winefraud.com/myths-and-reality-of-the-current-state-of-counterfeit-wine/, accessed 6 October 2019.
62
Kuo, “At least half of all Château Lafite sold in China is fake.”
63
Natalie Wang, “China Busts US$14.4 Million Worth of Fake Wines,” The Drinks Business, 22 November 2018,
https://www.thedrinksbusiness.com/2018/11/china-busts-us14-4-million-worth-of-fake-wines/, accessed 6 October 2019.
64
Fu Yi, Zhang Yitao, and Liu Sijia, “The van brought out a ‘family-style’ fake wine gang involving 60 million yuan,” Beijing
News, 18 April 2019, http://www.bjnews.com.cn/news/2019/04/18/569219.html, in Chinese, accessed 25 September 2019.
65
International Barcode, “Barcodes for Wine, Beer and Spirits,” https://internationalbarcodes.com/barcodes-wine-beer-spirits/,
accessed 6 October 2019.

12
Quick Response Codes (QR codes)
Similar to barcodes, QR codes contained machine-readable information and were also put on
the labels of wine bottles. But a QR code, which was invented in 1994, held much more
information than a barcode. Using certain QR code scanner apps, which could be downloaded
for free on smartphones, people could scan the QR code, and the predetermined action, such as
opening a website, sending a tweet, or downloading an app, would be automatically triggered.
In the wine industry, QR codes were used to give consumers more information on the wine and
the winery or to direct them to a webpage where they could order the wine to be shipped to
their homes.
QR codes printed on the wine labels were also used for protecting against counterfeiting in the
wine industry. Consumers could scan the QR code and be directed to a webpage to check for
counterfeiting. Wineries could work with bars and restaurants, using a series of codes to
confirm the authenticity of the bottles. Since adding QR codes was inexpensive, using the
unique QR code for each batch of wine could protect consumers from fraud.66
However, both
barcodes and QR codes were unable to provide a unique identification for each product.
Radio Frequency Identification (RFID)
RFID, first invented in World War II, was a contactless automatic identification and tracking
technology that relied on radio frequency signals to recognize its targets and obtain relevant
information automatically. Unlike barcodes and QR codes, RFID could provide a unique
identification for each product. An RFID system included RFID tags, an RFID reader, and a
computer. An RFID tag could be attached to a target item, such as a wine bottle. RFID
technology was able to increase inventory traceability, data accuracy, and operational
efficiency.67
However, RFID’s applications in the real world were very limited because of the
high costs of system setup, purchase of RFID tags,68
and the revamp of existing operations to
fit in the RFID system. Problems such as reader collision69
and patenting issues also existed.70
In the wine industry, RFID technology was used for inventory management.71
eProvenance
used RFID and InkSure convert ink to authenticate and track fine wines from wineries to
consumers and got a number of Chȃteaux wineries to try out the system in 2010. However, the
system was eventually used to monitor and record the storage temperature during the
distribution process, instead of as a successful anti-counterfeit solution.72
RFID and other web-
based system could store information; however, they could be hacked and modified.
66
Courtney Copland, “QR Codes Help Keep Wines Authentic and In Reach,” 28 July 2014,
https://www.winedirect.com/resources/knowledge-center/QR-Codes-Help-Keep-Wines-Authentic-and-In-Reach, accessed 6
October 2019.
67
R. Nayak, A. Singh, R. Padhye, and L. Wang, “RFID in textile and clothing manufacturing: technology and challenges,”
Fashion and Textiles 2, no. 9 (2015): 1–16.
68
The cost of RFID tag ranges between USD0.1 and USD50, depending on the type of tag, the RFID system, and the volume
purchased. RFID readers cost between USD1,259 and USD20,000 each. These are added to the installation costs and software
costs, depending on the system required. [Advance Mobile Group, “The Shocking Price of RFID Tags,”
https://www.advancedmobilegroup.com/blog/the-true-price-of-rfid-tags, accessed 10 February 2020.]
69
This problem occurs when the signal from one RFID reader interferes with the signal from other concurrent RFID readers.
70
H. L Chan, “Using radio frequency identification (RFID) technologies to improve decision-making apparel supply chain,” in
T. M. Choi, ed., Information Systems for the Fashion and Apparel Industry (Amsterdam: Elsevier: 2016).
71
Claire Swedberg, “RFID Helps Resort Digitalize and Manage Its Wine Collection,” RFID Journal, 10 September 2018,
https://www.rfidjournal.com/articles/view?17806, accessed 6 October 2019.
72
eProvenance, “InkSure and eProvenance Form Technology Alliance to Protect the Fine Wine Market,” press release, 21 May
2008, https://www.eprovenance.com/news/pressReleases-050801.htm, accessed 6 October 2019; eProvenance, “Understand
what happens to your precious cargo, connect with your customers, create brand value and build market share,”
https://www.eprovenance.com/home/services/wine/, accessed 6 October 2019.

