Flashback Friday: Cracking the Chinese Wine Market

The news from my friends in Portugal is that exports to China are rising, which reminds me of the first time I wrote about Portuguese wine in China back in 2010. Here is a Flashback Friday reprise of that column.

Portuguese Wines in Beijing

President Obama wants to double U.S. exports within five years. With this in mind he recently sent Commerce Secretary Gary Locke to Hong Kong to sign a Memorandum of Understanding (MOU) on Cooperation in Wine-Related Businesses. The press release says that

The United States is one of the leading wine-producing countries in the world, and American wines have been growing in stature internationally for decades as people around the world have learned what American wine producers and consumers have known for years: American wines are outstanding,” Locke said. “Working with the Hong Kong government, we want to create opportunities to heighten exposure to American wines in Hong Kong and the region. This MOU will help do just that.

“Hong Kong and the region” … I think that would be code for China. Everyone wants to crack the Chinese market, something that is easier said than done. I’ve written about this problem before (see “Wine and the China Syndrome”). Sean, one of our recent graduates, wrote his senior thesis on the challenges and opportunities of exporting Washington wine to China. Sean identified a number of significant political, economic and cultural barriers that American wine exporters must overcome. He was optimistic regarding the long term, but very cautious about short term success. (Secretary Locke, you might want to give Sean a call.)

Cracking the Chinese Market

Everyone looks hungrily at China with its growing economy and expanding consumer base. But it is hard to break in. Bulk wine imports are substantial (imported wines get blended with local products and labeled “Chinese wine”), but at unsustainably low prices. No future there.

France and Spain have had better luck. The French have been able to leverage their reputation and the prestige of their finest producers to carve out a attractive niche markets for Bordeaux and Champagne as luxury products.

The Spanish achieved success through old fashioned hard work. They have partnered with Chinese wine producers in both production and distribution. If Chinese wines are improving in quality (and I understand they are) then this is at least in part due to technical improvements facilitated by joint ventures.

Miguel Torres has been particularly active in partnerships and ventures of all sorts. You might be interested in their everwines project, which was recently launched in an attempt to develop a western style Chinese wine culture. If you check out the site be sure to click on the Online Shopping link to purchase a variety of international wines in the $20 range and also Opus One for about $550 and a first growth Bordeaux for more than $1200.

Any Port in a Storm

The U.S. is obviously not the only wine producing country with China on its mind and  I was pleased to receive an invitation from ViniPortugal to participate in their recent China seminar program and tasting of Portuguese wines. Sixteen winemakers flew from Lisbon to Beijing to present and promote their wines. A good chance to observe this Old World wine country’s China strategy in action.

Beijing is a long way to go for an afternoon tasting, so I was represented by my crack China wine research team, Matt Ferchen (Assistant Professor of International Relations at Tsinghua University) and Steve Burckhalter (who works as a translator for the Chinese public relations firm BlueFocus). Matt and Steve are former students of mine at the University of Puget Sound and keen observers of rapidly changing Chinese markets.

Matt said that he was impressed with the wines he tasted.

The first wines I tasted, and the ones I ended up liking the best, were from a cooperative called Adega Coop. De Borba.  A couple of the wineries were family owned and there was a kind of earthiness to the wines that I really enjoyed.  I was especially impressed with the Portuguese whites, which were all very crisp and I think would go very well with spicy Chinese food.

I find that most of the wines available in Beijing, both foreign and Chinese, are expensive and mediocre or cheap and bad.   Across the board the price to quality ratio was just excellent and I really hope that some of these wineries can find distributors here … [but] …there was only one of the wineries that had any presence in Beijing.

So the product is good and a good value. But that doesn’t necessarily solve the Chinese market puzzle.

Most of the representatives seemed rather disappointed that the turnout at the tasting was quite small and that many of those who were in attendance weren’t in the wine business (i.e. they didn’t see many prospects for finding distributors even if they found possible retail customers).  I was asking some of the representatives why Portugal seemed so far behind Spain in terms of entering the Chinese market, especially given what seemed to me the outstanding quality of their product.  The answer mostly just seemed to me a question of focus, that somehow the Spanish wine organization was just more aggressive about getting Spanish wines to China and advertising.

