Chinese billionaires splash out on fine wine

He Wei Qi, a businessman from eastern China's Zhejiang province, says he routinely pays more than 30,000 yuan ($US4,500) for a bottle of wine to entertain guests.

“A price tag of more than a million yuan a bottle - that does more than show off your wealth, it shows you have good taste,” He, 38, said while attending a three-day Hong Kong wine and spirits exhibition that drew about 700 companies from 29 countries and regions. “We don't care how outrageously expensive the wines are.

Wine sales in the city by Sotheby's and Christie's International will raise more than in New York and London combined this year, the top two auction houses said, with vintage Chateau Lafite selling in excess of $US200,000 a bottle. Sales at Hong Kong's auctions have more than quadrupled since the city cut duties to zero two years ago.
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“What we've seen emerging in the last year are people paying virtually any price for wine,” said David Elswood, Christie's London-based head of wine. “That's not investment. That is just uncontrolled spending.”

Buyers from China, where the number of billionaires rose more than 60 percent from last year, may double auction sales in Hong Kong next year, he said.

“Red wine is better than stocks,” wine merchant Alex Yu said while touting a HK$80,000 ($US10,321) 5-litre bottle of Chateau Mouton Rothschild. “Chinese wine lovers are pushing up prices.”

Vintage Lafite

Three bottles of Chateau Lafite's 1869 vintage sold for a record $US230,000 each on October 29, 28 times Sotheby's top estimate before the auction.

Chinese collectors in Hong Kong, China and Taiwan hold about one in four bottles of fine or rare vintage wine globally, according to Crown Wine Cellars, which stores about HK$1 billion of wine in a network of converted ammunition bunkers in Hong Kong. Total consumption has doubled in China in the past five years, with red wine accounting for 75 percent of demand, according to a March report by Citigroup.

Wine isn't the only product Chinese buyers are mopping up. The fastest growth of any major economy and an appreciating currency have led them to pick up properties in London and artwork in New York. In Hong Kong, mainland Chinese demand drove luxury property prices past the 1997 peak, spurring the government to warn of an asset bubble.

1,400 Percent Markup

Asia's wine market will expand four times faster than the rest of the world, said Robert Beynat, chief executive of wine exhibition organiser Vinexpo Asia Pacific. Much of the growth will come from China, which is the final destination of a “large part” of the wine imported into Hong Kong, he said.

Liu Xue Biao, a wine merchant from Shenzhen, said that wine he buys in Hong Kong for about $US3 a bottle can be sold in mainland China for 300 yuan, a 1,400 percent markup. “They are willing to pay just about any price,” said Liu, accompanied by two female assistants carrying suitcases for their purchases.

Imports by Hong Kong merchants jumped to $US600 million in the first nine months, more than the whole of last year. The value of auctions reached $US120 million this year, almost double the $US64 million in 2009, according to the government.

Sotheby's had to issue tickets for the first time for its October 29 wine auction at the Mandarin Oriental, when it offered almost 2,000 bottles of Lafite shipped directly from the Bordeaux chateau's cellars.

No Catching Up

The sale beat the auction record for a single bottle set in 1985 in London, when publisher Malcolm Forbes paid 105,000 pounds ($US169,000) for a 1787 vintage.

“New York and London aren't going to catch up,” said Richard Sleigh, who moved to Hong Kong from New York in August to run Sotheby's Asia wine business. “People like the fact that the wine is here in Hong Kong. You just go and pick it up.”

Sotheby's sold $US52 million of wine in eight auctions this year in Hong Kong compared with a combined $US24 million so far in New York and London, previously the world's biggest- and second-largest markets. The New York-based company had 11 consecutive sold-out wine auctions in the Chinese city.

The Hong Kong sales are an indication of how far mainland Chinese buyers have come since the 1990s, when they would drink Coca-Cola with wine and merchants hawked unwanted vintages to them, said Gregory De'Eb, general manager of Crown Wine Cellars.

