Week in China The Little Red Book A guide to how China is reshaping the global wine industry Brought to you by Winter 2014 www.weekinchina.com The Little Red Book Week in China Winter 2014 Contents 3 Introduction 5 China’s bubbly returns 15 A matter of taste 23 Growth story 37 A photographic journey 1 The Little Red Book Week in China Winter 2014 Red dawn ere’s something that the French probably Hdon’t want you to know: they like Big Macs so much that France is the second-most profitable market for McDonald’s after the United States. That might sound unlikely, but McDonald’s sales there look like being the best ever this year, as well. In January France’s bon viveur image took an - other knock following news that China had over - taken it as the largest consumer of red wine, quaffing almost 1.9 billion bottles in 2013 (the French drank 1.8 billion bottles). That marked a 136% increase from five years ago, with red wine consumption almost tripling in China in the six years from 2007, while it de - creased 18% in France. No doubt French nationals will be keen to point 1.9 billion out that – on an individual basis – they are still Bottles of red wine drunk drinking more than 30 times as much wine as by the Chinese in 2013 their Chinese counterparts. But ranked by total consumption China came out top, which isn’t bad for a country once re - puted to know so little about wine that its shiny- suited businessmen mixed their Lafite with lemonade almost as a matter of course. That kind of behaviour is largely consigned to the past. China’s top tipplers are growing more so - phisticated, and are as likely to be glimpsed bid - ding for Bordeaux’s top wines at auctions in Hong Kong, assembling a first class selection of first growths in their cellars in Beijing, or even buying P h o a chateau in Burgundy. t o S o How is China becoming more influential in the u r c e : world of wine and what does it mean for everyone J a n i else? The Little Red Book is designed as an intro - s M i g l duction to some of the main questions about a v China’s changing view of wine, as well as the likely s impact it’s set to have on the global wine market. Home with the harvest: a grape farmer from Yunnan 3 The Little Red Book Week in China Winter 2014 On a per capita basis the Chinese drink very lit - complaining about overheating prices. And again, The disruptive effect of changes in supply and tle. Uncorking a few more bottles each year would it is new interest from China that is often cited as demand even led to panic stories in the press last be a massive fillip for wine professionals every - the culprit. year, following a report by an investment bank where, boosting vineyards and wineries, as well as And it’s not just the customers for wine that are seeming to indicate a looming wine shortage (al - the coterie of middlemen and merchants that worried. In France there is grumbling about its though much of its analysis was pooh-poohed in support them. wine country being snapped up too, with the following months). On the other hand, there is a sense of unease chateaux and vineyards sold to Chinese buyers. So in section two of the publication we discuss about some of China’s newfound interest in wine, By mid-2011 the prices for investment grade the Chinese palate and look at which types of wine not least from lovers of the finer vintages who wine were sky-high. Then the market suddenly look most likely to benefit from growing sales in fear that they are going to be priced out of the best lost its fizz and prices have fallen dramatically in China. bottles forever. the years since. So in the first section of The Little Finally, we turn to a lesser-known aspect of Many long-term clients of Bordeaux from Eu - Red Book we look in more detail at the anatomy of China’s contribution to the wine world – the fact rope and North America were forced out of the the wine boom and whether Chinese demand was that it is already the fifth largest winemaker and market in 2009 and 2010 by escalating prices, for really to blame for the hike in prices. still growing fast. In the third section of The Little instance, or found out to their fury that their How about Chinese demand when it comes to Red Book we talk to insiders in some of China’s usual allocations had been diverted eastwards to buying wine for actual consumption? Could it go winegrowing provinces and we look at some of higher-bidders from Hong Kong and China. the same way as with the ‘investment’ world of the key challenges that its domestic producers Now that Bordeaux’s bull market seems to have wine, where Chinese buyers have been blamed face as they seek to compete against Old and New run its course it’s the Burgundy lovers who are for the rapid run up in prices? World imports. n The history of wine in China Traditionally, mijiu or “yellow wine” was made in China from The difficulty for China’s winemakers was that grapes sticky rice, yeast and water rather than grape, which is why the are more seasonal than other crops and they do not retain Chinese refer to wine today as putaojiu or ‘grape wine’ their freshness for long. This traditional rice wine is different to harder-hitting lo - So wine production didn’t really take-off until the end of cal booze like baijiu , which is made of sorghum, corn or bar - the nineteenth century, when European missionaries ley, but sometimes translated incorrectly into English as brought seedlings and new winemaking technology to China. ‘white wine’ rather than its truer description as white spirits. In 1892 an ethnic Chinese from Indonesia called Zhang But grape wines have a history in China dating back to the Bishi started the Changyu wine company in Shandong, em - Han Dynasty. Production probably started in present-day ploying the Austrian consul as his winemaker. Other winer - Xinjiang or Gansu, where the locals learned their techniques ies were established in the years after, mostly to supply the from the Persians. Grape wine was more of a luxury good, foreign communities living in the main Chinese cities. It enjoyed by the wealthy. Hence Cao Pi, who ruled the state of wasn’t until the late 1990s that wine volumes grew signifi - Wei during the Three Kingdoms period, praised it as “sweeter cantly again, following a government campaign to reduce than the wine made [ from cereals ] using ferments and consumption of cereal-based spirits (not just for the health Cao Pi: wine lover sprouted grain”. benefits, but also to reduce the pressure on the grain supply). Importantly it gave him less of a hangover too. “One re - More than a hundred new wineries opened between 1996 covers from it more easily when one has taken too much," he and 2004, ushering in the modern era of China’s wine pro - noted appreciatively. duction. n 4 1 China’s bubbly returns P h o t o S o u r c e : J a n i s M i g l Jade Valley vineyard a v s in Shaanxi The Little Red Book Week in China Winter 2014 A taste for wine investment P h o t o S o u r c e : R e u t e r s Christie's employees take notes during the auction of six bottles of 1999 Domaine de la Romanee-Conti in Hong Kong ecent wine doesn’t need signs to be hung out the wine trade, hoping to profit as the market hit Below, WiC pieces together the story of Asia’s D(好酒不用掛招牌 ) is a Chinese idiom with a unprecedented highs. wine boom – the build-up, the peak, and eventu - simple message: if something is good enough, it Today the picture is more subdued. The wine ally the bust (for some of its more unfortunate will sell on its own account. trade is busy supplying its current clients and participants) – including the inside view from Four years ago the proverb seemed to ring es - trying to win new ones. But there is far less of the four Hong Kong-based wine merchants who wit - pecially true in Hong Kong, the heart of the global exuberance that characterised the peaks of the nessed it firsthand. boom in fine wine. The city’s wine shops buzzed market a few years ago. Instead, the talk is more with visitors, its auction houses were announcing about the next phase of the cycle, and how in - Poised for take off new records for wine sales almost by the week, terest in fine wine in Asia is going to broaden, es - Hong Kong was the place that many rich Chinese and hundreds of new salespeople took up jobs in pecially in China. developed their interest for the wine world and it 6 The Little Red Book Week in China Winter 2014 continues to play that role today. So says Paulo Pong, who started Altaya Group –“a fax machine and me” – in the city in 2001. He built his business through word-of-mouth and his clients were Hong Kong-based for the first few years.