Steve also commented on quality and value — and the problem of focus and establishing reputation.

The[seminar] speaker, who I believe was a Chinese man from Macau, noted the long history of wine making in Portugal, the long time presence and popularity in Macau (“We drink this all the time in Macau”), the diversity of wines they are able to grow thanks to the wide range of different climates in Portugal, wines unique to Portugal – such as a “green wine” they grow in the North, which he reasoned would do well in China, being ‘fruity and sweet’ – and finally he also stressed that “Nearly all Portuguese wines are reasonably priced. It’s hard to find any in excess of 2000 RMB.”

He also expounded on why Chinese outside of the Southeast regions don’t care for white wines, which I found interesting. As for the growers and the distributors, there was some diversity to be found in “Brand Portugal”. Interestingly, some were insistent on showing tasters how they straddled both New and Old World wine making (actually, the speaker also touched on this, going on about a vineyard that had invited Australian winemakers to teach them in the ways of new world wine). Others, however, were insistent that they were exclusively Old World – “Portugal is Old World. How can it be New World – that’s not us.”

In response to how they were looking to position their wines, one of the winery reps said that they were looking to focus on promoting, above all, their grapes: the varieties, why they grow so well in Portugal, etc. And their other edge (which I heard from several people) is in pricing, “what you get for X RMB in a Portuguese wine is better than what you get for X RMB in a French wine.” That tended to be the dual answer whenever someone brought up how Chinese people generally went straight for French or Italian wines.

A Wineglass Half Full. Red or White?

Based on Matt and Steve’s reports you can be either an optimist or a pessimist regarding Portuguese wines in China. The upside is that there are many potential advantages, cost being one of them. It is obvious that Portuguese winemakers would like to be seen as a “value” fine wine and avoid the cheap and anonymous bulk wine trap. Good thinking.

But then there is a bit of an identity crisis. Old World or New? Well, both – a harder sell. Focus on regions or grapes (or both)? That requires a substantial sustained education program.

Even the most basic question is problematic: red or white?  Westerners know that crisp whites like Vinho Verde taste great with Asian foods – great to westerners, anyway. But, as has often been said, the first duty of wine in Asia is to be red.

I’m cautiously optimistic about Portuguese wines in China, especially if they can settle on the right focus and sustain the education/marketing efforts. But they have a long way to go.  Steve reports that “I noticed at a store (targeting Western tastes) last night the only Portuguese wines (out of hundreds and hundreds) were four Ports. Haven’t been to Carrefour in a while, but I bet it’s the same deal.”

Good luck to Portugal – and to American winemakers, too, of course.  China is a key market for the future. But scaling the Great Wall is a real challenge and many will fail in the attempt.

Book Reviews: “Thirsty Dragon” and “A Decent Bottle of Wine in China”

Brief reviews of two new books on wine in China.

Suzanne Mustacich, Thirsty Dragon: China’s Lust for Bordeaux and the Threat to the World’s Best Wines (Henry Holt, 2015).

Suzanne Mustacich’s new book is rightly being hailed as one of the wine books of the year (the Financial Times named it one of 2015’s best business books). It is a great read and deserves both critical acclaim and your attention.

I have tried to follow the China wine scene closely over the last ten years, but I still found that I learned something new in every chapter. Mustacich deftly connects the dots and supplies depth and detail. The stories she tells are incredibly interesting and relevant. Each chapter reads like a New Yorker magazine investigative reporting piece — that’s meant as high praise.

In broad terms, you might say that Thirsty Dragon is a love story. First China discovers that it loves Bordeaux, then Bordeaux realizes that it desperately needs China whether it loves her or not, then finally China realizes that its lust for Bordeaux might have been a mistake. In the end we have Chinese-owned Bordeaux chateaux and French investments in China and, in a funny way, if is hard to know where one set of influences and dependencies stop and another begins. Bordeaux may never be the same after its China fling and China has changed a lot, too.pogo-we-have-met-800wi

Along the way we are introduced to many fascinating personalities, both the usual big time suspects and smaller players whose stories reveal a great deal.  This is the perfect book if you are interested in China or in Bordeaux or in wine or in how globalization is changing business culture. Highly recommended.

