Can China drink more French Bordeaux than France is producing? Apparently so, if statistics for top Bordeaux consumption in China are correct – by a factor of 8 or 9.
The Shanghai Times reported one enterprising merchant is importing bulk reds through Hong Kong, then bottling them aboard a factory-ship into recycled and fake bottles from the Chateau Lafite Rothschild wine estate. CCTV, the national broadcaster, cited the case of a 5-star hotel in Dongguan, South China, moving 40,000 bottles of Lafite annually. The Chateau Lafite Rothschild annual allocation to the entire China market is only 50,000 bottles.
The scale of fakery appears to be breathtaking. Although the fabled French vintner produces about 200,000 bottles annually, China records some 3 million bottles sold every year, making 80-90 percent of Lafite fakes. Lafite sells for US$7,800 a bottle at some restaurants. Formal business entertainment is expected to serve Lafite as the dinner wine. Businessmen dare not disappoint their guests. Empty bottles of real Lafite trade at near US$450 a bottle to recyclers.
Like the European luxury handbag, watch and couture labels in China, serious punters have more confidence in purchasing the same brands in Hong Kong.
Hong Kong becomes the world wine auction capital
In 2008 the Hong Kong government abolished all taxes on wine. The number of wine-related companies registered in 2008 was 850. By 2010 that grew to 3,550. Staff engaged in the wine trade increased from 5,000 to 40,000. The zero-tax situation catapulted the city into auction-wine parity with London and New York. Much of that demand comes from China, where a combination of hot money and the new rich seeking social status have rushed to this liquid asset.
Wine auctioneers Christie’s and Sotheby’s of London plus New York’s Acker, Merrall & Condit, have enjoyed record sales and profits in Hong Kong from 2009. They now hold multiple auctions through the year in Hong Kong of vintage Bordeaux and private collections.
"One must have a nuanced view of the market. Taiwan, Hong Kong and Singapore have relatively mature buyers, says Charles Curtis, Christie’s head of wine sales. “Mainland China has the characteristics of a newer market. They tend to focus on the top-line stuff, which explains why sales of Bordeaux such as Lafite-Rothschild and Chateau Haut-Brion have skyrocketed."
Serena Sutcliffe, Sotheby’s wine chief adds: "They’re building bigger houses and want a cellar. It’s an important part of business and social life."
Even the real stuff gets spoiled
Stephen Quinn who taught for a year at Ningpo and writes a weekly wine column for China Daily, is appalled by the lack of proper wine storage.
"I encountered some dreadfully abused imported wines,” Quinn says. “Good labels which on uncorking, displayed none of the aroma, flavor or taste that I associated with them – a sure sign of storage-trauma from Europe and within China. Temperature and relative humidity fluctuations can kill the best of wine. It is fragile like cigars."
Quinn, who now works and lives in Hong Kong, says he is relieved to be in a city with a more mature wine culture and responsible merchants. He is all too aware how local traders exploit the China market where consumers readily believe everything they are told about wine. He blames the Robert Parker factor for the excitement about red Bordeaux for investment and banquet wine status.
"Most Chinese food does not pair well with red Bordeaux,” he says. “But people still try to match them – with disastrous consequences for the cuisine and the diners."
Annabel Jackson teaches at the vocational hotel school in Macau, Instituto de Formacao Turistica (IFT). She is impressed by the hunger for knowledge about wine among her students, about a third of whom are from the mainland. Her students prefer white wines over red due to their natural sweetness, lack of tannic bite and New World reds (less ‘sour’) over Old World reds, she says.
Jackson says there are temperature-storage-transport issues with Hong Kong as well below the premium distributors. Many local Chinese, inhibited by language and perceived cost, frequent local stockists in the New Territories and Kowloon who also ply Chinese restaurants with red Bordeaux.
Stomping Grapes in Hong Kong?
In 2003 the Mainland-Hong Kong Closer Economic Partnership Agreement (CEPA) was signed which exempted Hong Kong-produced goods from mainland duties. China imposes a tariff of 14 percent, a VAT of 17 percent and a consumption tax of 10 percent on imported wine. The elimination of the import tariff lowers the effective tax rate considerably and allows competition with domestic producers at the budget end.
