Latest Bernie Madoff Scheme in Wine Industry

J

Joe Dressner

Joe Dressner
My thanks to the Captaintumorman.com site for letting me publish this here on winedisorder.com

Two guys just made a quick four million dollars selling a virtual winery. One guy is a sommelier in Colorado, the other guy is an art collector in Miami.

Richard Betts and Dennis Scholl have made some highly rated wines from the Northern Rhone, California and Australia from the comforts of Betts' home in Aspen and Scholl's home in Miami. How they do this logistically is a mystery to me, but I suppose they didn't do the pruning of the vines with their own hands. Perhaps they stay in touch through Twitter and Skype.

Anyhow, its quite a feat and they just cashed out to the tune of four million dollars. Castle Brands just bought the operation, along with the continued services of the dynamic duo. Castle Brands is a wonderful purveyor of such high class beverages as Boru Vodka, Gosling's Rum, Pallini Limoncello, Raspicello and Peachcello, Knappogue Castle Whiskey, Clontarf Irish Whiskey, Jefferson's Presidential Select and Jefferson's Reserve Bourbon, Sam Houston Bourbon, Celtic Crossing Liqueur, Brady's Irish Cream and Tierras tequila.

The two lucky winners of Castle Brand's largesse say they needed to align with a professional company because they were now producing 5,000 cases of wine and were overextended. Marc Ollivier at Domaine de la Ppire produces more Muscadet than 5,000 cases and still manages to run the estate without selling out to Gosling and Boru for four million dollars.

That could change, if M. Ollivier moves his base of operation from Maisdon-sur-Sevre to Vail. He may have no choice but to accept four million dollars.

We live in a country where people don't have medical coverage but two cynical operators with no vineyards, no facilities, no real history and no track record can sell a virtual winery for four million dollars and no one raises an eyebrow!

Anyone up for buying the Brooklyn Bridge?
 
It's the brand equity, Joe. Castle is paying their millions for the brand equity Messrs. Betts and Scholl have built for their brand. It probably includes a healthy amount for the inventory. Actually, they only received about $1MM in cash in the transaction. The rest was equity and jobs with the company. We all know how fleeting those values can be.

Virtual companies are what the new economy is all about. We no longer value hard assets such as plants and equipment (vineyards and wineries in this case) - they are liabilities in a fast moving, leveraged economy. Rather we value brands and the equity they have with consumers.
 
Thanks for the explanation, Ice Cream Man.

I used to think wine was a real, agricultural product. Even the crazy sales of Bordeaux Grand Cru are based on real places and a tangible product.

Thanks for the correction.
 
originally posted by Keith Levenberg:
originally posted by David M. Bueker:
Welcome to the new world, where wine is a commodity (most of the time) like everything else.
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It must be George W. Bush's fault!
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I thought it was Obama's fault now? Ugh, I cannot keep up with the direction for my outrage.
 
So you're saying these guys went to wine region, found a wine they liked, stuck their own label on it and sold it for a profit?
 
originally posted by Kay Bixler:
So you're saying these guys went to wine region, found a wine they liked, stuck their own label on it and sold it for a profit?
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Not really.

They went to a wine region, found a wine they liked, stuck their own label on it, said they were the winemakers and sold it for a profit. On the basis of their success over I believe three years with their virtual winery and high scores, they sold the virtual winery for four million dollars.

They could be importers, selectors, agents or anything else they could have come up with.

But they are certainly not "winemakers."
 
originally posted by David M. Bueker:
Welcome to the new world, where wine is a commodity (most of the time) like everything else.
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Good point David.

I've also enjoyed some of your other views around the internet:

There is no ironclad rule that a winery must own its vineyards. Certainly the romantic notion of the vigneron tied to his piece of land, inherited over 7 generations is a lovely one, but it's not the only way to make fine wine. Joe Dressner has a vested interest in selling that romantic notion. Roberto has a vested interest in selling that romantic notion. The reader is advised to draw their own conclusions from there.

The comparison to Madoff is ridiculous though. There's a big difference between defrauding people and making a willing business transaction.

"the Truth in Wine freaks" I like that.

It's kind of hypocritical. There's plenty of folks on that ever so fun site that are friends with Dressner, have either visited or met winemakers multiple times, yet their comments are held in high regard. I just find the whole thing so hypocritical.

Put down the stones, or get out of the glass house.
 
I went to my car today and there was a package left for me. I opened it up and there were several notes detailing the creepy things I have done over the years. Creepy, creepy and creepy. Frankly, they were all true.

One of the major creepy things I am guilty of is begrudging Betts & Scholl their recent four million dollar windfall.