The subtitle suggests a “threat to the world’s best wines” and I struggled just a bit trying to decide what Mustacich meant by this. Is the threat due to fraud and counterfeit, which are analyzed in detail here? Is the threat the collapse of Bordeaux’s en primeur system, which is analyzed in detail. Or is it the of the rapidly growing Chinese wine industry itself, with its peculiar characteristics?

Certainly Bordeaux has reason to feel threatened by changing economic circumstances, but it is not clear who is to blame for that! Sometimes, as Pogo said, we are our own worst enemies.

I was fortunate to moderate a panel discussion of wine in China that featured Suzanne Mustacich and I asked her about the threat. Two threats, she said. The first is from the rampant fraud, which undermines the market for top wines. The second was the greed that drove China’s speculative wine bubble. I agree, that’s a real threat — one of those Pogo problems.

Thirsty Dragon is a must read if you want to understand how China is transforming the world of wine.

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Chris Ruffle, A Decent Bottle of Wine in China (Earnshaw Books, 2015).

Chris Ruffle is a Chinese-speaking Yorkshire native who specializes in finance. So it makes perfect sense that he would decide to plant vineyards in Shandong and build a winery designed on the model of a Scottish castle. His quest to produce A Decent Bottle of Wine in China is a very personal account of his ten-year castle-building, vineyard-planting, wine-making journey.

Ruffle writes that he began this book project intending to write one of those popular romantic ex-pat stories like A Year in Provence or Under the Tuscan Sun, but the business side of the winery just wouldn’t be left out. Indeed, much of the book follows the author and his family as they deal with pesky neighbors, inconvenient local officials and inefficient workmen and contractors in a very Year Under the Shandong Sun sort of way.

But the book this really reminds me of is Caro Feely’s excellent Grape Expectations: A Family’s Vineyard Adventure in France. Feely and her family moved from Ireland to France to follow their dream and the winery they restore is nobody’s idea of a castle, but otherwise there many similarities. Both books teach a lot about wine-growing, wine business, the clash of cultures that ex-pats experience, and the power of wine to overcome obstacles.

One big difference is that the Feelys went all in on their project. No day job safety net. Ruffle kept his investment fund job and it is a good thing. Ten years in and with enormous work and investment, his Treaty Port winery is just about breaking even (if, of course, you don’t count the value of his time).

But, and this is the point, he is by his own account finally making that decent bottle of wine in China and not losing too much money in on each sale! A fascinating story, full of great information about China, wine and life.

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These two books could not be more different, but because they are both about wine in China I kept waiting for them to intersect. And they did in at least two places.

Mustacich gives a good account of both Chinese wine investments in France and French projects in China. One of these is a vineyard and winery that DBR Lafite, one of the most famous Bordeaux names, has built-in Shandong. In fact the project is next door to Ruffle’s Treaty Port winery and the first Lafite Chinese vintage was actually made in Ruffle’s cellars.

This would seem to give credibility to Ruffle’s project, and it does, but I feel a little sad for Lafite because Ruffle reports all sorts of mold and fungus problems in the vineyards (not especially good news for nearby Lafite) and, just when it looks like things are getting better, the government decides to build a big highway through both the Treaty Port and Lafite vineyard properties. Yikes!

The award-winning Silver Heights winery is featured in Thirsty Dragon and it makes a cameo appearance in Ruffle’s book. Chris Ruffle and his wife make a trip to visit this highly regarded producer and, at the end, Chris’s wife turns to him and says she’s really glad they went. They are even crazier than you are, she says. Always good to put things in perspective, I guess!

Do you have to be crazy to make a decent bottle of wine (in China or anywhere else)? I will leave that up to you.

Thirsty Dragon? Symposium on the Wine Trade in China

Suzanne Mustacich’s new book about wine in China, Thirsty Dragon: China’s Lust for Bordeaux and the Threat to the World’s Best Winesseems to have captured the wine world’s imagination.

