Hong Kong is Asia’s wine capital, a survey released in conjunction with VINEXPO Asia-Pacific has confirmed. But China remains the dominant player because of its huge population and growing wealth.
In its tenth annual survey for VINEXPO, the International Wine and Spirit Research (IWSR) company found Hong Kong residents drink an average of five litres of wine a year. It is the highest per capita figure in Asia and more than twice the average in Japan and Singapore, and four times the number for mainland China.
To provide a European perspective: Italians drink 10 times as much. So Asia has a long way to go, suggesting potential markets for the world’s winemakers.
Hong Kong’s wine consumption is predicted to rise 34 per cent over the next five years. But the forecast rise is even higher for mainland China: 46 per cent.
If China’s current consumption were combined with Hong Kong’s we would see the world’s fifth biggest wine market, just ahead of the UK.
Wine consumption in China
Data from China Customs show China imported 260 million litres of wine in 2010, or about 346 million standard-size bottles. This represented a rise of 58 per cent compared with the previous year. Data for 2011 were not yet available.
The IWSR survey predicted consumption in China would rise 54 per cent between 2011 and 2015 to more than 1,000 million bottles. “By 2015 Chinese drinkers will be consuming an average of 1.9 litres a head.” This should have some wine merchants drooling in anticipation.
China also makes a lot of wine and is in the global top 10 of producers. Last year China produced about 10.9 million hectolitres. Almost all of that wine is consumed domestically. Almost all of what I tried while living in China last year was poor quality.
Despite the country’s vast size, it is difficult to find regions suited to grape growing. Summers tend to be too hot and humid. Winters can be bitterly cold and temperatures below minus 5C can kill vine roots. Some international grape varieties struggle in this climate.
Australian viticulturalists working in China report horror stories of local farmers cutting fences to let their goats graze on young vines.
Several French companies have joint ventures. Dynasty partnered with Remy Martin in 1980 to make wine in Tianjin province. Helan Mountain works with Pernod Ricard in Ningxia, south of Inner Mongolia. Domaines Baron de Rothchild has a joint agreement with the Citic Group in Shandon province.
Debra Meiburg MW has been living and reporting on the Asian wine market for a quarter century. She said emphasis was being placed on wine education and the spread of wine culture, which was the core focus of Meiburg Wine Media, and this was beginning to bear fruit. “The recent excitement surrounding domestic wine production in China, with foreign companies entering joint ventures and starting production across the country with increasing regularity, can only support this trend.”
Between 2006 and 2010 French wine exports to China rose seven fold. Interestingly, cognac consumption rose 68 per cent in those same years, and IWSR predicts a further 47 per cent growth in the half decade to 2015.
The Italian Central Statistics Institute reports that imports of Italian wine to China doubled in value in 2010. Debra Meiburg MW confirmed the Italian government had been investing a huge amount of time and energy into developing the Chinese market, where they have not so far had nearly the impact of France.
Wine Australia reported that country’s wine exports to China increased an astonishing 565 per cent between 2001 and 2010.
China is already the world’s biggest market for Bordeaux. CWW vice president Jancis Robinson MW told a press conference for the Wine Futures event in Hong Kong in November 2011 that the demand from Hong Kong and China has fuelled massive price rises in Bordeaux.
Robinson wondered if any of the stock of the world’s finest wines would be available once the people of Hong Kong and China had taken their share. “I take an old-fashioned approach that wine is for drinking, not investing.”
Meanwhile, Chinese companies have been quietly buying Bordeaux estates, and vineyards in Australia and South Africa. Daniel Carmagnat, of Bordeaux property agency A2Z, said Chinese companies wanted “a foothold in one of the most prestigious wine regions in the world”.
For example, last year Chinese luxury goods company Hong Kong A&A International bought a controlling interest in one of Bordeaux’s oldest estates, Château Richelieu.
A billionaire Chinese investor purchased the Château Chenu Lafitte estate in Côtes de Bourg as a gift for his son. And Philippe Raoux, owner of Château d’Arsac in Margaux, sold his 20-hectare Lalande-de-Pomerol estate Château Viaud to Cofco, a company owned by the Chinese government that controls the Great Wall wine brand.