13
Electronic Product Code (EPC)
As one of the industrial standards for global RFID usage, the electronic product code (EPC)
was a radio frequency identification code attached to a product. EPC was designed as a flexible
framework supporting different coding schemes to provide a unique identity for physical
objects. EPCs could be used with both RFID data carriers and optical data carriers (e.g., linear
barcodes and two-dimensional barcodes). EPC enabled tracking a specific item along the supply
chain.73
The EPC system was managed by EPCglobal, a subsidiary of the Global Standard One (GS1).
GS1 was a global and generic standard to help identify companies and their products and enable
information exchange about them. GS1 used a number-based coding scheme at every stage of
production and distribution to uniquely identify products and services. A machine-readable
number or barcode was used to specify the item to which it was assigned. GS1 standardization
developments provided industry standards for the use of RFID-supported EPC.74
As the world’s second-largest wine auction center behind New York, Hong Kong had a local
office, GS1 Hong Kong, which offered GS1 All-in-One Solutions for the wine industry [see
EXHIBIT 9]. It promised to improve the efficiency and transparency of wine inventory
management and offered 100% operational accuracy and fast time-to-market enabled by the
interoperable and global GS1 Standard.75
GS1 categorized the wine industry into seven key areas, including grape grower, wine producer,
bulk distributor, transit cellar, filter/packer, finished goods distributor, and retailer. GS1 would
assign a unique numeric number to each batch of wine for every stage this batch of wine passed
through with the detailed information. This enhanced the traceability along the wine supply
chain.76
Companies using the GS1 Standard could use the BarcodePlus platform, a product and location
information portal offered by GS1, free of charge. The platform was cloud-based and provided
authentic information about brand owners, authorized distributors, and product information.
BarcodePlus could also generate QR codes, allowing companies to share information about
their products with consumers.77
BarcodePlus allowed more than 3 million of its members to
upload their product barcodes (GTIN78
), descriptions, and images to the BarcodePlus product
information repository. BarcodePlus allowed potential buyers and consumers to use the product
barcode to check the relevant product information on the webpage (www.barcodeplus.com.hk)
or using mobile app (Consumer Connect).
Blockchain
Blockchain was a peer-to-peer network invented in 2008. Cryptocurrencies, such as Bitcoin
and Ethereum, were its first and one of the most popular applications. Blockchain relied on
individual computers on the Internet acting as its nodes to record, share, and synchronize
information and digital contracts in their own electronic ledgers. In a blockchain, each block
contained all updated transaction data, a time stamp, and a cryptographic hash of the previous
block. So blockchain was a growing list of blocks with all transaction records kept in its entirety.
There was no need for an intermediary to centrally manage the database, and blockchain relied
on decentralized trust.
73
Business Dictionary, “Electronic Product Code (EPC),” businessdictionary.com, accessed 6 October 2019.
74
GS1 Hong Kong, company website, http://www.gs1hk.org, accessed 6 October 2019.
75
Ibid.
76
GS1 US, “Wine Supply Chain Traceability,” https//www.gs1us.org, 2012, accessed 6 October 2019.
77
GS1 Hong Kong, company website.
78
GTIN refers to the global trade item number, developed by GS1, which is an identifier for trade items.

