"For 2009 futures, we expect to do more than 50% in Asia"

[JonB]

This is a Wine Spectator blurb, with the quote from a negociant.


Wine World Looks to China at Vinexpo 2010
Three-day trade show draws 12,000 visitors in Hong Kong
Suzanne Mustacich
Posted: June 1, 2010
China strengthened its image as a rapidly evolving wine market during Vinexpo Asia-Pacific last week in Hong Kong. Two years ago, during the trade show's last visit to Asia, producers and industry members were still exploring how to get their feet wet in the Chinese market. This time, there was a gold rush atmosphere as startup Chinese firms scrambled to make deals with wineries and merchants. Everyone was looking to get a piece of the action, especially sales of 2009 Bordeaux futures.
More than 880 exhibitors from 32 different countries greeted 12,000 visitors over three days, a 40 percent attendance increase from 2008. Of the visitors, the majority were from Asian countries, with China taking the lead, followed by Taiwan, Japan, Korea and Singapore.
The energy inside the show was a result of the rapidly expanding market—according to Vinexpo, total wine consumption in the region is increasing four times faster than the world average. Hong Kong's elimination of import duties in 2008 has only accelerated the trend.
"The no-tax system in Hong Kong has really affected the distribution market for fine wine in China," said Bruno Finance, export manager for négociant Yvon Mau. New companies in Hong Kong and Macau, without any previous wine trade experience, are buying fine wine free from import duties, making them more competitive than official mainland Chinese traders, who are paying 50 percent in duties. Much of that wine enters mainland China, not always legally or properly valued. "Today you can find a big price discrepancy for the same chateaus [in mainland China]," said Finance.
The ease of starting a new business in China and the difficulties in investing in other sectors such as real estate have lured investors to fine wine, further increasing pressure on demand for top labels. "When the duty went down, it was like a trigger," said Doug Rumsam, managing director at Bordeaux Index.
The Chinese focus on brands, rather than vintages, has also changed the investment side of the market, said Rumsam, opening the door to vintages that have not been easy to sell to Americans or British consumers. And everyone seems to see the potential. "People from Bordeaux, the U.S., U.K. and other countries are interested in this growing market, so the competition is very, very intense," said Finance.
But wine suppliers expressed caution, despite the show's high turnout. Many of the new Asian traders may not be in the business a year from now, they argued. They also emphasized the need to expand beyond the Beijing and Shanghai markets. "The big cities are important platforms, so you have to be present there," said Toru Yagi, president of Suntory's wine division. "At the same time, other cities, not yet developed today, have an enormous potential." Last year, Suntory purchased an 80 percent stake in importer ASC China, which has 800 employees and offices in 10 cities, to give itself a foothold in those markets.
Retailers and distributors are also realizing that there's a growing opportunity for mid-priced wines, between the grands crus and low-cost Chinese wines. "The imported wines are expensive and high quality, and facing them are domestic wines at very cheap prices," said Yagi. "In the middle, there is an empty space. The key will be to fill that space."
Washington state and Napa Valley vintners, showing at Vinexpo Asia-Pacific for the first time, saw opportunities for capturing some of that shelf space. "We're trying to expand our markets to new consumers coming up in China or Korea, and give them an opportunity to try our wines," said Jay Schuppert, president of Cuvaison, which distributes through local retail leader Aussino. "We've been talking about the potential of China for many years now and we are starting to realize the potential. A big part of it is Chinese consumer education and the younger demographic—they are not as locked into the first-growths or the image wines."
But with the 2009 futures campaign in progress and Bordeaux's dominant position in the Asian market, talk at the trade show focused heavily on how to get a supply of grand cru wines. "Allocations in the en primeur campaign will certainly be more difficult for everyone around the world," said Yip, who feared that Asian demand, not necessarily equivalent to real consumption, would create a speculative bubble.
"I was very surprised to see some retailers from the U.S. and Europe here to negotiate allocations from the châteaus to resell to the Chinese," said Finance. "So obviously China will have a big, big impact."
"For the 2009 futures, we expect to do more than 50 percent in Asia," said Jean-Pierre Rousseau, managing director of Diva Bordeaux, a négociant that sells to 35 countries. Rousseau said buyers in Asia had already bought some 2009 crus Bourgeois.
But the most common refrain during the three days of tasting and negotiations may have been the clamor for Bordeaux's most famous wine in China. "Château Lafite—they don't have enough to sell," said Hilda Chu of Aussino.

[JimHow]

I remember the textbooks in my poli sci classes as an undergrad back in the seventies used to say: Watch out for the Chinese, they have the population and the resources to dominate the world. Little did I ever imagine that thirty years later they would be keeping me from wines that I didn't even know existed at the time....

[Houndsong]

They have the population but not the resources, and therein lies something.

[Mike Christensen]

And the prices for Carruades de Lafite keep getting crazier. I just sold my remaining bottles of the 2000 on winecommune last week for $330 (????!!!!). I only regret that I wasted one by bothering to taste it. Perhaps worth the $28 I paid for it, but it's not worth even $100.

[JimHow]

That's insanity, Mike, like an idiot I drank all of my bottles that I got for $28.

[JonB]

That IS insanity. A quick check on winecommune shows the '04 Lafite asking price to be around $600-800 per 750. That's quite a spread from the sub-$200 price most of us bought this for.........

Next up, Smith Haut Lafitte.

[AlexR]

Napoleon said "Quand la Chine s'éveillera, le monde tremblera"...
Truer words were never spoken!

The journalist who wrote the Agence France Press dispatch is a friend.

Like so much to do with a study of Bordeaux, it is very hard to get hold of reliable statistics.
For instance, a lot of wine that is recorded as being sold to England in fact goes to Hong Kong.
And great growths can be sold and re-sold several times...

The fact is that no on knows for sure how big Asian demand will be.
For sure, I wouldn't pooh-pooh it.
There is plenty of money there among the elite. And a tiny elite in the country with the world's largest population still makes a heck of a lot of firepower.

All the best,
Alex R.