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  1. Wealth
November 7, 2012updated 29 Jan 2016 4:44pm

Chinese Collectors Are Not Only Buying Bordeaux Wines But Vineyards Too

By Christopher Silvester

Red Red Wine The Chinese have fallen in love with Bordeaux, and they’re not just buying its wines they’re now collecting vineyards too, says Christopher Silvester

Red Red Wine
The Chinese have fallen in love with Bordeaux, and they’re not just buying its wines — they’re now collecting vineyards too, says Christopher Silvester

TWENTY-FIVE YEARS ago the words ‘Chinese’ and ‘Bordeaux’ were rarely mentioned in the same breath. Apart from a handful of wealthy individuals in Hong Kong, few Chinese drank what the English call claret. Today, however, it is commonplace for the two words to be coupled together: last year China overtook Germany and the UK as the biggest export market for Bordeaux wines.

Not only have Chinese buyers driven the market for Bordeaux first growths during the past decade, causing the great Lafite asset bubble, but Chinese UHNWs and companies have begun to buy vineyards in the Bordeaux regions. There have been around 30 completed sales of vineyards to Chinese buyers since 2008 and there are probably around twenty more in the pipeline. ‘Many Chinese dream of owning a château in Bordeaux,’ Zhang Jinshan told the South China Morning Post in May, three months after buying Château Grand Mouëys d’Au in the Entre-Deux-Mers region.

What sort of Chinese UHNWs are doing the buying, and why? And does it strike fear into the Bordelais? According to Alex Hall, director of the Bordeaux property agent Vineyard Intelligence Direct, as many as a third of the 8,200 producers in Bordeaux would probably sell up if they received a reasonable offer.

The first Chinese person to buy a Bordeaux vineyard was a woman named Haiyan Cheng, whose family made its fortune in property development. Since acquiring Château Latour-Laguens in 2008, she has distributed its entire production of 160,000 bottles a year in China, through her own wine importing business. She was soon followed by Hong Kong A&A International, a luxury-goods company which acquired a controlling interest in Château Richelieu, and in November 2010 an unidentified Chinese shipping billionaire bought the Château Chenu Lafitte estate as a gift for his son, a student in London. In the case of Château Latour-Laguens and Château Chenu Lafitte, the names of the estates sound very close to the names of first growth classification estates, which may help explain their appeal to the brand-obsessed Chinese.

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The Chinese movie star Zhao Wei bought the seven-hectare Château Monlot, which produces a Saint-Emilion grand cru, and she plans to spend €5 million on improvements with assistance from French experts. But the Chinese businessman with the biggest commitment to Bordeaux so far is Qu Naijie, whose Haichang Group includes shipping, property and theme park businesses. He has bought no fewer than five châteaux.

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When the China Oil and Foodstuffs Corporation, a state-owned agribusiness, bought Château Viaud, its vice-president Chi Jingtao explained that a key motivation was being able to control the supply chain to ensure the quality and authenticity of the product: ‘We have a strategy for constructing a complete chain from production to consumption to guard against forgeries and to reassure our clients. Being involved from the vineyard upwards in Bordeaux helps to strengthen this commitment, and investing in vineyards internationally is part of the fight against fraud.’

Another motivation is to tap into the growing interest in wine tourism, especially among Chinese visitors to Bordeaux. Zhang Jinshan will offer hotel accommodation to Chinese guests at Château Grand Mouëys d’Au and will open a Chinese restaurant there that will be managed by a restaurateur from Guangxi and will showcase cutting-edge Chinese chefs. Planning permission has been obtained for tennis courts and a nine-hole golf course, and he dreams of creating a spa hotel if demand is sufficient. Zhang’s goal is for 10,000 Chinese visitors a year to the château, but he is not neglectful of his primary purpose of producing wine. Retaining a French oenologist, the château has begun to increase the density of its vines and has bought new harvesting equipment. Increasing the quality of the wine is also a goal.