Jancis Robinson raved  about Thirsty Dragon in her regular Saturday Financial Times column. This is a bigger deal than than you might think because Jancis is generally too busy writing great books to take time to review them! Thirsty Dragon clearly is something special.

My copy hasn’t arrived yet, so look for a book review here at The Wine Economist in a couple of weeks. In the meantime some of you in the Seattle-Tacoma area can meet the author, learn more about wine in China, and taste Chinese wines.

Wildside Wine in Tacoma is hosting a program called Symposium: The Wine Trade in China on Monday, November 30 at 6:30 PM. The cost is $25 , which includes wine and h’ors d’oeuvres. The event is nearly sold out, but if you are interested check with Carol at  wildsidewine@comcast.net.

I will be there to add what I can to the discussion, but the featured speakers will be the  China experts: Suzanne Mustacich and my academic colleagues Pierre Ly and Cynthia Howson, who have recently returned from another fieldwork expedition to China to gather information for their own forthcoming book about the Chinese wine industry.  I’m looking forward to meeting Suzanne and learning more about the Thirsty Dragon!

Developing a Market for Chinese Wine: Tourism and Education

Here is the final post in the series on the Chinese wine industry by Cynthia Howson, Pierre Ly and Jeff Begun. It has been very revealing to see aspects of China’s wine industry through their eyes! Thanks to all three for so capably filling this space while I have been away. I hope to persuade them to give us brief reports of their future research fieldwork.

Developing a Market for Chinese Wine: Tourism and Education

by Cynthia HowsonPierre Ly and Jeff Begun

Like many sectors of Chinese economy, the wine industry is growing at breathtaking speeds and we were excited to spend a month finding out how it’s happening. Our last posts talked about how China is developing distinct terroirs and the arrival of world class wines, but there’s more to the industry than the best tasting wine. It’s not just the huge production (now 6th in the world), or the arrival of awarding winners like Jiabelan and Silver Heights. It’s the bevy of chateaux, wine museums, resorts and tourist activities that seem to be popping up faster than customers can fill them. Are there really consumers to justify the small European town at Changyu AFIP? What about the entire roads lined with just-opened wineries and resorts in Ningxia, where a long vine separates lanes and signs are shaped like wine bottles?china3a

Recently, Mike wrote about the “amenities gap” in Yakima, Washington, where some say there aren’t enough restaurants and hotels to attract visitors, but there aren’t enough tourists to attract investment. But in China, investors seem more than happy to tolerate some empty hotels and restaurants as they anticipate (and promote) future demand. Of course, each new business or infrastructure project helps provincial governments to achieve very high economic growth targets, so the environment for investment matters. But it’s not enough. The seeming promise of an insatiable and growing consumer market in China continues to draw investors from around the world. (The documentary, Red Obsession, shows a China passionate about buying and making expensive red wine and it’s easy to forget that most Chinese people never drink wine, and many others add Sprite).

An Insatiable Market? Developing a Taste for Wine

Industry experts and winemakers repeatedly told us that the Chinese consumer market is bigger than they can satisfy and it continues to grow. But, they are also concerned about marketing to average consumers, people developing a taste for wine when most still prefer spirits (baijiu) or beer and serious wine lovers tend to be biased toward imports. For the winemakers, of course, there are always concerns about a stable and consistent grape supply. High quality wine is a notoriously costly and long term investment, so it’s not surprising that young wineries are not yet profitable. The search to define a style that will distinguish a Ningxia cabernet sauvignon and the ability to coordinate wineries toward the development of appellations is still in the earliest stages. What is unusual in China is that there are resorts and wine clubs when the wines may be largely unknown or difficult to find.

Of course, many resorts and clubs are beautiful, but not yet full or profitable. The crowds have yet to arrive, but investors seem confident enough to continue building. So, what is binding construction companies, real estate moguls and foreign wine merchants in their faith in the Chinese wine market?

There is something to be said for accessing the largest market in the world. Indeed, the most famous wineries have no trouble attracting crowds for their tours and it is worth noting that the tasting at the end of the tour is not an important part of the experience. Some people skip it. Others seem to find it amusing. We appreciated the insight of one expert, who told us that when the tasting seems deemphasized, it’s probably not the best part of the tour.

