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11.15.2011

China the Wine Juggernaut

china_wine.jpgDid you need any further confirmation that China is now the 8000000000 pound gorilla in the global wine industry? From the low end of the consumption spectrum to the high end, Chinese consumers are transforming the global wine scene.

First we heard of it, they were beginning to buy up large quantities of very cheap Australian wine. Then they started investing in the wineries themselves. That was good for Australia, who had fallen on hard times in other parts of the world. With exports up 36% year over year, apparently, China was picking up the slack.

When Hong Kong eliminated duties on wine imports and sales, the auction market went haywire, first for Bordeaux, and more recently for Burgundy.

It didn't take long for that to happen. I watched Burgundy flirting with China last November.

All of us who bemoan the high prices of already scarce Burgundies are going to quickly find them forever out of reach, especially those with pedigrees. There's a lot of Bordeaux First Growths to go around, compared to minuscule amounts of some grand cru Burgundies.

Is it any wonder then, that Penfold's announced the most expensive (release price) single bottle of wine in Australian history for the first time at an event in Shanghai? This not long after Chateau Lafite Rothschild decided that its newest label would feature the chinese character for good fortune.

The Penfold's wine, dubbed Bin 620, will sell for $1000 per bottle on release, which means it will probably be available at auction in Hong Kong for $5000 a bottle soon. Start saving now.

All kidding aside, it's quite remarkable to see the impact that Asia in general, and China in particular continues to have on the wine market. Perhaps this means the wine industry may be a bit more recession proof in years to come.

And those noises at the door? They're all the high end Spanish and Italian producers trying to get in on the party.

Read the full story.


Comments (4)

Todd wrote:
11.16.11 at 10:48 AM

Having studied Chinese in college, and consistently watched the growth that has occured in the last 25 years, it has always seemed that this was only a matter of time. Aside from what pressure is doing to prices, as you mention, the creation of scarcity in smaller scale, but high quality productions across the board, may become a real challenge for the upper end evolution of the US wine consumer. When the Chinese get enthusiastic about something, watch out. Practice saying "Gan Bay!"

Kerry wrote:
11.17.11 at 5:09 AM

China has been pretty unstoppable for the last 20 years? Great to see they are investing so much in the wine industry

Christopher Robinson wrote:
11.20.11 at 7:32 PM

Here is the reality in China from someone who lives in Hong Kong and watches all this development. The biggest reality is that hardly anyone is drinking this stuff. It is being gifted. The problem with that is that Lafite and Penfolds Bin 620 are today’s Rolex watches and next year will be Piaget. The Chinese will take years to understand or even want to understand Burgundy. They just want instantly recognized symbols, which mean DRC will be the darling of the next few years. To infer China is a huge market is true, but 99% of wine sold is in the under RMB40 category at retail. All these wonderful war stories about luxury wines are simply a reflection of the huge desire of people in China with money seeking the next, next thing to show off about. Much of this is corrupt money or money made for the outrageously hyped property and stock markets in China. All this is starting to implode, so what will be next? Reality will set in, as it quickly did when the Bordeaux trade expected a huge surge in interest from this supposed educated wine drinking audience to the 2010 en-primeur. The so-called Chinese buyer stayed away in droves. After all why buy something you can hardly pronounce and your friends you want to entertain (or pay off) can hardly recognize. If this seems weird ask why Duhart Milon is so successful in China. It ain’t the wine it’s the label, which looks like Lafite. It probably will take years before serious wine drinkers in China know their Chateaux from their Clos. One only has to look at auction markets to see that Lafite is off the boil in China/Hong Kong. DRC is now hot – that easy pronunciation and label recognition again! There are huge volumes of wine sitting in Hong Kong storage, not being drunk, just being traded or gifted. The truth, don’t panic the next big thing will be luxury yachts, chalets in Aspen or some other nebulous branded line. Friends of mine are selling otherwise unsaleable 19th century art to these people. Why because you can hang it on the wall and brag about the price you paid,hang the quality!

Steve wrote:
11.21.11 at 8:39 AM

I'd be curious to know what the US is doing to compete for some of that huge market. Last I heard there were huge trade tariffs on bringing US wine into China (like 40%)

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