MOST CHINESE VINEYARD owners in Bordeaux are reserving their entire production for the Chinese market. Hong Kong tycoon Steve Loo is distributing 200,000 bottles from his Château Lagarosse in mainland China through his wine importation holding company Carlico International, which has a network of 30 shops, twelve offices and 400 distributors. Global oversupply is not a problem for the Chinese, who are only just beginning to drink and appreciate wine, but for the time being Bordeaux wines are those for which they yearn above all else.

For many wealthy Chinese vineyard investors in Bordeaux, the principal motivation is to become even richer. Remember Deng Xiaoping’s adage from the era of China’s initial capitalist dash for growth — ‘To get rich is glorious’? By cutting out the négociants (the Bordeaux middlemen) or local collective and selling the entire production of modest châteaux into an eager but unsuspecting Chinese market bewitched by the mere name Bordeaux, shrewd investors will ensure vast bottom-line profits — at least until the market catches on.

‘I believe they’re doing it first of all because wine’s in fashion and it’s part of today’s etiquette de vie,’ says John Kolasa, managing director of Château Rauzan-Ségla in Margaux and Château Canon in Saint-Emilion, which are owned by Chanel. ‘The Chinese are only buying petits châteaux, in the Côtes de Bourg and the Côtes de Bordeaux, and it’s simply because they want to make money. They buy these wines that would normally be sold at €2 or €3 a bottle, but they want to sell them at €15 or €20 or more. They are doing it for the Chinese market.

‘They’re not stupid. They won’t buy a Calon-Ségur or a Lascombes or something like that, because they know they can’t multiply the price by five. That probably will come, but for the moment it’s purely business. If they sell the entire production of Château Plonk in China, nobody else is selling it. They can control, for a period of time, what’s happening, because nobody’s going to be able to compare their prices to what other people might charge for the same wine. If they buy Château Latour and try to sell it, then all the distributors are going to be comparing prices, and that jeopardises their possibility of making money.’

THE BORDELAIS HAVE reacted calmly to this incipient invasion. The hectarage given over to wine was already shrinking as some producers sold land close to urban areas for property development and others, wishing to maintain the integrity of their landholdings, have accepted EU subsidies to grow alternative crops. Not every producer has their own winemaking facility.

Indeed, some 20 per cent of the Bordeaux crop is sold to co-operatives for relatively low prices. The estates of producers who are reaching retirement age and are without offspring are ripe for the picking. As for the négociants and brokers through whom the Bordelais have traditionally supplied the market, few are yet suffering as most of the châteaux that have been bought were not selling their wine through them in the first place.

The reaction in Burgundy to the first sale of a vineyard there — the illustrious Château Gevrey-Chambertin was bought by Louis Ng Chi-sing, a businessman who works for Macau gambling magnate Stanley Ho — was greeted with anxiety by the local syndicate president, even though Ng will restore the buildings using an architect experienced in heritage projects and is committed to using French viticulturists and workers.

Eddie Yuan of Hong Kong-based Langfan Consulting, who has brokered a handful of Bordeaux estate sales to Chinese owners, believes that such sales will peak in a few years’ time when the Chinese market matures and discovers that it is paying too much for modest Bordeaux wines.

‘The Chinese are learning very quickly,’ says Kolasa, ‘but whether they’ll actually go into the classified growth sector I don’t know.’ But if a Pearson Group can buy Château Latour or a Chanel can buy Château Rauzan-Ségla and Château Canon, then it is surely conceivable that a Chinese buyer will buy a leading Bordeaux vineyard at some point. After all, if the Chinese are so obsessed with buying leading-brand wines to drink, why not buy a leading-brand wine business?

In the meantime, however, Chinese UHNWs seem happy to sell Bordeaux in China for what European buyers would consider grossly inflated prices and use the profits to stock their personal cellars with those luminous first growths.
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