Thomas White Global Investing
France
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November 4, 2011
A Postcard from Europe
France: China’s new-found taste for fine wine cheers Bordeaux

Fine Bordeaux for the Chinese

China’s new-found taste for French wine is creating new opportunities for traditional wine-growing areas in places such as Bordeaux. Chinese businessmen are also thronging the French region to establish their presence in the wine industry.

In the fall of 2010, Thomas Jullien, a well-known wine consultant based in Asia, put together a stall at the Hong Kong Wine and Dine festival to showcase some of Bordeaux’s finest wines for wealthy Chinese consumers. Jullien expected at least 20,000 patrons. Instead, more than 70,000 clients crowded the cramped stall. The wine that was stocked for the three-day event was sold out even before lunch of the first day of the event. A pleasantly overwhelmed Jullien told the Wine Spectator magazine “this is the kind of problem I would like to have everyday”.

Indeed, the emergence of the Chinese wine connoisseur has not only brought cheer to consultants like Jullien, but has created new opportunities for many vineyards around Bordeaux, a balmy port city in France that has produced some of the world’s finest wines for more than 13 centuries. Thanks to the Chinese binge, with tipplers reportedly drinking almost 14 million liters of wine just last year, many of the wine-making hamlets of France are abuzz. For Bordeaux’s numerous chateaux that were facing intense competition from low-end wines produced in countries like Australia and South Africa, the Chinese connoisseur could not have come at a better time. In 2010, China overtook both the UK and Germany as the largest export market for Bordeaux.

To the discerning Chinese, Bordeaux is not only something to be savored, but also something to be cherished. Nowadays a bottle of Bordeaux is a staple at meetings between high-profile businessmen and government officials in China. In fact, some Chinese consumers demand Bordeaux of such high quality that some vintners in Pauillac, one of the leading Bordeaux wine-growing regions, are revisiting some of the lost traditions of wine-making to produce the finest quality wine. In 2009, for example, Château Latour chose to give up mechanized tractors to plough the rich Bordeaux soil. Instead, the vintner now employs horses, going back to its time-worn methods, even though this is a more expensive way of growing the vines. But authorities at Château Latour say the traditional method is worth it: horses plough the soil more precisely and do not damage the centuries-old soil that supports the vines.

In another sign of vigor, Bordeaux has become a center of attraction to many Chinese entrepreneurs. Many young Chinese are rushing towards the French port city to buy wine-growing chateaux and develop them in a way that will appeal to the home market back in China. The French vineyards, in particular those with numerous curved and rough-edged ponds are precious assets to the Chinese, because the Chinese believe the evil spirit is offended by crooked lines. Since 2008, Chinese have acquired five prestigious estates in and around Bordeaux. Sometimes the fierce competition between the Chinese businessmen has resulted in a sharp bidding war, much to the delight of the French estate owners.

In many ways, the new Chinese owners of the châteaux have proved more than competent in running the centuries-old estates as well. In the three years since Hayan Cheng, the 31-year old daughter of a wealthy Chinese businessman acquired Château Latour-Laguens, the estate has expanded substantially. The Chinese owners have patiently invested in new technology and marketing. They have retained the French workforce and have hired a veteran French oenologist, who specializes in the art of wine-making.

But sometimes, as it happens when two great cultures meet, there have been some disagreements between the proud French and the nouveau riche Chinese over how to run these châteaux. A case in point, the purchase of Château de la Salle in Bordeaux by a Chinese firm called Zhongai dragged on for more than three years. In the end, although Zhongai eventually acquired the vineyard, both buyer and seller were left unhappy. A classic cultural difference was partially to blame for the bitterness. For the Chinese, written contracts are often said to have little value, for they are easily broken in China. With this, the Chinese vineyard acquirers in France generally insisted on the “word” of the French owners rather than a contract. The French, for whom written contracts are sacrosanct, did not particularly like the Chinese way of doing business without a formal contract. Still, after all, for every deal like Zhongai there were four smooth transactions forged between the Chinese and the French in wine-making territory.

Truth be told, the sheer size of China’s market for Bordeaux wines and the business opportunity for the Chinese in the wine industry will be likely pushing both sides to reach a common ground. To the Chinese, the French experience is also quiet asset; they aim to replicate their wine-making success in China as well. Some estates in China, apparently modeled in the style of the Bordeaux chateaux, have sprouted in Ningxia in the north-western part of the country. And for the French, the Chinese penchant for fine wines is creating a boon for its wine-making industry. So for now, it appears that the French will continue to raise their glasses to toast the new Chinese wine connoisseur.

Image Credit: Thefunny42’s photostream under Creative Commons license

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