China and Bordeaux
2012-01-11

The big wine story for 2011 was supposed to be how China saved the Bordeaux wine industry. And China did save the Bordeaux wine industry. Just not as dramatically as it was supposed to.


Bordeaux is to wines what Rolex is to watches: a designation that bespeaks high end luxury, a combination of highly pedigreed cultivars and that ephemeral essence that is called terroir but is really the magical spirit of the countryside. For the true oenophile, heaven is a bottle of Chateau Lafite-Rothschild, or maybe Chateau Margaux.

Chinese wine drinkers love Chateau Lafite-Rothschild too but probably not for the same reason you do. The vast majority of China’s 1.4 billion population are not wine drinkers, mostly preferring a white liquor called Baijiu, distilled from sorghum, when they feel the need to drink. But in major metropolitan centers like Beijing and Shanghai, wine drinking is on the rise, driven by young professionals whose tastes are increasingly informed by the West. These trendsetters like Bordeaux because it is the premium, imported European wine, an elite vintage that is very expensive. Drinking wine, they feel, gives them a competitive business advantage. Exclusive Beijing restaurants, whose wine lists offer no domestic wines at all, serve Chateau Margaux not because it goes with the food but because it goes with the financial wheeling and dealing taking place at the table. In China, Bordeaux is not a region in France that produces wines; it’s a brand.

In 2010, the Bordeaux market struggled, despite an amazing vintage. Sales of 2009 Bordeaux futures were down 14 percent. The combination of a global economic downturn and a strong Euro had priced many Bordeaux out of the reaches of the U.S. and British buyers who had traditionally been their strongest customers. Enter China. The People’s Republic purchased 3.6 million gallons of Bordeaux for close to $100 million. Hong Kong, considered a separate market, purchased an additional one million gallons for close to $15 million, the price differential no doubt representing the former British protectorate’s increased familiarity with finer vintages.

Bordeaux winemakers were hoping for an even better showing from China this year. But while China bought lavishly, expectations that this would be one of Bordeaux’s most lucrative futures campaigns ever did not materialize.

But give it time. Wealthy Chinese love Bordeaux and that love is growing stronger all the time. China is now the biggest export market for Bordeaux, outside of the European Union, and it’s growing exponentially.

In fact, wealthy Chinese love Bordeaux so much that they have begun buying established wineries in the region just so they can send their entire production back to China. It’s part of a canny business investment strategy to capitalize on the ballooning profits inherent in China’s booming wine market, up 98 percent in the last year.

In March 2011, Richard Shen Dongjun, CEO of the Chinese jewelry group Tesiro, brought Laulan Ducos, a 50 acre cru bourgeois estate in the Medoc region outside Bordeaux; it was one of six similar Chinese purchases of Bordeaux estates made in the past five years. A few weeks earlier the Château de Viaud was purchased by COFCO, the state-owned agribusiness conglomerate.

The wines produced at these Chinese-owned estates will never be tasted by Western lips, at least Western lips paying money for the privilege: Laulan Ducos’ entire 150,000 bottle production will be sent back to the Middle Kingdom. To that end, changes are being made in the way the wine is produced. Laulan Ducos will be given both a taste and packaging makeover to bring it more in line with Chinese tastes. The Chinese prefer sweet flavors to bitter; they are not fond of the tastes of tannin or oak.

Initially at least, Shen intends to package the wines with the jewelry his company distributes as a high-end wedding gifts. Ultimately, however, once the Laulan Ducos brand is established, the wines will be sold alone and other Bordeaux will be sold under the Laulan Ducos brand name.

Chinese oenophiles do exist, however, and they are working hard to educate Chinese wine drinkers that premium vintages can be more than merely status in a bottle. 2009 saw the opening of the Wine World Education school in Shanghai in a building that not coincidently also houses the city’s largest wine shop. The store is partnering with the London-based Wine and Spirit Education Trust to bring Chinese consumers to an appreciation of wine that is based on more than just price point and packaging.

China has also begun hosting its own wine fairs. The largest, in Beijing, is called the Wine China Exhibition: in 2011, attendance reached 6,500 and wines from 200 countries were on display. Needless to say, the belles of the ball were French Bordeaux. A Bordeaux and Aquitaine Wine Fare is scheduled to be held central Chinese city of Wuhan in November 2011.

The counterfeiting of Western goods is a huge problem throughout China and Bordeaux is not exempt. As one wine importer observed recently that there is more Lafite 82 in China than was ever bottled in the whole of France, and it’s impossible to tell the chaff from the vine on the basis of price point alone since some of the more egregious fakes cost the most. There’s a brisk, profitable online business in China in used grand cru bottles into which lower quality Bordeaux of more or less the same vintage as the original are poured. It is not uncommon to see these counterfeit Bordeaux wines at wine fairs and supermarkets. One sure giveaway that the wine is a fake is a label marked “Laffite” or “Lafitte”.

The problem, of course, is that so long as the Chinese continue to appreciate wine on the basis of labeling rather than taste, they will be unable to distinguish counterfeit vintages from the real thing. Here is where education comes in: As more and more Chinese study and work abroad, they return home with an appreciation of wine and understand that Bordeaux is more than just a brand like Gucci or Rolex or Rolls Royce. When that happens, watch for Bordeaux sales in China to really start taking off – and other varieties of wine as well.

Posted by allan at 8:21 AM

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Labels: Bordeaux, China