The picture here is the Changyu Wine Culture Museum on a typical day. The museum is packed with tourists, attracted to the beaches of Shandong Province for the summer holidays. On another tour, we invited our taxi driver to join us. Although more of a beer drinker, he told us about the founder of Changyu Winery in 1892 and took his own pictures in the museum.   china3b

So, unlike other wine regions in the world, the infrastructure for wine tourism is appearing in China before the actual tourists. And, the tourists may be willing to come when they are not (yet) wine drinkers. We saw photo shoots with blushing brides and families learning about wine tasting, but what struck us was the number of people who were interested in wine even though they claimed not to like the taste of wine.

Of course, true connoisseurs aren’t left out. They will find wine clubs where they can not only blend their own wine, but actually pick and crush their own grapes before fermenting their own wines. Meanwhile, for families looking for something to do on the weekend, there are day trips where grandparents can play mahjong under a beautiful trellis and kids can pick grapes, run around, and at one wine chateau, they can even play drums or a game of foosball in the wine bar.   Indeed, wine tourism in China has something to offer for everyone.

Wine in China: Government Investment, Civil Servants and Hospitality

I’m still in Australia (soon to step aboard a flight to Tasmania) and, through the magic of the Internet, simultaneously in Mendoza, Argentina, where I am a member of a virtual panel of experts (or is that a panel of virtual experts?) addressing the competitiveness of Argentina’s wine industry at the IX Foro Internacional Viniviticola. I guess you can be in two places at once these days!

Last week’s column by  Cynthia Howson, Pierre Ly and Jeff Begun on the search for Chinese terroir generated a lot of interest. Here is the second part of their report. Come back next week for the final installment.

Government Investment, Civil Servants and Hospitality in China

by Cynthia HowsonPierre Ly and Jeff Begun

 In the last post, we talked about the diversity of Chinese terroir and how the distinctive features of each region might be developed. It’s no secret that the government is a major player in the Chinese economy and wine is no exception. Each winery we encountered depends on some form of support or relationship with local government officials, usually at the local level (town, county or prefecture). And each wine producing region has a provincial government that is committed to upgrading in some way, but the issues they face and the resources they can provide vastly different.

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In this photo, a couple poses at the “World Wine Walk”, a street in Yantai, Shandong, where city has built a beautiful space to highlight the wine industry. Presumably, wine shops or other stores will fill the vacant spaces, but for now, it is just a very pretty place to walk near the beach and restaurants.

The State as Public Investor, Institutional Facilitator and Quality Control Monitor

Crucial government support can come in the form of investment, cheap credit, infrastructure or institutional support, like facilitating contracts or coordinating farmers. Each of these is critical and is likely to affect the types of wineries that will be most successful in each region. For some wineries, relationships with farmers require careful, daily supervision. In one case, the village head provides much of the human resource management for a winery, coordinating day laborers and making sure the vineyard has the right workers at the right time. Elsewhere, a manager for a large corporate winery said it’s not so much about financial support as good policy, helping to coordinate with banks and institutions. “They don’t interfere,” he said.

In Ningxia, local governments encourage new wineries by providing electricity, irrigation, pavement, signs on the road, subsidies for imported vines and even funds to invite foreign consultants and prizes for award-winning wineries. In Shandong, local governments coordinate lease agreements with farmers so that a winery can establish a single vineyard and control its grapes even if dozens of different farmers control the small plots of land.

Interestingly, the role of government as regulator came up less frequently in our discussions, but it is one of critical determinants of a successful wine industry. Pollution, pesticides and food safety are all critical features of a healthy vineyard and are very sensitive topics in China. Indeed, a 2012 scandal over contaminated wine stoked concerns about the largest producers and whether food safety inspectors should become stricter about pesticides. We took this photo of a pesticide-laden cluster at a major state-owned winery (although this may be just a very large demonstration vineyard).

