Along with Anthony Rose of Decanter Magazine and the Independent, I am helping to lead a group of members of the International Wine Clubs Association on a fact finding trip to Hong Kong and China, set up by Sophie Jump, the association’s dynamic head. The visitors include the heads of top global companies such as Laithwaites/Direct Wines and Hawesko and bosses of wine producers such as CUNE. Some already do business in the region; others are exploring it for the first time.
My own experience of China led me to warn the group that much of the information we heard would be contradictory and that was certainly the case on the first day. Over the course of 10 days, however, thanks to the calibre of the people we are meeting, some clarity will hopefully emerge.
I am attempting to record our findings as we go along, without generally attributing of them to the people who may have provided the information. Contradictory information will appear as we encounter it.
Cover of a recent Sotheby’s wine sale
The first days included meetings with Andrew Davis of Invest HK, Keith Cheng of the Hong Kong Trade Council; Debra Meiburg MW, the leading authority on Hong Kong and author of an invaluable guide to the Hong Kong wine trade; Greg de ‘Eb of Crown Cellars, creator of the former colony’s – and he would claim the world’s – best storage facility; James Hepple, head of retail at specialist retail chain Watsons wine: wine merchant and restaurateur Paolo Pong of Altaya and new retail chains Bordeaux etc and Champagne Etc; Richard Sutton of Armit, Doug Rumsam of Bordeaux Index, Robert Sleigh of Sotheby’s; Lilian Haynes of Northeast wines; Patricio de la Fuente Saez of Links Concept; Laura Budlong of Force 8; Luke Cianfarini of Corney & Barrow, and David Wainright of Zachys Asia.
So what did we learn?
Some key points:
- Of the 7m people in Hong Kong, half a million could be described as ex-pats (including non wine-consuming Muslims). Nationalities such as France (the largest group) and the UK represent would each amount to fewer than 30,000 people. Official consumption figures are 5 litres per person (compared to an impressive 1.3 for the mainland). This figure, however, includes much or all of the wine that is re-exported officially or unofficially.
- Most fine wine in Hong Kong is consumed by 20,000 people but 2m qualify as wine drinkers.
- The removal of all duty in 2008 has led to an explosion in the wine market (with growth of 240%) and of wine buying in Hong Kong by mainland Chinese who smuggle bottles back home and visitors from other parts of the region.
- Huge amounts of wine are re-exported in this way. No-one knows how much wine is involved but it is almost certainly much higher than the 20% quoted officially. Significant amounts are smuggled by people crossing the border.
- Wine is also smuggled by professionals (for HK$200 per bottle).
- Readiness to accept bribes by officials also means that larger quantities are trucked across the border and shipped into China’s many ports.
- The Hong Kong and Chinese mainland buyers have – at least for the moment – fallen out of love with Bordeaux en primeur. Unless a very convincing case is made for it as an investment, it is unlikely that we will ever see them buying on the scale they did in 2009. It would be wrong to underestimate the anger they feel at being taken for fools by the pricing in 2010 and 2011. See my previous post about this.
- The oft-quoted problem of Chinese buyers not liking the fact that they can’t touch and hold their en primeur purchase may be overstated. If an investment or gamble is attractive enough, they will buy at a distance.
- The most serious Chinese fine wine buyers, with whom the Hong Kong-based people we spoke to deal, like the flavour of old wine and dislike tannin. (Unlike many of their counterparts in the US, for example). Anyone hosting a tasting or tutored wine dinner (of which there are huge numbers in Hong Kong) focused on young and current vintages risks low attendance and high disappointment. (Guests at a Barolo event were apparently unhappy not to taste anything earlier than 2000).
- Younger, less experienced drinkers in mainland China are happier with younger wine
- There is no question that high end buyers are switching from Bordeaux to Italy, the Rhoneand particularly Burgundy, though there is also a market for top wines from Australia and California (despite what some find to be too alcoholic styles). One anecdote concerned a 28 year old Hong Kong trader who had drunk all the first growths back to the 40s and is now looking for something different.
- Auction buyers generally only want the “right” wines and the “right” vintages (based on reputation and Parker/Spectator ratings). So, in sales of Gaja wines or Burgundies, disproportionate interest is given to the top wines.
- Any talk ofmatching wine to “Chinese” food, is questionable, given the wide range of styles of cuisine (Hong Kong Chinese often find Szechuan food far too spicy for example) and the number of different dishes that make up the kind of banquet at which wine is likely to be served.
- Wine now features at all big banquets such as weddings where it might not have been included in the past. It is however treated as an option rather than a staple, and beer and soft drinks will also be available.
- Counterfeiting is a big problem – on the mainland, but so is handling (where 7 in 10 Lafites are said to be fake) and storage. Chinese buyers are now becoming obsessive about provenance.
- Red is still THE colour. Despite a growing appreciation of good, off-dry Riesling by those moving into wine, white wine is handicapped in ways westerners may not expect. Its name, in Chinese, is easily confused with the strong Baiju spirit; Chinese medicine teaches that it is unhealthy to drink cold liquids with hot food; many Chinese (though far from all) cannot physically drink large quantities of wine and it is seen as easier to linger over a glass of red than a glass of white.
- Champagne sales are growing, but sweet wine is still slow to take off, possibly because of its role at the end of a meal (when many Chinese drinkers will feel they have already had enough)
- Buyers are very disloyal in their purchasing habits, shopping around between merchants and comparing prices on Wine Searcher. It is hard to get buyers here to sign up to a Wine Club programme that delivers a case every month, as in Europe and the US.
- Online use is growing rapidly, but more as an information resource than for purchasing. This is particularly true of Hong Kong, given its limited size.
- Wine education is booming, especially among women, but unlike Japan, there are few female sommeliers.
- The restaurant scene is also booming, but wine sales are suffering from an increased readiness to allow customers to bring their own wine and to pay corkage (BYO). This is now customary even in some of Hong Kong’s top restaurants, though high corkage prices are a deterrent for anyone not wanting to drink a very special bottle. Penetration of wine (imported or Chinese) is still weak in Chinese restaurants frequented by Hong Kong Chinese.
- Despite the problems of selling white wine already described, it may benefit from the BYO trend and customers buy a bottle as part of a negociation to reduce corkage costs.
- Hong Kong wine drinkers follow Parker, Wine Spectator and Decanter points. Despite the respect given to local experts like Debra Meiberg MW, Simon Tam of Christies and Jeanie Cho Lee MW, no local expert has the impact of these three publications. Medals from competitions have little impact.
- This is a market where private labels have yet to take off. Established names plus high scores are definitely preferred.
- Gifting is hugely important. Many great bottles pass through numerous hands without ever being drunk.
- There is high understanding and appreciation of regionality in food (better crabs from one place rather than another), but few wine regions are known about. So it is hard to sell wine from regions such as Languedoc, or many DOs in Spain.
Watch this space – or subscribe – for the next part of this report: on mainland China.