In September 2010, Lisa Perrotti-Brown MW reviewed Chinese wines for Robert Parker’s Wine Advocate for the first time. A Bordeaux blend, Grace Vineyard Chairman’s Reserve 2008, received the highest score – 85 points. Grace Vineyard’s Deep Blue 2008, another Bordeaux blend, got 83 points.
The chairman’s reserve retails for about 488 RMB in China (£49) and Deep Blue sells for about 288 RMB (£29). An Indonesian-Chinese businessman, CK Chan, founded Grace Vineyard in 1997 with the help of a Bordeaux oenologist, Denis Boubals. It is located on the Taigu plateau, 40km south of Taiyuan, the capital of Shanxi province. Mr Chan’s daughter, Judy Leissner, manages the vineyard.
Are all Chinese drinkers the same? They generally prefer full-bodied red wines, Hong Kong wholesaler Defranco Leung said. About 92 per cent of all wine consumed is red. But each city had its own preferences.
People in Xiamen in Fujian province liked sweet wines, while folks further south preferred drier ones, wine wholesaler Nikolas Prehn said.
Jancis Robinson MW, asked her opinion of Chinese wine at the Wine Futures press conference, said China had produced some “quite nice” bottles. It was only in past few years that any “decent wine” has been made in China. Robinson said only wine from four producers had impressed her. “For many it’s too early to say.” It was not likely Chinese wine would be exported, except as “a novelty”.
Robinson also highlighted the need for wine education. “Increasingly I see a need for independent sources of education, rather than people in the [wine] business.”
Education about wine would improve the situation markedly in China. While in Foshan near Guangzhou I was taken to a high-end restaurant where my hosts asked me to choose the wine. I selected a second growth 2004 Bordeaux, which cost about £65. The wine waiter supplied excellent glasses, decanted the wine at a nearby table, and then filled every glass except mine. By the time I got to taste the wine, which was corked, the 11 other guests had drained their glasses, and were complimenting me on my choice. The second bottle was fine, but the third was also corked, though again I did not get a chance to taste it until all other glasses had been filled.
Debra Meiburg MW said many Chinese consumers’ tastes in wine had less to do with flavour preferences and more to do with what was deemed socially acceptable to consume. Her company is based in Hong Kong.
“We see this tendency in nearly all young wine-consuming markets: consumers’ lack of confidence in their ability to judge wine quality for themselves will lead them to make consumption decisions that may have very little to do with their palates or with their food styles,” she said. “Hence the overwhelming preference for dark, tannic red wines in China even though many food styles are either too delicate or too spicy to be a good match for these wines, at least according to conventional western pairing principles.”
For this reason Meiburg launched the Cathay Pacific Hong Kong International Wine & Spirit Competition. Wines are only judged by Asian-born and Asian-based judges. A segment of the competition focuses on finding the best wine match for regional specialties.
Hong Kong’s wine market
This city is a wine-drinkers’ paradise. The government abolished all duties on wine in June 2008. Removal of taxes was the major factor for the development of a flourishing market, combined with cheap taxis and excellent public transport. Residents of some cities limit consumption because they need to drive. Hong Kong people take taxis.
I can buy quality wine in Hong Kong shops for half the price I have paid for the same wine at the cellar or vineyard door. The range and variety is superb. Wine events are offered almost every night of the week.
Since 2008 Hong Kong has also become established as the regional hub for the Chinese and Asian wine markets. Two in five bottles that arrive are re-exported to the region.
Last year Hong Kong wine sales increased by almost 7 per cent, to a total of 39 million bottles. Consumption doubled in the half decade to 2010. French wine remains the most popular, accounting for 28 per cent of sales ahead of Australia (20 per cent) and the United States (11 per cent). American wine consumption is expected to increase by 10 per cent over the next five years, analysts suggest.
Nine bottles in 10 consumed in Hong Kong are red. The amount of sparkling wine and champagne drunk is tiny: perhaps 0.5 per cent of the total. But Hong Kong people drink twice as much “bubbly” as the rest of Asia combined, which suggests some cause for potential celebration. And perhaps the need for a marketing campaign for this kind of drink.
