The Two Speed Wine Market!
For most Australian wine consumers the last few years have been a buyer’s heaven. The wine glut, increased competition from overseas, a high Australian dollar and the GFC have created a ‘perfect storm’ – leading to some of the best buying opportunities in decades!
So you may be surprised to hear that in Asia, and in particular Hong Kong and China, demand for wine is accelerating and prices, especially for first growth Bordeaux, are booming. William Lyons of The Wall Street Journal reported that the price of Chateau Lafite Rhothschild 2000 has climbed 611 per cent since December 2004. A Bull Market for Wine: Top vintages have outperformed almost every other asset class over the past decade. How much longer can it last? The Wall Street Journal, 19 September 2010.
Recent Sotheby wine auctions in Hong Kong achieved 100 per cent clearance rates and more than 80 per cent of the lots sold for prices that exceeded high estimates. A 12-bottle case of Domaine de la Romanée-Conti 2005, for example, sold for US$232,962, equating to approximately $US19,413 per bottle! Sotheby’s Big Wine Haul by Amy Ma, The Wall Street Journal, 4 October 2010.
What’s fueling Asian demand for fine wine? Lyons says that Hong Kong’s decision to abolish all import duties and taxes on wine in 2008 is one of the reasons behind the boom. But as Shayne Heffernen explains in his very interesting article, China’s Emerging Wine Market, Live Trading News, 17 October 2010, over the past 10 years increasing cultural and business exchanges between Chinese and Westerners have for the time created a wine culture in China.
Today, affluent urban Chinese are associating wine with sophistication, vitality and high social status, according to Wu Jianhua, head of the Shanghai Drinks Association (SDA). Jenny Li, a Chinese wine market analyst for UK-based Wine Intelligence, says that middle-aged Chinese also believe that drinking red wine daily is good for general health. Red wine sales in China are also benefiting from its auspicious colour, which signifies good luck and happiness. (China’s Emerging Wine Market, Live Trading News, 17 October 2010)
Australia’s leading wine critic James Halliday is very optimistic that export growth into Asia, and China in particular, will help the Australian wine industry to recover from its slump. Australia is the second largest exporter of wine to China, accounting for approximately 20 per cent of the imported wine market. Australia, however, is a long way behind France, which has captured 40 per cent of the market and, as Halliday notes, the challenge is to get past the view that they have in China and many parts of Asia, that only France produces high quality wine. (Exports will save us: Halliday by Nan Berrett Northern Argus 06 Oct, 2010)
According to VinExpo, consumption of imported wine in China grew 400 per cent between 2004 and 2008, but imports still account for less than 15 per cent of the Chinese wine market, suggesting that the market for imported wine is still in its infancy.
Halliday firmly believes that Australia needs to focus on the premium wines to develop Australia’s profile for high quality wine in China. Given the prices the Chinese are prepared to pay for super-premium Bordeaux and Burgundy, Australia’s Grange and its fellow icon brands may look like bargains in a few years!
Photo Credit, Chinese Wine Consultant Frankie Zhao offers some very interesting insights on the Chinese wine market in an interview with the Grape Wall of China.