14
In blockchain, all the records are not changeable or forgeable. All transaction
records are transparent and traceable. It provides a secure trading
environment and gives confidence to users to trade or exchange assets without
a third party’s supervision.
- Kai-Lung Hui, Chair Professor of HKUST Business School79
Many applications were emerging to leverage the benefits of blockchain. One of them was to
use blockchain to track the whole supply chain, because all the transactions in blockchain were
recorded and publicly available. For example, in the agriculture industry, consumers no longer
relied on the brands because they could access the information of the products all the way from
the seed, to the fruit, and to the harvesting.80
The traceability and transparency of the whole
supply chain could help build trust among consumers.
Nevertheless, as an emerging technology, blockchain was facing some challenges. For example,
Bitcoin faced scalability problems. It could take a long time to process the data because
blockchain kept all the transaction data in its entirety, and the amount of data to be processed
per second was limited. As a result, though digital contracts reduced transaction costs, it was
possible that this scalability problem could lead to increased transaction costs. 81
In 2019, the
development cost of a blockchain project started at USD5,000 and increased to USD 200,000.82
To include operational costs, the total costs were estimated to be over USD 40,000 for the first
year and around USD150,000 for the subsequent years.83
Moreover, the usefulness of the
blockchain technology critically depended on trusted intermediaries to effectively bridge the
offline world (such as the bottle of wine) and its digital record.
If a winery wanted to use a blockchain, it had a couple of options. It could develop its private
blockchain from scratch, but the initial investment could be substantial. Since the operational
costs would be lower than using outsourced systems in the following years, this option would
be suitable for those expected to have a large volume of transactions.
Examples of Blockchain Providers for Wine Industry
Some consulting companies could develop a private blockchain for their customers. For
example, EY Ops Chain, developed in 2017, was a blockchain platform that enabled companies
to create digital contracts and share inventory and logistics information, pricing, and payment
processing. Different clients had used the assets traceability module of EY’s Ops Chain in over
11 million bottles of wine. One of its clients was Cantina Volpone wine production in Puglia,
Italy. It placed a smart tag, a QR code, on each bottle as the access key to information and data
about the wine and its production. Each step in the wine-making process was tracked and
certified. A bottle scanner app was provided for consumers to scan the smart tag and access the
information about the wine-making process and promotional information.84
79
Kai-Lung Hui, “Use the Knowledge of Blockchain to Understand Bitcoin,” Hong Kong Economic Journal, 1 August 2017.
80
Karim Lakhani, “Blockchain – What You Need to Know,” Harvard Business Review, 15 June 2017,
https://hbr.org/ideacast/2017/06/blockchain-what-you-need-to-know?referral=03759&cm_vc=rr_item_page.bottom, accessed
15 June 2018.
81
For example, in September 2019, the average confirmation for a Bitcoin transaction was 10.08 minutes, which was slightly
longer than before and could make Bitcoin an unattractive medium of exchange. [M. Szmigiera, “Average Bitcoin transaction
confirmation time 2017-2019,” 4 October 2019, https://www.statista.com/statistics/793539/bitcoin-transaction-confirmation-
time/, accessed 8 February 2020.]
82
Azati Software, “How Much Does It Cost to Develop Blockchain in 2019,” 8 February 2019, https://azati.ai/how-much-does-
it-cost-to-blockchain/, accessed 6 February 2020.
83
EY, “Total cost of ownership for blockchain solutions,” April 2019, https://www.ey.com/Publication/vwLUAssets/ey-total-
cost-of-ownership-for-blockchain-solutions/$File/ey-total-cost-of-ownership-for-blockchain-solutions.pdf, accessed 8
February 2020.
84
EZ Lab, “Wine Blockchain,” company website, https://www.ezlab.it/case-studies/wine-blockchain/, accessed 6 October 2019.