“Through their own aggressive tasting, they have built a better knowledge of what suits their palettes,” De'Eb said. 'Inflating a Bubble' While the Chinese are the ninth-largest consumers of wine globally, the spirit accounts for only 2 percent of alcohol drunk in the country, according to Citigroup analysts.

That's changing as wine starts to win favour compared with the traditional Baijiu and Maotai liquor. In 2008, Domaines Barons de Rothschild (Lafite) agreed to develop more than 25 hectares of vines in Shandong province with Citic Group, China's biggest state-owned investment company.

The burgeoning wealth is “inflating a bubble” in wine, said Christie's Elswood. “When you're paying four, five times or even more than the reference price then you have to seriously question the market knowledge of that buyer.”

At Sotheby's April 3 auction in Hong Kong, a 12-bottle lot of Chateau Latour 1982 fetched HK$338,800 or $US43,649. About two weeks later, New York-based Tribeca Wine Merchants ran a newspaper advertisement offering the same for $US2,250 a bottle.

“Westerners drink wine slowly as a way of enjoying life,” said He, strolling around the Hong Kong exhibition holding a glass of wine. “Just look around you. Mainland Chinese tilt the glass and pour it straight down the throat.”

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Kiwi wine first in the world to spell out its carbon trail on label

A New Zealand wine company has become the first in the world to declare its carbon footprint for each glass. Bottles of Mobius Marlborough sauvignon blanc - which go on sale today - will show the carbon emissions for a 125ml glass on the label. The New Zealand Wine Company, parent company of the Mobius Marlborough brand, is the first maker to show how many grams of carbon dioxide were emitted as the wine was transported and refrigerated.

The company's marketing manager, Helen Wilkes, said the emissions initiative matched New Zealand's clean and green image and had taken two years to develop. "The original idea came out of customer demand. "Overseas, especially in the UK market ... they are wanting to show consumers what the carbon footprints are for each product so consumers can make a more informed choice."The carbon footprints are calculated separately for each export market.

For example, bottles sold in New Zealand will carry a figure of 140g CO2, whereas bottles shipped to Australia will display a 190g carbon footprint. Ms Wilkes said a sustainability consultant had helped the company work out the emissions. Ms Wilkes predicts that carbon information will soon become as common as nutritional details on products.

A small footprint stamp will be displayed on the bottom left of the wine labels, with a small number inside the print showing the carbon emissions. "The whole idea is when consumers are choosing their product they can make a more informed decision. "They can choose a product which is making them feel better about what they are doing for the environment and for themselves."The carbon footprints were added to the already established Mobius Marlborough savignon blanc, and have been certified by Britain's Carbon Trust.

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Napolean III-era claret that 'probably tastes like vinegar' fetches record £147,000

A bottle of wine from Napoleon III's reign in France almost 150 years ago has sold at auction for a record £147,020. The 1869 Chateau Lafite-Rothschild was sold by Sotherbys in Hong Kong to Chinese investors, along with a series of other vintages. A 2009 blend fetched £3,600, more than three times the price available a few months ago.

The Bordeaux red, which came as a group of three and a grand total of £441,060, has been hailed in some quarters as one of the finest ever made, but critics feared the taste would be little better than vinegar.

However the initial joy at such a high price was tempered by fears that it would push the overall cost of fine vintages further and further out of reach for the majority of drinkers. The cost is being driven, some claim, by a small group in the Far East, with demand now out-stripping supply.

Gary Boom, the head of Bordeaux Index, which specialises in trading fine wines, said in the Telegraph: 'We've already seen that people who can no longer afford Lafite start to buy Mouton, and those who can't afford Mouton, buy Leoville Barton. It goes on down the chain.'