I don't know the guys and have nothing against them. People make lots of money for doing truly repulsive things that belittle, hurt or kill innocent people and certainly these guys can't be accused of any such thing.

What I object to is their pretending to be "winemakers" in Australia, California and Hermitage. C'mon....they are two guys with day jobs, one in Aspen and one in Miami. They are not "winemakers" and they are running on hype, pretense and posture. The crazy thing about America is they are being rewarded, rather than condemned, for their efforts.

We just went through an economic blow-up with people selling derivatives of derivatives of derivatives. All with no real product or value. The economy collapsed.

Isn't it time to call a halt to such lunacy? Wine is rooted, an agricultural product, which was here before and which will be here after credit derivatives come and go. Wine comes from the earth, not a marketeer's cynical playbook. The key to all great wines is the vines, not a business plan.

Betts & Scholl got the idea to create a label, plop that label on wines, and say they were the "winemakers." Betts & Scholl then got lots of great reviews (Betts was already a well-known sommelier and had plenty of contacts) for the winemaking they never did. Their wines got critical praise and the next step was to parlay a virtual winery with no facility, no vines, no nothing into the big sale. They didn't say there were importing wines or selecting wine, Betts & Scholl were winemakers.

This is not winemaking and it is not a ngociant model. In principal a ngociant buys grapes, must, juice or makes wines and then blends, bottles and then plops their label.

I import wine. None of the wines say Mis en Bouteille par Joe Dressner East 4th Street, Dubai-sur-le-Bowery."

For me, what is beautiful in the wine world is the seemingly lost world of growers who work their fields well, bottle their wines and then go out and sell them. Artisan has become a cynical term because everything is now working on an "artisan" basis. Even Aspen and Miami "winemakers." But there are real artisans out there all over Europe and even here in America we have the beginning of a movement. Artisans who are in tune with nature, not Powerpoint presentations.

For me, what is cynical about Betts & Scholl is that they always knew they were not "winemakers." Betts is a well known sommelier and no doubt a talented and charismatic guy. I don't know anything about Scholl other than he is an art collector, seems to have money and has the same last name as the people who make the foot care products. The Betts who picked wines for Little Nell didn't pick wines based on gimmicks or hype, but insisted on some honesty in the wines presentation and what was in the bottle. He knew what a "winemaker" is and is not.

I received a note today from a wine lover I respect thanking me for Ariana Occhipinti's wine. I thanked the person, but noted that it is Ariana who deserves the thanks not me. I'm the importer, she does the work in the vines and the cellar.

I firmly believe "chacun son mtier."

Everyone has their craft, everyone has their place.
 
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originally posted by Ice Cream Man:
It's the brand equity, Joe. Castle is paying their millions for the brand equity Messrs. Betts and Scholl have built for their brand. It probably includes a healthy amount for the inventory. Actually, they only received about $1MM in cash in the transaction. The rest was equity and jobs with the company. We all know how fleeting those values can be.
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Presumably the amount paid over inventory value in this kind of deal would be either: (a) the amount that Castle Brands thinks it will save by buying a recognized brand vs. building their own similar operation; or (b) the amount extra they can charge over buying similar wine, based on Betts & Scholl's reputation. Given Joe's description of Castle's portfolio, one can see how they'd lack confidence in doing it themselves. But the value of Betts & Scholl's expertise is surely rather speculative and hard to quantify.

Virtual companies are what the new economy is all about. We no longer value hard assets such as plants and equipment (vineyards and wineries in this case) - they are liabilities in a fast moving, leveraged economy. Rather we value brands and the equity they have with consumers.
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Possibly a big mistake in wine - a category with generally low consumer loyalty and narrow brand or name recognition.
 
originally posted by David M. Bueker:
Welcome to the new world, where wine is a commodity (most of the time) like everything else.
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Can't really agree. I'd say that wine is one of the least commodified, most fragmented and differentiated products around. If it was commodified, neither Betts & Scholl nor Joe Dressner would survive very long and the market would consist almost entirely of Fred Franzia, Gallo and Constellation's low end brands.
 
Hey Joe - nice job taking most of what I posted on that thread & then shoving in something else out of context to sharpen your axe. I see you haven't changed much. Sad.
 
originally posted by David M. Bueker:
Hey Joe - nice job taking most of what I posted on that thread & then shoving in something else out of context to sharpen your axe. I see you haven't changed much. Sad.
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Joe seems to have a bug up his ass about you ever since you made the mistake of praying for him. But in this case, I fail to see how you have been quoted out of context or inappropriately. You do seem to take the gloves off on other boards and not here. We all probably modify our personae for the different boards we post to if we engage in controversy. But when you're caught out on it, you should just grin and bear it.
 
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