Late in 2011 Debra Meiburg MW launched a book about the market. “When we compiled Debra Meiburg’s Guide to the Hong Kong Wine Trade we ultimately gained insights from over 250 active import businesses, and listed an additional 100 that seem to be operational (if unresponsive). This is a significant increase on the number in operation in 2005.”
Because of the lack of legal or financial barriers to entry, many businesses entered without necessarily having sufficient understanding of the risks and challenges involved. “Of the new entrants, some are wine enthusiast who made the transition to wine from other industries – especially finance, which was collapsing just as the wine industry was starting to take off in Hong Kong,” Meiburg said. “Others were trading companies engaged in other import businesses who found that they could easily bring in a few bottles of wine along with the shipments of, for example, leather footwear they were already shipping in from Europe. Many of these businesses have since either closed or been acquired, and it’s quite probable that we are only at the beginning.”
This was not because the market as a whole was becoming less lucrative, Meiburg said, but because competition was now much too fierce for anyone who was not willing to invest effort and capital into their business to survive. “On the other hand,” she said, “I think we will start to see a lot more diversity in the actual wine offerings in our market. We used to have a very split market, in which the top end was dominated by very expensive bottles from France and the low end by very inexpensive bottles from Chile. But it is actually our mid-market that has picked up the most steam these past few years and this is a field in which many other countries, including Argentina, Italy and Spain, and lesser-known regions of France, have some wonderful offerings that will hopefully be much more prevalent on our market from now on.”
Hong Kong consumers appear to be becoming more discerning. VINEXPO data show sales of wine for under £3 (about 36 HKD) grew less than 1 per cent between 2006-2010. Purchases of wines between £3 and £6.5 (HKD 37-80) grew by almost 11 per cent. But the highest growth was for wine priced at more than £7 – up by almost 15 per cent.
Jancis Robinson MW told the Wine Futures conference in Hong Kong in November 2011 that she was surprised at how rapidly Hong Kong had emerged as a centre for quality wine. She was also concerned about how quickly prices for high-end wines were rising.
My attendance at auctions confirms the trend. In January 2012 in Hong Kong, Zachys, a US company, auctioned the cellar of Dr Joseph Weinstock, a close friend of wine writer Robert Parker. About $US 5 million went under the hammer that morning. Another $US 7.3 million was spent at the previous Zachys auction in Hong Kong last November. Buyers from the mainland bid via the phone and online.
Auctioneers have been known to speak at 350 words a minute and sell two or three lots a minute. These figures provide a snapshot of January’s prices: A magnum of 1976 Romanee Conti Domaine de la Romanee Conti went for 75,000 HKD in perhaps 10 seconds. Its expected selling price was 60,000 HKD. Three 750ml bottles of Corton Charlemagne Cloche-Dury 1989 sold for 70,000 HKD in a few seconds (expected price 46,000 HKD). A dozen half bottles of d’Yquem 1990 went for 24,000 HKD (expected sale 16,000 HKD) in the blink of an eye.
Chateau Lafite has always been popular in China. For the great 1982 vintage, two groups of 24 half-bottles sold for 170,000 HKD per item. Two bottles of the 1953 vintage sold for 26,000 HKD. Several cases of the 1996 vintage sold for an average of 75,000 HKD a case. The current exchange rate is about 12 HKD to the pound.
VINEXPO chief executive Robert Beynat described Hong Kong as the “nerve centre” of the international wine and spirits industry. Asia was now the “most important new market” and Hong Kong was “especially vigorous”. VINEXPO Asia-Pacific will be held in Hong Kong from May 29-31.
The annual VINEXPO / International Wine and Spirit Research survey is regarded as the largest and most detailed analysis of the world wine market. It covers 28 producing countries and 114 markets.
VINEXPO exhibitors will come from 35 countries. For this year’s event South Africa and the United States more than doubled their total stand areas from the previous event two years ago. The exhibition alternates each year between Bordeaux and Hong Kong. Chinese exhibitors this year include Grace Vineyard, Yantai Changyu Pioneer Wine and Dynasty Fine Wines. The full list of exhibitors can be found at http://www.vinexpo.com.
* Published in the May 2012 edition of Circle Update for the Circle of Wine Writers, pages 46-49, under the headline “More and more bottles, and they’re almost all red”.