Simon Staples at Berry Bros added: 'It has had an instantaneous effect, with prices of the 2008 Lafite increasing by 40 per cent in 48 hours.Some of the other big houses have gone up in price.'He added: 'Once mainland China wakes up to fine wine, and India too, we will ave a serious shortage of supply. That has to force prices up. 'In five years time I worry that it will be impossible for many drinkers to afford good wine.'

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Hands off Lafite, signals China

With Chateau Lafite Rothschild 2008 recording an overnight 20% price jump last week to £10,160 ($ 16,000) a case by adding the Chinese symbol ‘eight’ on the bottle and the record price of HK$ 1.815 million (over $232,000) each for three bottles of Lafite 1869 sold at the Hong Kong auction by Sotheby’s last Friday, China seems to have signaled to the wine world to keep hands off Lafite, using the M power- not Military but Money.Anyone studying Chinese wine industry won’t tire of cribbing about the cheap quality of wines that shows no signs or the need for improving; or the industry figures churned out by computers doing the double or triple counting. But Lafite has created history, going by the penchant of the super-rich to buy it at any price. At the current prices, all the Lafites of the world might be traveling to China soon, directly or via Hong Kong.

The stories, jokes and anecdotes about Lafite abound, especially in Hong Kong. From the incredible story of how a Chinese wine merchant could not believe why he was refused when he went to Lafite and offered to buy only the Lafite labels at a hefty premium or that the market price of an empty bottle of a Chateau Lafite ’00 fetches as much as HK $3000 (Rs. 18,000), many such stories are doing the rounds in wine circles.

At the International Hong Kong Wine and Spirit Competition that concluded yesterday, the hot topic of discussion has been the unnatural love affair the new Chinese millionaires have developed for Lafite. Says Fongyee Walker one of the judges who is a wine consultant in Beijing, has partially cleared her MW and conducts WSET wine courses, ‘the rich Chinese are obsessed with the thought of drinking the world’s best wine which they believe is Chateau Lafite. They believe Lafite adds another dimension to Luis Vuitton, luxury yachts and Lamborghinis.’

Interestingly, most of these nouveau rich millionaires who have made uncountable money in the fields like real estate and mining are uneducated and have no knowledge about the 1855 Classification of Bordeaux.

It is not that they have not heard of the other First Growths. Some of them do know it is owned by Rothschild family, but are not as smitten by Mouton- the first growth label owned by the other arm of the family. Latour and Margaux are also lagging while Chateau Haut Brion is at a clear disadvantage as most Chinese cannot pronounce the name correctly and avoid drinking it.

So impressed are the Chinese with Lafite that they refer to Chateau Duhart Milon-owned by the same owner- Baron Eric de Rothschild of Domaines Barons de Rothschild, as ‘Little Lafite’, says Fongyee, adding. ‘They would rather buy Carruades de Lafite (second wine of Chateau Lafite) than the Chateau wine of Second Growths-Cos D’Estournel or Pichon Lalande.’

What is the reason for the long lasting love affair with Lafite? ‘If I could have a dollar for every reason given to me for their charm, I would be a rich woman,’ says Fongyee. Most people give credit to X-factor which includes luck and being at the right place at the right time. But Lafite also gambled when it invested in the development of the market at the right time. Even the recent announcement of etching the letter 8 in Chinese (when pronounced it means ‘prosper’ and so is considered very lucky by them) is part of the marketing strategy. They are perhaps the only Bordeaux company that has the complete website in Chinese. They make regular visits and follow ups with trade tastings and have focused strategy for this market.

To take advantage of the popularity and to entrench themselves for the long haul, Lafite has also tied up with CITIC, China’s largest state-owned investment company, to develop 25ha of vines on the Penglai peninsula in the Shandong province, reports Decanter.

Serena Sutcliffe, Sotheby’s international head of wine says reportedly, ‘There’s a lot of speculation about why the Chinese like Lafite so much. People say it’s because the name is easy to pronounce in Mandarin. Actually, they like the taste; otherwise they wouldn’t pay such high prices for these wines.” Most of the wine journalists from China disagree. Apparently, the people who drink Lafite have no knowledge of wine, would drink it in any glass, with any food and without any idea of how to the taste. Best wines in the world, according to these nouveau super-rich, should taste like Latour.