That has already attracted the attention of Canadian entrepreneurs. Hong Kong now has two "wineries" in industrial buildings which import US and Italian grapes to be pressed, fermented, barreled and bottled, qualifying as ‘made in Hong Kong’ products for CEPA access. The price for these Hong Kong-processed wines ranges from US$25-$39 per bottle. Production capacity is estimated at 100,000 bottles annually to satisfy growing mainland demand.
The 100-point Parker Rating Arrives
Lawyer Robert Parker who publishes the Wine Advocate, created a 100-point rating system to score wines, providing American consumers a dummy’s guide. The country of fast food and instant coffee took to that instantly. Retailers badged Parker ratings on bottles. Consumers looked no further.
A one-man wine rating industry was born in 1978, establishing as Parker the Pope of Wine, displacing the small band of wine critics in London whose florid prose left most wine drinkers perplexed. The British critics did not aspire to be sales agents – just eccentric and amusing purveyors of purple prose, aficionados talking over the heads of ordinary folk.
Parker made wine accessible by reducing taste to simple numbers, vaulting into prominence when he called the 1982 Bordeaux vintage ‘superb’ when other critics faulted it for being too ripe and lacking structure. That continues to elevate the 1982 vintage above others in China and elsewhere even now at auctions. The 1982 vintage has disappointed many when actually decanted.
In London a whole new ‘alternative asset class’ index called the Liv-Ex 100 administered by the London International Vintners Exchange has been established. In 2006 Liv-Ex 100 was added to Bloomberg’s list of financial indices. The Liv-Ex 100 tracks 100 top wines, 91 of them Bordeaux with the token other nine spread across Burgundy, Rhone, Champagne and Italy.
James Miles, the managing director of Liv-Ex 100, declares that the index includes wines that have scored at least 95 on the Parker scale. "He is the Standard & Poor’s or Moody’s of the wine market. Liv-Ex is benchmarked around Parker." James predicts that the rush to investment-grade fine wines as a store of rapidly appreciating value is "a warrant on wealth creation."
The prophet loses credibility
Parker’s Wine Advocate states: "…wine is no different from any consumer product. There are specific standards of quality that full-time wine professionals recognize." That suggests wine drinkers defer to a coterie of ‘full time wine professionals’ who will reduce taste to numbers. He has held the wine market hostage for nearly four decades, perhaps more by default than by design.
Jancis Robinson, OBE, Master of Wine, editor of the The Oxford Companion to Wine and weekly columnist for the Financial Times, dismisses Parker’s 100-point system as needlessly rigid and pretending an objectivity which does not exist – given the subjectivity of taste and ageing development of wine over time. As President of the WineCreator conference in Ronda, Spain in 2008, she reminded wine critics that "we have only one palate" and urged them to be humble, noting that they have a ‘parasitic role’ in the wine trade.
Parker claimed in an interview in The Atlantic Monthly (Dec 2000) titled "The Million Dollar Nose" that he tastes 10,000 wines annually and can remember all of them down to the scores. At a 2009 blind tasting of 15 wines of the Bordeaux 2005 vintage organized by Executive Wine Seminars, however, he failed to correctly identify any of them and confused left bank wines with right bank ones (The Gironde river divides Bordeaux into St Estephe, Pauillac, St Julien & Margaux appellations on the Left Bank which are Cabernet Sauvignon dominated and the more Merlot based Right Bank of Saint-Emilion, Pomerol, Bourg & Blaye).
Tellingly, Parker was unable to identify his top-rated (100 point) L’Eglise Clinet and confused a Lafite (from Paulliac) for Troplong-Mondot (St Emilion). Dr Tyler Coleman, author of Wine Politics: How Governments, Environmentalists, Mobsters and Critics influence the Wines we Drink, reported this in his Dr Vino Blog, noting that Parker’s top-ranked wine of the evening (Le Gay) was the one he rated lowest in his scores for the 2005 vintage. Nonetheless, fine wine auctioneers and retailers in Hong Kong and China are pushing the Parker ratings as the fastest way to peddle Bordeaux, even plonk from Chile, just as media and critics in the West wean away from that dependency.