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Needless to say, this is not what the grapes looked like in most of the vineyards we visited, including those of small farmers.  However, several wineries expressed concerns about producers using pesticides that are banned in China (where regulations are already looser than in Western countries). This is a particular concern in Shandong, where humidity is most threatening and where, it’s worth noting, some farmers are hesitant to eat the skins of their own grapes. Here, efforts to tighten enforcement of environmental regulations could be facilitated by ongoing efforts to promote agribusiness over more diverse types of wineries.

Another Public Investment: Government as Customer

The most successful wineries benefit from government contracts for banquets and from civil servants as high end customers. Those sought after consumers are not just wine drinkers, of course, but collectors, and most importantly, those who purchase wine as gifts. It’s no secret that gifts are an important part of business negotiations in China. Some experts have pointed out that a market for extremely expensive Chinese wine has benefited from civil servants and business magnates who are looking for an appropriately priced gift. Such a gift need not be consumed. At other times, negotiations might involve fancy banquets or informal meetings, where the spirit of friendship is facilitated by a meal and a bottle. Indeed, most people we spoke with emphasized food and drink as part of maintaining good relationships with local officials.

But conventional wisdom has it that civil servants have seen their belts tighten, a trend that the new President, Xi Jinping, is eager to continue. The national government has made some public efforts toward curbing corruption in addition to increasingly strict monitoring of accounts. Of course, careful control of public expenditure sounds great to a political economist, so we were surprised when even a taxi driver called it a “disaster.” The “disaster,” we are told, is that when civil servants are constricted in their use of expense accounts, the entire hospitality industry is affected, including hotels, bars, restaurants, taxi drivers, and of course, wineries. Now, it’s important to keep in mind that our informal conversations are just that. We can’t say whether civil servants have actually changed their spending habits or if, for example, announcements in the media have stoked the rumor mill, but we did find it curious to encounter the same perspective from very different people in the hospitality industry and to note that it was echoed by Beijing Boyce. We asked a driver in Shanxi province whether he sees a lot of tourists and he explained how changes in government spending have hurt the tourism industry. We discussed the prices of Chinese wine with a foreign barrel merchant in Shandong province and he explained how changes in civil servants’ accounts are crushing the market for low quality, expensive gift wines.

If our barrel merchant and others are correct, there may be important changes in Chinese supermarkets. If wine drinkers seek out higher quality at the same time as consumers limit their purchase of exorbitantly price gift wines, we might start to see some of the delicious wines we tasted taking up more space at the supermarket. Actually, we are pretty optimistic that those delicious wines are coming regardless of civil servants’ expense accounts.

In Search of Chinese Terroirs

I am in Australia this week where I am giving a talk called “Australia on the Global Stage” at Savour Australia 2013, the international wine gathering that Australian wine is using to relaunch Brand Australia on the global scene. I will have a report on what I learn in Australia in due course, but for now I’m busy just being there.

My friends and colleagues Cynthia Howson and Pierre Ly and their associate Jeff Begun have recently spent several weeks in China examining trends and issues in the Chinese wine industry. They have been kind enough to write three short essays that I will publish here while I’m away from the office. I think you will find their analyses very timely and interesting! Here is their first report.

In Search of Chinese Terroirs

by Cynthia HowsonPierre Ly and Jeff Begun

We were lucky to spend a month last summer traveling through several Chinese wine regions, meeting producers, farmers, and experts, and tasting some truly delicious wines. In past Wine Economist posts, Mike noted that China’s fragmented agriculture was the biggest challenge for Chinese wine producers. How can winemakers ensure a reliable supply of flavorful and fully ripe grapes, when they have to work with hundreds of implausibly small family-run vineyards?  Mike pointed out that the best producers are those who somehow solved this problem. Another serious and more permanent challenge comes from the climate. So how did they improve and what’s next?

The grape supply chain

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Stunning view at Grace Vineyard in Shanxi province.