Of course, like Louis Vuitton and thousands of other luxury products that find their duplicates in China, there are any numbers of fake Lafites or look-alikes available at any wine shop. They even carry catalogues with different fake labels that can be affixed on the bottle the price of which varies with the quality of the liquid. No wonder, the empty bottle of Chateau Lafite brings a premium, of up to US $300-400 in Hong Kong, bringing memories of the premiums on the empty bottles of JW Black in India which supposedly consumes more Scotch whisky than produced in Scotland.

What is the relevance of this love affair for India? There is also a huge population of nouveau rich and the super-rich who spend a lot on the high-end luxury goods. Like China which had no knowledge or availability of wine till a few years ago, these people are not yet aware of wine as a lifestyle product or the status symbol fine wine represents. Once they are catalysed, the boom may be unprecedented and the market will be transformed overnight.

However, there are two major differences. The high taxes in India are a big damper-even in Hong Kong the explosion has taken place after the government waived off duties in February 2009. The second reason is that in India, even the super-rich look for some value. Unless the brand is impeccable-as one discovered recently with around 160 Mercedes sold in the small town of Aurangabad in Maharashtra during a road show, the super-rich won’t rush for the brand-be it Lafite or Latour.

Soon after these two landmark incidents, there would be a rush to flood China with Lafite-through Hong Kong; there are carriers who act as couriers to deliver wine anywhere in China at a small premium to the duty free price. Yesterday, Acker Merrall and Condit, one of the premier US- based auctioneers with offices in Hong Kong, announced today the sale of 12 cases of Chateau Lafite at US $20,000 each-undoubtedly aimed at the Chinese market. With all the current hullaballoo, all the cases might be sold in a couple of days. There seems to be a new business opportunity – sourcing Lafite to sell to China. But if you are a connoisseur of fine Bordeaux wine, be advised to leave Lafite alone for the Chinese

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Growers' tractor protest tries to squeeze homes out of wine land

There was a tractor protest against a housing development at McLaren Vale yesterday and full-page advertisements against a proposed highway bypass in the Coonawarra appeared in weekend newspapers.

Winemakers are up in arms over the proposed developments, saying they will swallow valuable land for growing vines and could damage tourism in the area. Yesterday a convoy of about 150 tractors and cars travelled through McLaren Vale, about 40km south of the centre of Adelaide, protesting against plans to build 1170 homes on 77ha of land on the edge of the world-renowned wine region.

Chalk Hill winemaker Jock Harvey said a recent geological survey found the land was on "some of the most spectacular geology for viticulture in the world".He also said the development site at Seaford Heights was a gateway to an area with economic and tourism value estimated at $940 million a year.

"And that's put in jeopardy by taking what is the last green buffer between suburbia and the McLaren Vale wine region and covering it with housing," he said.

Protest organiser Laura Jackson, who works in the wine industry and lives in McLaren Vale, said there was no need for more housing in the area. "We've got investment properties lying empty and people won't rent them," she said.

Mr Harvey said Planning Minister Paul Holloway could rezone the land to rural "if he wants", and called for a moratorium on the development until a development plan for the region was finalised.

But Mr Holloway said the fate of Seaford Heights was sealed 20 years ago when it was earmarked for development.

"Even if the decision had not been made 20 years ago to zone this land residential, it would still be very difficult to justify agricultural activities on that particular 77ha, given that it is adjacent to existing housing," he said.

"The long-held expectation that this land would be developed for housing also informed the decision to invest $291m on extending the Noarlunga rail line to Seaford."

Meanwhile Treasury Wine Estates, part of the Foster's Group, has published advertisements about a proposed highway bypass through the Coonawarra wine district, in the state's southeast, famed for its cabernet sauvignons.

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