China has supplanted the United States as Bordeaux's top volume market outside of Europe. According to trade figures released recently, the People's Republic imported 13.5 million liters (equivalent to 18 million bottles) of Bordeaux in 2009. It's further evidence of the country's growing thirst for wine and its respect for Bordeaux. But some in the trade warn that the Chinese industry still faces growing pains.
It's also a Pyrrhic victory for Bordeaux. Bordeaux exported 206 million bottles in 2009, generating $1.73 billion. That's a 14 percent drop in volume, and a 23 percent decrease in value from 2008. "We've never seen such a rapid and brutal collapse," said Roland Ferendj, general director of the CIVB, Bordeaux's wine trade body. Exports took a thrashing in some of Bordeaux's biggest markets in 2009 as the recession hit. Shipments to the United States were down 44 percent, to 11.6 million liters (or 15.5 million bottles), while United Kingdom imports were down 33 percent and Belgian imports down 16 percent.
The only good news came from Asia. Mainland China reported their Bordeaux imports rose 40 percent in value and 97 percent in volume. Hong Kong increased imports by 46 percent in value and 24 percent in volume.
And there's no sign of slowing demand. "We expect further growth for 2010, around 50 percent," said Doug Rumsam, managing director of Bordeaux Index (HK) Ltd. (The U.S., however, is still a larger market for Bordeaux by value, importing $186 million worth of wine versus China's $99 million.)
Bordeaux's success in China is a combination of the image of the French region and aggressive marketing by its top properties. As a growing population of Chinese have earned new wealth during the country's economic boom, Bordeaux has become a symbol of prestige. "Bordeaux holds a special place in China," said Don St. Pierre Jr., chief executive at ASC Greater China, the largest importer of premium wine in China. "As consumers develop a better understanding of wine, they do try to seek out better value, which can mean better opportunities for Australia, Chile, Argentina and South Africa, but none are viewed to have the same history or pedigree."
China is expected to be the world’s seventh-largest consumer of wine by 2013, according to a new report by Vinexpo, the Bordeaux trade show. At last fall's first Hong Kong Wine and Dine festival, 20,000 visitors were expected. Instead, 70,000 showed up. "We ran out of wine the first half-day, and it was a three-day event," said Thomas Jullien, Asia consultant for the CIVB. "We had to buy back stock from local distributors. This is the kind of problem I would like to have everyday."
But Philippe Laqueche and other wine merchants caution that the Chinese market is very difficult to navigate, especially with the current gold-rush atmosphere. Local bureaucracies can create problems. St. Pierre was detained briefly by the government last year, supposedly over duty violations. Foreign businesses are complaining of increasing government interference in foreign businesses.
And what kind of Bordeaux are Chinese consumers buying? Most of the growth in Bordeaux exports to China has been at the very low end. The better-quality brands, with the exception of a few top grand cru classé, have not seen big increases. "The danger for Bordeaux is that there is a lot of low-quality wine being shipped into China and this will, over time, erode the quality of the brand Bordeaux," said St. Pierre. "Especially in the last 18 months, there have been enormous increases in low cost AOC Bordeaux shipped into China as a substitute for the premium-priced local wines."
Then again, even low-cost Bordeaux may be far better quality than what the average Chinese wine drinker is currently consuming. Nearly 90 percent of the wine sold in China is Chinese wine, often mixed with imported bulk wine. Wineries have begun producing their own premium labels, but the quality is unreliable. "I think there is a huge opportunity for Bordeaux," said Laqueche. "Bordeaux can really be the reference not only for the grand cru but for the petit Bordeaux at three to five euros where we know we are struggling today as a region."