Getting control over land is not easy in China and many producers still have to work in large part with hundreds of small family-run vineyards. Yet, some high quality producers have found ways to work with this difficult supply chain by developing relationships with growers. For example, Grace Vineyard, in addition to renting land to grow grapes with their own labor, works with hundreds of very small farmers, and provides them with training and credit for inputs. Grace is willing to pay the price for good quality grapes and provides incentives to farmers accordingly. Of course, at Grace like elsewhere, this takes a lot of work with supervisors going through the vineyards and checking on the work, relationships are not always easy and some compromises may have to be made in difficult vintages to sustain good relationships. But the excellent wines we tasted at places like Grace Vineyard in Shanxi, or Leirenshou in Ningxia, could not have been produced without flavorful, fully ripe fruit and a sizeable portion of it had to come from small family farms.

Of course, it is easier for wineries to secure high quality fruit when it is grown in-house, by renting land to farm with their own employees. Some wineries rent large plots of land directly from the government. Others have to rent from individual farmers, either by dealing with each individual grower directly, or by entering contracts with a village authority which then redistributes rents to individual farmer. In each case, relationships and the local institutional context determine which types of arrangements are feasible and on what terms. Future policies and reforms regarding land markets will certainly play a key role to spread existing improvements in Chinese wine on a larger scale.

Many Chinese terroirs?

So if wineries have found and continue to find ways to improve the grape supply chain, what about the climate? Isn’t China simply too difficult a place to grow high quality wine grapes? People seem to disagree on this issue but what we saw makes us hopeful and optimistic that pockets of high quality will continue to develop.

One source of hope is that China, as one would expect given its size, has many terroirs with incredible diversity. One winemaker told us that opportunities and challenges come together, and this applies to each region in a different way. This post by award-winning winemaker and consultant Professor Li Demei, does a great job explaining the pros and cons of the climate in seven wine regions. For example, toward the Northwest, in Ningxia and Xinjiang, although harsh winters require that vines be buried in winter, reliably hot and dry summers protect the grapes from disease. A reputation for limited or no pesticide use could be a strong selling point, given that food safety incidents in China (including some related to pesticide residue) have received a lot of media attention.

In Shandong province on the East coast, producers enjoy a mild winter and vines do not have to be buried. However, the location also comes with the challenge of humidity and rain during the summer, and especially at harvest. The risk is that people will use pesticides a bit too generously, but careful disease prevention programs can be developed. Emma Gao, from award winning winery Silver Heights, based in Ningxia province, told us she saw a lot of potential for Shandong winemakers, and she compared them to the Burgundians, in the sense that there are many people there willing to put in the hard work needed to overcome challenging conditions. Hardworking Shandong terroiristes overcoming adversity, how interesting would that be! It will be interesting to see future advances there, and it is worth noting that the DBR (Lafite) – Citic project is currently under construction there in a small village next to the resort town of Penglai.

Unlocking China’s terroirist soul

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Terroir labeling: the mountains of Alti-wine, and the sandy dunes of Skyline.

That’s what Mike hoped when he wrote about China in Wine Wars. There are many challenges ahead for producers of course, from contracts on land and grapes, to infrastructure and climate. But our last tasting before leaving China gave us further hope. Jim Sun, founder and chief editor of the leading industry media winechina.com, welcomed us at his China-focused cellar in Yantai to share insights, as well as five delicious wines. With passion, Jim told us the story of each of the wines he picked from regions we had not visited, to illustrate a variety of interesting microclimates. The terroir message of each wine was evident, from the Gobi desert vineyard of the Skyline Chardonnay, the vertiginous high altitude of vineyards of the “Altiwine” red produced in Yunnan province, to the proximity to a lake that keeps some Cabernet Sauvignon vines cooler than usual in Xinjiang.

Experts seem to disagree on whether China can become a serious producer of fine wine. But there are already some delicious wines, and they each come with their unique and interesting story. That may be enough to get wine enthusiasts interested in China and encourage further progress.

In our next post, we will discuss the role of government in Chinese wine.

Decanter’s Power List 2013: Globalization and China’s Continuing Rise

He’s still #1

The July issue of Decanter (the self-proclaimed “world’s best wine magazine”) is out and with it comes the Decanter Power List 2013 – a list of the 50 most powerful people in wine this year as determined by the magazine’s editors.

