Greg De’Eb: Crown Wine Cellars is the ‘Alcatraz of wine storage’

Crown Wine Cellars, the military bunker-turned wine storage space in Hong Kong, has been likened by its company principal  to the maximum-security Alcatraz prison in the US, both for its impenetrable security system and the fact that not a single one bottle of wine has been lost over the past five years. 

The comparison bears some scrutiny: Crown Wine Cellars located in Deep Water Bay on the southern part of Hong Kong island used to be a military ammunition depot during the Second World War; and like the most un-redeemable prisoners inside Alcatraz, the wines are guarded inside its concrete wine chambers with 24-hour security surveillance, and a full force of internal police force – as well as with other wine-specific measures such as recordings of temperature and humidity at five-minute intervals.

“So what we decided right in the beginning was the only way we could control things is to build a prison like Alcatraz. So we have these concrete chambers, separate concrete chambers and each one has its individual biometrics lock,” said Greg De’Eb when talking to dbHK this week.

“My clients are never allowed in the cellar, and no case is ever opened inside the cellar, never! It’s a golden rule. Anyone who has been seen opening a case inside that would be instant termination.”

Today the cellar, which is largest in Hong Kong*, is chosen by auction houses and wine merchants including Sotheby’s, Christie’s, Bonhams, Heritage and Goedhuis as its designated storage place out of the city’s current 43 HKQAA qualified wine storage facilities for having the, “most organised and regulated” wine inventory control system in the world, said De’Eb, who instituted an upgrading of its inventory system roughly five years ago.

“We instituted a whole series of incredibly pedantic processes that slowed down our registration, cost us a huge amount of money, but has made our wine inventory storage system the most organised and regulated in the world, point-blank. And we are incredibly open and clear about this,” the former career diplomat, who served as Consul General of South Africa in Hong Kong, declared.

“First thing we did was that we realised we can’t just weigh a case to the kilogram because all that is going to tell you is that a bottle is missing or not. So we weigh every single case when it comes in and when it leaves to the third decimal, a thousandth of kilogram,” he said.

This ensures precision down to even neck level change in storage, which prevents any form of bottle exchange.

Continuing, he said, “Number two: on every single case we have four irreplaceable seals that are mobile phone scan-able, and the fifth is given to the client for safe keeping. So that means we can never ever change the seal and bamboozle the client, or open the case and change the contents.”

But most importantly, the company lauds the use of destructible codes on every case. “That means it’s like a rotation number that can never change and never be taken off the case and never be put on another case,” he stressed, admitting in the past shifty workers linked to the Triads had scammed expensive bottles by exchanging inferior bottles or cases with more valuable ones. Today, no worker at Crown can access the concrete wine chambers without a chain of authorised procedures triggered by an online order from a client.

Compared with other storage facilities in the city, De’Eb claims that Crown Wine Cellars is the only wine storage in the world that has total and catastrophic insurance cover for every single bottle of wine to the current value on WineSearcher. “As far as I understand, nobody in Hong Kong or the rest of the world has comprehensive insurance. Nobody,” he reiterated.

Wine storage industry split 

Since 2003 when Crown Wine Cellars was first set up, the city’s wine industry has exploded. With zero tax, and Hong Kong’s proximity to eager and deep-pocketed collectors from the mainland, Hong Kong has become the most important fine wine capital in Asia, where auction results in 2017 trailed only behind the US but ahead of London, and has the highest per lot price.

This prompted the city’s wine merchants and entrepreneurs to convert factories into warehouses to accommodate the city’s growing demand for fine wine storage.

De’Eb, the company principal of Crown Wine Cellars, was among the first members in the wine trade to call for a government wine storage qualification certification scheme – now known as the Hong Kong Quality Assurance Agency Wine Storage Qualification Certificate which was introduced in 2009.

Nearly 10 years on, he fears that the wine storage industry has gone in two directions: one towards what he calls “volume warehousing” and another led by the likes of Crown Wine Cellars towards the top end of the pyramid of fine wine storage for serious wine merchants and collectors.

“I think the evolution of wine storage again has gone into two directions. Again on the bottom side, the volume storage, or what I would call volume warehousing for people that just don’t care. They know they have something that has paper value and they trade it as if it’s paper. They don’t trade it as if it’s wine. They genuinely have no emotional connection to the wine,” he blasted.

Without missing a beat, he continued, crediting the first group of collectors as the foundation of the wine industry but also seeing their attitude to wine as, “a shame.”

“They are the people who will trade with anyone and will buy from anyone. They are quite frankly, in a strange way, I know they are like the foundation needed in the wine industry but they are the shame of the industry because it’s what takes away the passion, love, dedication, and caring,” he explained.

These are the collectors who most likely would continue to buy from merchants and auction houses without much due diligence and scrutiny. Wine in this instance is more equated to an investment vehicle, where he fears that with all the speculation going on in the current climate in Hong Kong, a crash like 2011 might be imminent.

Then there is the second group of people that he calls, “wine intelligent”, people who are discerning about wine insurance, the extent of their insurance coverage and storage security when selecting a wine storage facility – the same group of collectors that Crown is targeting, he added.

They, “are genuinely interested in what they are buying, where are they buying them from, and what the wine is. They exercise due diligence. It’s not that they are more intelligent, they are just more wine intelligent, they have a clearer understanding of the entire cycle from terroir to wine,” he said.

Auction overheat 

Speaking of Hong Kong’s glowing auction results, which in the past year jumped 7% to US$98 million with a price per lot of $5,643, much higher than the US’ $3,285, as reported in Wine Spectator, based on results from Zachys, Acker Merrall & Condit, Sotheby’s, Christie’s and Bonhams, De’Eb warned that over-heated speculation is “the euphoria before the crash” similar to what happened after 2011.

“I fear it’s happening again. There’s so much liquidity and low interest rates running around. You feel that again wine is becoming another investment vehicle asset class. When that happens you’ve got to worry,” he said emphatically.

“I don’t think the beginning of the current craziness is based on consumption but a lot of speculation,” he warned. “Then we have the additional problem and far more widespread problem of counterfeiting. It seems to me that wine traders, as opposed to the wine lover, have very very short memories. When you are just a trader you are sitting on an asset bubble and only looking at i like an investment vehicle. All of these touchstone words are very dangerous. That’s when things like provenance go out of the window. That’s when due diligence, anti-counterfeiting go out of the window.”

*Crown Wine Cellars declined to comment on its exact number and value of wines stored at its facilities for insurance purpose but maintains it is indeed the largest wine storage facility in Hong Kong. The exact size of Hong Kong wine storage industry has not been publicised by the HKTDC.