China no longer an El Dorado for Wine

Jancis_057 r.jpgChina was for long seen by wine exporters as El Dorado – a mysterious place that promised golden rewards if one could but crack the code. But that is now definitively unravelling amid signs that it is all very much more complicated and less promising than that, writes Jancis Robinson, pictured, left.

This is particularly so now that President Xi Jinping has so successfully enforced a crackdown on bribery and luxury goods. It was an open secret that a huge proportion of the once-booming market for wine in China was represented by “gifts”. In the good old pre-Xi days (two or three years ago), the sky was the limit for wine pricing. The higher the price tag, the easier it was to sell it to someone hoping to make a prestigious “gift” to a government official – and there are multiple layers of government in China.
Chinese producers, who of course understand the Chinese market much better than their foreign counterparts, were releasing wines, lavishly packaged even if the liquid itself was distinctly ordinary for up to 1000RMB (US$160) a bottle and they would sell. The natural tendency of the marketeers was to overprice. But now, as one trade observer put it ruefully, “wines have to earn their prices” and Chinese wine drinkers have become much cannier buyers – experimenting with a much wider range of labels.
Much to the dismay of those in the hotel and restaurant business, as part of the crackdown, charging corkage for those customers indulging in the common habit of bringing their own bottles has been officially outlawed. There is even a hotline for reporting those still applying such a charge.
One of the problems is the huge quantity of low quality wine that was imported in more optimistic times. Warehouses are still piled high with stocks that have been sitting there for two or more years. No type of wine is worse affected than classed growth Bordeaux. One Shanghai wine merchant told me he had seen First Growths piled high, all bought at prices way in excess of current market value, often by opportunist entrepreneurs rather than those with any real experience of the wine trade. It does not help that in better times, wine was so systematically faked and mislabelled.
The new austerity measures have resulted not just in a dramatic drop in wine imports but a considerable drop in the production of Chinese wine too, which makes one wonder since Nature was presumably blissfully ignorant of President Xi’s decree. According to Demei Li, one of the most respected wine consultants and academics in China, the past stratospheric growth of the wine market in China was “unhealthy”.
The government crackdown has affected those (many) wine companies built on the gifting market specifically but very few others are left untouched. Even Kerry Wines, an importer which enjoys the cushion of being owned by the Shangri-La hotel group, has been affected. Everyone is trying new directions now.
The Chinese distribution arm of the Catalan company Torres, for instance, which has seen its corporate business shrink by 90% in the last two years, has branded many of its 20+ retail outlets around China Everwines and has designed them so that they look like hip Barcelona bars. Some of their best sellers recently have been Joselito hams and, the accessory for the wine collector who has everything, ham stands!
Wine storage is a crucial aspect of the wine scene in China, not least because so few Chinese homes have much space. Since import taxes into mainland China are so high but are zero in Hong Kong, many high-end Chinese wine collectors keep their wine in Hong Kong where the number of specialist wine storage facilities – some of them in the most unlikely high-rise blocks – has mushroomed. This has helped to nurture the extraordinary growth in wine auctions in the ex-colony which have overtaken those of Europe and North America.
Truly the focus of the world of wine seems to have moved definitively east, and the market is now mature enough to have its own problems.
Jancis Robinson writes a regular column in Sommelier India WINE magazine. A longer version of this article appears in June/July 2014, available in print and digitally, via Magzter.

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