15
Compared with in-house development, this outsourcing option involved the risks of sharing
data and workflows with the external vendors. Nevertheless, if the winery was not worried
about losing too much control over the business data and technology management, it could
consider using the blockchain platform developed by other companies.
TATTOO was a blockchain owned by Blockchain Wine Pte. Ltd. It issued the first winery e-
token based on the Ethereum blockchain, so no intermediary could control the overall supply
chain. Buyers were allowed to buy directly from vineyards. Each bottle had its unique QR code
“tattooed,” linked to the e-token online providing detailed information about vineyards’ names
and locations, types of fertilizers used for farming, and the transportation process. Similarly,
VeChain, a Shanghai-based start-up, worked with wineries to provide QR codes to consumers
to get the information on winery details, grape type, an 18-digit Chinese customs declaration
number, and arrival dates in Shanghai and at the retailer. For those premier wines, VeChain
planned to embed a designated near-field communications (NFC) chip near the wine stopper.
Once the wine was open and the chip was broken, one could no longer read or write data on the
blockchain. It alerted consumers about refills.85
Slightly different from TATTOO and VeChain, Chai Vault86
provided a Chai Vault certification
that included the bottle’s history and authentication information such as date, location, and
name of the independent authenticator in a blockchain ledger. Each time a bottle was traded,
the transaction information was added to the bottle’s ledger. Vendors and distributors received
bottles directly from wineries; importers or négocients could create the blockchain ledgers for
each bottle with proof of purchase and shipment. In the secondary market, retailers, auction
houses, and brokers needed an authenticator to inspect wine and spirits bottles. The
authenticator was trained and licensed by Chai Vault. Once inspected and approved, authentic
bottles were certified in the blockchain, with a unique bottle URL linked to a certificate of
authenticity and provenance. Auction houses could include the bottle URL in their sales
catalogues.
In addition, some apps used blockchain to provide other solutions to wineries. For example,
Vinsent,87
formerly known as VinX, was an app for buying new wine; it was founded in 2018
by winery owners and IT entrepreneurs. Vinsent allowed investors and consumers to use
cryptocurrency and credit cards to purchase the wine that was still in the barrel at the time, one
or two years before it was bottled and released on the market. The business model combined
the American model of DTC winery clubs with the concept of en primeur, giving wine brokers
the opportunity to taste and rate new wine and set prerelease prices. For preordered wines, once
the wine was released to the market, Vinsent would arrange shipment to the buyer’s address.
Having saved about two-thirds of the wine industry’s revenue that normally went to importers
and distributors, Vinsent offered 10% to 60% discounts to customers. Vinsent helped wineries
to improve cash flow by selling wine early and predict the popularity of new wine, along with
the information on the buyers and their delivery methods. Wineries were willing to offer deep
discounts to buyers because buyers bought at least three bottles. In fact, 6- or 12-bottle cases
were the most popular. Using blockchain, consumers were assured of the trusted provenance of
the wine delivered. Vinsent also offered consumers some after-sales services, such as wine-
making updates, “ask the winemaker,” and live streams.
85
Maggie Zhang, “For Chinese wine connoisseurs wondering what’s in their bottle, it’s blockchain to the rescue: Shanghai start-
up VeChain aims to help verify the whole supply chain with technology behind bitcoin,” South China Morning Post, 24 May
2018, https://www.scmp.com/business/companies/article/2147477/chinese-wine-connoisseurs-wondering-whats-their-bottle-
its, accessed 25 September 2019.
86
Downey, “How will blockchain technology change wine?”
87
Mike DeSimone and Jeff Jenssen, “Vinsent Combines Traditional Wine Buying Model With Blockchain Technology To Bring
Consumers Close To Wine,” Forbes, 30 July 2019, https://www.forbes.com/sites/theworldwineguys/2019/07/30/vinsent-
combines-traditional-wine-buying-model-with-blockchain-technology-to-bring-consumers-closer-to-wine/#155dc6386fea,

16
Looking Forward
There were several different technological options available to Lafite. However, each
technology had its advantages and limitations. Even the blockchain, as an emerging technology,
was not a technology to simply automate a process in Lafite’s existing supply chain. There were
several blockchain options available, and each required different levels of changes introduced
to Lafite’s supply chain. Therefore, the question posed to the senior management of Lafite was
whether blockchain or any other technology had the potential to fight counterfeiting and
whether it was feasible for the company to adopt such technologies.

17
EXHIBIT 1: TOP-10 WINE CONSUMPTION COUNTRIES IN 2018
Ranking Country
Consumption in million
hectoliters
1 United States 33
2 France 26.8
3 Italy 22.4
4 Germany 20
5 China 18
6 United Kingdom 12.4
7 Russia 11.9
8 Spain 10.7
9 Argentina 8.4
10 Australia 6.3
Source: Statista, “Wine consumption worldwide in 2018, by country (in million hectolitres,”
2019), https://www.statista.com/statistics/858743/global-wine-consumption-by-country/,
accessed 6 October 2019.
EXHIBIT 2: TOP-FIVE MOST EXPENSIVE WINES EVER SOLD
Name of Wine Price (in USD)
Screaming Eagle Cabernet Sauvignon 1992 500,000
1947 Cheval-Blanc 304,375
Shipwrecked 1907 Heidsieck 275,000
Château Lafite’s 1869 230,000
Château Margaux 1787 225,000
Source: Adapted from R. J. Huneke, “Top 5 Most Expensive Bottles of Wine Ever Sold,”
NY Wine Events, 2018, https://newyorkwineevents.com/top-5-expensive-bottles-wine-ever-
sold/, accessed 25 September 2019.

