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Investing in wine? How about a China Red?

The Chinese are the largest consumers of red wine in the world and is poised to be the largest consumers of wine in the world. Their demand is shaking up the entire market for wine especially red wine, constantly setting new record high prices for premium fine wine in particularly the French red from Bordeaux and more recently Burgundy.  The popular options from Bordeaux like ‘Lafite’, ‘Latour’, ‘Margaux’, ‘Mouton Rothschild’ as well as ‘Petrus’. However in recent years, there is a shift in taste from Bordeaux to Burgundy options like ‘Romanee-Conti’ and ‘Leroy’. The more serious investors are buying up vineyards in Bordeaux.

I think another shift is happening, not only is the market in China and Asia Pacific still growing but the Chinese consumers are still evolving by becoming more open-minded and sophisticated, they are keen on exploring and try out newer options not just limited to red wine , not just French red. They are looking inwards as well to domestic options produced in China.

The first bottle of Chinese wine I tried was a bottle of ‘Changyu Golden Valley Ice Wine, Gold Diamond Label’ and that shock me as well as awaken me to the world of Chinese wine. That bottle of wine was one of the best wine I ever tasted. It was better than any of the Canadian ‘Inniskillin’ Ice wine I tasted before and it was about a fraction of the price as well or less, definitely very value for money. Ever since that moment, I have been looking and exploring the world of Chinese wine. Taiwan is able to produce some of the best whisky in the world, China has lots of talented people as well and China is a vast country with all sorts of terroir available. Terroir is very important in winemaking. China possessing many different terroirs and hardworking, talented people would definitely be able to produce great wine.

Generous funding would enable Chinese wine to compete with the best wines globally. According to Euromonitor International, China is likely to come of age as a producer. With major international houses investing heavily in production in the country, Chinese wine exports will soon make their presence felt on the international stage. Mr Christophe Bourrie, Managing Director of Prestige Brands at Moët Hennessy, comments, “I would say luxury Chinese wines will be coming into the market in the near future.”

The LVMH group had set up the Ao Yun Winery in Yunnan, a region that is also known as Shangri-La. Ao Yun, which is Mandarin for ‘flying above the clouds’, is a reference to the Himalayan foothills in which the grapes are grown. They released their first vintage the Ao Yun 2013 back in 2016. Jeannie Cho Lee tried both and said that Ao Yun Proves China Can Produce Wines That Can Compete With The Best. Domaines Barons de Rothschild started the Lafite China project, known as Domaine de Penglai, near the city of Penglai on the Shandong Peninsula will make its debut  this year.

According to Cult Wine, fine wine has an extended period of compound annual growth rates in the region of 10-20%, fine wine possesses a remarkable track record as an investment. The fine wine market is a consumption based market with a perfectly inelastic supply curve. Over time as bottles are consumed the price of the remaining bottles in that vintage rise in value. This market has been proven to provide strong risk adjusted returns over the medium to long term and has been proven to have low correlation to traditional financial markets. While fine wine investment is no new phenomenon, today market liquidity and price transparency have evolved to a point where investors of all levels can profit from this expanding market. The luxury aspect of Fine Wine has meant that in recent times a new breed of wine collector has appeared in the market. Due to the increasing wealth and proliferation of HNW individuals in Asia Pacific, this new demand for fine wine has put further strain on the acute supply/demand imbalance, placing greater pressure on liquidity and prices.

It is safe to invest in blue chips like Lafite and Romanee-Conti but the greatest investment is to find those wines that are emerging and has the potential to be the next blue chip. I think wine from China has immense potential and specifically the red wine from ‘Ao Yun’ and the ‘Lafite China’. Ao Yun and Lafite China has access to talent, expertise, marketing and funding from established companies like ‘Louis Vuitton Moët Henness’ and ‘Domaines Barons de Rothschild’ which produce some of the best wine in the world, also they are produced in limited quantity. Wine experts like Jeannie Cho Lee has confirmed that Ao Yun is able to compete with the best in the world and ‘Lung King Heen’ the 3 star Michelin Chinese Cantonese restaurant in Hong Kong is offering several Chinese wines in their wine list. I am betting that the next great red wine will be a China Red.


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