Thursday, August 09, 2012

The perils of underestimating China

Flickr image by rebecca anne

Here's my serious suggestion. Any wine professional who says "the Chinese all add Coke (or Sprite or whatever) to their wine" should be forced to spend a week in China at their own expense. And then to write a 10,000 word essay on what they see.

First, it's fundamentally not true. I'm sure it happened on occasion a few years ago and the wine in question was almost certainly a Petrus or equivalent which helped to give the story its shock value - rather like anecdotes Chinese probably share of ignorant westerners stashing their umbrellas in priceless Ming vases. There almost certainly are Chinese customers in karaoke bars who do still choose to cut their red with a bit of pop, and some who do so in the privacy of their homes. But no one has recently reported seeing any such behaviour in a restaurant in any major city. The Chinese take "face" and the risk of losing it very seriously, and they know that adulterating claret is not considered to be appropriate behaviour; drinking wine neat is a habit they are rapidly acquiring.

These stories make it much too easy to underestimate the clever approach the Chinese are currently taking to wine. China is just about the only nation on earth with an unashamedly pro-wine government. While the France administration continually devises new, health-related ways to harrass its vignerons, and an emerging wine-drinking nation like Russia imposes a ban on alcohol advertisements, the Chinese authorities are actively encouraging wine production and consumption. Apparently, the policy dates back to Deng Xiao Ping's concern that once his people had a little spare cash, they'd spend it on alcohol produced from rice or grain that might otherwise have been used for food; grapes are not a staple. India has a lot of very hungry people and is currently the world's biggest whisky market, consuming some 140m cases per year; maybe its rulers could learn a few lessons from their counterparts in Beijing.

Chinese wine consumption has been growing steadily by 7%, faster than any other market, to reach 1.6bn bottles in 2011: over a bottle per head. Domestic production has also grown; next year, China's wine grape harvest will probably overtake Australia's and within two years China may make enough wine to satisfy domestic demand. The decision to use tax-removal to turn Hong Kong into the fine wine hub of the world was also apparently very much a made-in-Beijing initiative.

But there are more interesting things happening on the margins that suggest that the Chinese wine industry is actually smarter than some of the countries that treat it with disdain.  there is a tradition of using wine as a gift so, quite logically, producers stick their bottles in attractive cartons. In the west (where wine is also often used in this way), we pack spirits, Champagnes and port in this way, but very rarely think of doing so for $50 bottles of red or white. New World regions like Napa have long understood the potential value of wine tourism, but Bordeaux is only beginning to exploit it. Neither Old nor New Worlds, however, have anything to compete with the "International City of Wine" that Changyu, China's oldest winery, is aiming to open in 2016. It will apparently cost nearly a billion dollars, be twice the size of Monaco and be blessed with an array of hotels and a "200,000 square metre wine-themed tourist town".

Wine gift pack and Chateau Changyu, the existing tourist attraction

Sheer extravagance? Maybe, but if it succeeds in its aim of attracting over a million visitors per year, that extravagance could prove to have been as good business for Changyu as the "extravagant" Frank Gehry hotel has been for Riscal. Profitability certainly ranks highly on the list of Chinese priorities. When the Japanese first got the wine bug, they splashed out on jewels such as Chateau St Jean in California, (for $40m way back in 1984), Chateau Lagrange in Bordeaux and Robert Weil in Germany. The Chinese have been more moderate in their shopping, rarely spending more than the cost of a smart apartment in Shanghai. As an estate agent in St Emilion confirmed to me, anything they buy has to be turning a profit, and future prospects are usually bolstered by ready-made distribution networks in China. But don't imagine that the Chinese are being remotely insular in their thinking. The recent purchase of Diva Bordeaux, one of the region's canniest negociants and part of the equally canny global Diva network reveals how ready Chinese investors are to dip their spoon deeply into the international wine industry broth.

Most recently, as Meininger's Wine Business International correspondent Jim Boyce tells me, Ningxia Province in the north west of China has invited ten international winemakers to make wines from its grapes this year, with the producer of the best red and white, standing to win 26,000 euros. Not a bad way to amass a load of cheap, potentially invaluable consultancy. I could go on, but I'm not sure my friends in China want me to spread the word about ventures like this; they'd probably rather I joined in the Lafite-and-Lemonade chorus and gave them time to go on quietly and patiently honing their plans for global vinous domination.

2 comments:

  1. From @subirchWe agree, you shouldn't [underestimate China]; the Chinese are very canny.

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  2. From @GetWineWise Rob, yes longer term China will start producing good, maybe even great wine, but a way to go yet - but then look at Olympics!

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