The Power List, which appears every other year, is great fun, both in the way that it spurs debate (my soccer-fan friends spend hours and hours debating similar lists for their sport) and because of the glimpse it offers into the way the world wine map is changing … or not.

Small World After All

What does the 2013 list reveal? Well, the #1 most powerful man (only 15% of those on the list are women) is once again Pierre Pringuet, CEO of drinks multinational Pernod Ricard. There are bigger wine companies – Gallo (Gina Gallo is #17 on the list) and Constellation Brands (#5 Robert Sands) but it is Pernod Ricard’s global reach and decidedly global strategy that sets it apart and makes Pringuet #1. Or so I believe, because one of the messages of this Power List and the last one is that globalization is now the way of wine.

The new #2

Asia is the key to the global kingdom, or so the list seems to say. Ten of the 50 listed luminaries have a strong Asian connection, including the new #2 (up from #8 last year) Wu Fei, head of the wine and spirits division of COFCO, China’s state-owned Cereals, Oils and Foodstuffs Corporation.

COFCO makes wine (Great Wall brand), invests in wine properties (Chateau Viaud in Bordeaux with more foreign acquisitions to come) and is a key potential partner for anyone in the world who wants to sell bulk wine into the Chinese market. It will soon start bottling Australian and Chilean wines to sell under the Great Wall label, with more international expansion planned.

COFCO’s (and China’s) influence is so strong that its association with Bordeaux flying winemaker Michel Rolland seems to account for his surge in the ratings from #18 last year to #7 in 2013. The China connection also might explain Aubert de Villaine’s meteoric rise from #30 to #8.

De Villaine is co-owner of Domaine de la Romanée Conti and that alone might justify a place on the list. But 2013 has been widely seen as the year that many Chinese investors and collectors lost interest in Bordeaux and turned their attention to Burgundy. So no surprise that DRC, perhaps the most sought-after Burgundy wine, would surge in the ranking.

New Names and Faces

There is always a good deal of churn in the Power List and this year is no different. I counted 14 new names, starting with #48 Judy Leissner (CEO of Grace Vineyards, China) and ending with #11 (John D Watkins, ASC Fine Wine, China) and #12 (Yang Wenhua, C&D Wines, China).

Not every new face has a Hong Kong or China link, but many do including # 44 Li Demei (Chinese consulting winemaker), #42 Paolo Pong (Hong Kong retailer and restaurateur), #27 David Pedrol (Chinese online wine retailer) and #23 David Dearie (CEO of Treasury Wine Estates, which is noteworthy for opening a vast 6000 square meter wine gallery in Shanghai).

Other new names on the Power List are Magdalena Gerber (#33 – she is CEO of Sweden’s wine monopoly, Systembolaget) and Bob Peter (#32, head of the provincial monopoly Liquor Control Board of Ontario). Systembolaget and the LCBO are two of the world’s largest wine purchasers and retailers (along with Costco, the U.S. leader, represented by Annette Alvarez Peters at #4 and Tesco’s Dan Jago at #14). Globalization can create a huge wine pipeline and this gives power to those who can fill it (like Pernod Ricard) and those who can empty it profitable (Costco, Tesco, Systembolaget and the LCBO).

More questions than answers

The U.S. is the world’s largest wine market today and it seems a bit under-represented on the Power List with only eight names, but they are heavily concentrated in the top tier: #9 critic Robert Parker, #6 Constellation’s Robert Sands, #5 distributor Southern Wine & Spirits’ Mel Dick and Costco’s Annette Alvarez Peters at #4.

It’s interesting to ponder the Power List because it raises more questions than it answers.  Who do you think really is the most powerful wine person in the world?

Why aren’t there more women on the list, especially from Europe where Jancis Robinson and Magdalena Gerber are the only female representatives? This is a question for the industry (and not just Decanter’s editors) to ponder. Will this year’s new faces still be around in two years when the next list is released? Where will the next group of new names come from?

And, of course, when will Decanter finally include a wine economist in the power list? I guess we’ll just have to wait and see.

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Click on the links to read my analysis of previous Power List selections for  2011 and 2009.