18
EXHIBIT 3: VALUE CHAIN IN THE WINE INDUSTRY
Source: The authors.
EXHIBIT 4: KNIGHT FRANK LUXURY INVESTMENT INDEX, 2018
Asset Class 12-Month Change in Value 10-Year Change in Value
Rare whiskey 40% 582%
Coins 12% 193%
Wine 9% 147%
Art 9% 158%
Watches 5% 73%
Cars 2% 258%
Colored diamonds 0% 122%
Stamps 0% 189%
Jewelry -5% 112%
Source: Kenneth Kiesnoski, “Are collectibles for collecting or investing? Advisors weigh in,”
CNBC, 24 June 2019, https://www.cnbc.com/2019/06/21/are-collectibles-for-collecting-or-
investing-advisors-weigh-in.html, accessed 25 September 2019.
Grape
Growers
Wine Makers Distributors Consumers

19
EXHIBIT 5: WINE BRANDS UNDER DOMAINES BARONS DE ROTHSCHILD LAFITE
A. Château Lafite Rothschild
B. The Châteaux
C. The Domaines
D. The Collection
Source: Adapted from company website, www.lafite.com, accessed 6 October 2019.
Château Lafite Rothschild
•Château Lafite Rothschild
(Premier cru classé,
Pauillac)
Carruades de Lafite
•Carruades de Lafite
(Pauillac)
Château Duhart-Milon
•Château Duhart-Milon
(4th cru classé, Pauilac)
•Moulin de Duhart
(Pauilac)
Château Rieussec
•Château Rieussec (1st
cru classé)
•Carmes de Rieussec
(Sauternes)
•<<R>> de Rieussec
Château L’Évangile
•Château L’Évangile
(Pamerol)
•Blason de L’Évangile
(Pamerol)
Domaine D'Aussières
•Château
d'Aussières
(Corbières)
•Blason d'Aussières
(Corbières)
•Aussières Rouge
Los Vascos
•Le Dix de Los Vascos (Colchagua)
•Los Vascos Grande Reserve
(Colchagua)
•Los Vascos Carmenere Grande
Reserve (Cochagua)
•Los Vascos Cabernet Sauvignon
(Colchagua)
•Los Vascos Chardonnay
(Colchagua/Casablanca)
•Los Vascos Sauvignon Blanc
(Casablanca)
•Los Vascos Rosé (Colchagua)
Bodegas Caro
•Caro
(Mendoza)
•Amancaya
(Mendoza)
•Aruma
(Mendoza)
Long Dai
Légende, the taste
of elegance
•Bordeaux Rouge
•Bordeaux Blanc
•Médoc
•Saint-Emilion
•Pauillac
Saga
•Saga Bordeaux
Rouge
•Saga Bordeaux
Blanc
•Saga Médoc
•Saga Pauillac
Réserve
•Réserve Spéciale
Bordeaux Rouge
Bordeaux Blanc
Médoc
Pauillac

20
EXHIBIT 6: VINEYARDS OF LAFITE
Location Country
Château
Bordeaux, France
Carruades plateau
Saint Estèphe
Château Duhart-Milon
Château Rieussec
Château L’Evangile
Viña Los Vascos Chile
Domaine d’Aussières Languedoc
Bodegas Caro Argentina
Penglai China
Source: Lafite, http://www.lafite.com/en/, company website, accessed 26 September 2019.
EXHIBIT 7: LA PLACE DE BORDEAUX
Source: Authors.
Négociants
Brokers
Wineries Winery
Broker
négociant négociant négociant
Broker
négociant négociant

21
EXHIBIT 8: LAFITE’S PROOFTAG SYSTEM
The above is the Prooftag’s “Bubble Seal” security system Lafite introduced in February 2012.
The seal with the bubble code appears at the back of the bottle neck, partly on the cap and partly
on the glass. This unique “bubble code” and the associated 13-character alphanumeric code
provide the protection. To authenticate a bottle, when the final consumer enters the
alphanumeric code on Lafite’s official website, the corresponding bubble code displays on the
screen, which should be the same as the bubble code on the bottle. Along with an undamaged
seal, these measures are used to guarantee the bottle’s authenticity.
Source: Château Lafite Rothschild, “Château Lafite Rothschild adopts the Prooftag System,”
2012, http://www.lafite.com/en/chateau-lafite-rothschild-adopts-the-prooftag-system-2012/, accessed
30 January 2020.

22
EXHIBIT 9: GS1 HONG KONG STANDARD-BASED ALL-IN-ONE SOLUTIONS
Source: GS1 Hong Kong, “Maximize Profitability and Efficiency with GS1 Hong Kong All-in-
One Solutions for Wine Industry,” www.gs1hk.org, accessed 6 October 2019.
1. Logistics
Management
System
2. Warehouse
Process
Improvement
3. Retail and
Distribution
Improvement
4. Cold Chain
Management
Solution
5. Product
Authentication
Solution
6. Product Data
Management
Solution

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