The grape haul of China
Chinese buy up chateaux to lock in supply of prime Bordeaux
First published South China Morning Post, May 03, 2012
In a region with 8,000 wine properties, it's hardly fair to say that you could stick a pin in a map of Bordeaux and find a Chinese owner. But you would find someone who knows of an offer, an inquiry, a rumour or a visit. To date, since the first Chinese acquisition - of Chateau Latour Laguens in 2008 - there have been 30 completed sales, with an estimated 20 further purchases close to completion.
One Chinese owner in the hilly, green corner of the region's Entre Deux Mers appellation is Zhang Jinshan. If he set off at a brisk walk from his estate, within five minutes he would arrive at the front door of his nearest neighbour at Chateau de Grand Branet, which sits on the crest of the next hill, almost visible from the turrets of his 18th century property. There, he would be greeted not by a local French vigneron, but by fellow Chinese businessman Qu Naijie, owner of five chateaux in Bordeaux.
Zhang shrugs at the improbability of his nearest neighbour being a fellow Putonghua speaker. While he made his fortune in Gougi, a fruit-based alcohol from goji berries that forms the backbone of his Ningxiahong organisation in northwest China, Qu's came from building up the Haichang Group into one of China's largest companies, with interests in shipping, property and theme parks.
"I know him a little," Zhang says of Qu. "Perhaps it shows what a good choice we have both made in location. But many Chinese dream of owning a chateau in Bordeaux."
Zhang bought the estate in February. Within eight kilometres of this spot, Zhang and Qu could meet up with three other Chinese proprietors: Hong Kong investor Steve Loo Chung-keung at Chateau Lagarosse in Tabanac, the Dashang Group-owned Chateau Lezongars in Villenave-de-Rions, and Meng Gao at Chateau Bertranon in Sainte-Croix-du-Mont.
It fits with the open spirit of Zhang's ambition that his arrival was marked by a press conference and contract signing ceremony - something that has happened with only one other Chinese purchase, that of Chateau de Viaud by state-backed China Oil & Foodstuffs Corporation (Cofco).
The company also held a press conference in February, when it announced that the main motivation in buying Viaud was to control the supply chain.
At the time, Cofco vice-president Chi Jingtao said the Chinese government was particularly interested in assuring products sold in China were authentic and unadulterated. "We have a strategy for constructing a complete chain from production to consumption to guard against forgeries and to reassure our clients. Being involved from the vineyard upwards in Bordeaux helps to strengthen this commitment, and investing in vineyards internationally is part of the fight against fraud."
Zhang's motivation is quite different. Through a translator, tourism consultant Li Lijuan, he explains that winemaking will be left in the hands of French oenologist Karine Lemaitre. By June next year, a luxury guest house will open at the chateau, with an upscale Chinese restaurant on the ground floor. Tennis courts and a nine-hole golf course have planning permission, and there are plans to become a fully fledged hotel with spa if the response proves enthusiastic.
Every detail has been meticulously conceived. The restaurant will be run by Lei Wuan, a restaurateur from Guangxi, with renowned and emerging Chinese chefs invited for residencies.
"Once things are up and running, we hope to welcome about 10,000 Chinese visitors a year," Zhang says. "But European guests will also be welcome."
Confirming the plans by telephone from China this week, nearly three months after the signing ceremony, Zhang says: "We have already begun to plant more vines, to increase the density, and have bought new harvesting equipment and generally begun working on the wine quality. We are calm; there are no bad surprises yet - some holdups with the plans, some staff changes, but nothing that isn't normal in setting up a new business anywhere."
Zhang also differs from many of his compatriots with his stated desire to keep about 20 per cent of the chateau's production in Europe. Far more typical is the approach taken by Cofco with Viaud, or Qu with his five estates, or Steve Loo at Lagarosse, where 100 per cent of the wine is distributed through the mainland.
Since its purchase last year from American investor Stephen Adams, Lagarosse has become the flagship property of Carlico International. This holding company, based in Hong Kong, imports wines from across France. Taking care of on-site operations is director Benoit de Guigne, who is overseeing a project to restore the stunning chateau - parts of which date to the 14th century - to its original glory.
But however beautiful things are going to look for Bordeaux visitors, the focus of the production is 8,000 kilometres away, with the 30 shops, 12 offices, three importing bases and 400 distributors that Carlico has in place in Hong Kong and the mainland.
"Adams had good distribution in place beforehand," says de Guigne. "But since we began sending the wine to China, stocks at the chateau have never been so low. We have got two more containers leaving next week, and after that, I am going to have to wait until we bottle the new vintage."
Lagarosse produces about 200,000 bottles per year and, together with the other wines that it sources and distributes from Bordeaux, Burgundy and beyond, its shipments to the mainland amount to about one million bottles per year.
Many of the recent Chinese owners follow this same pattern of exporting not only their own wines, but also those of neighbouring estates, benefiting from strong networks and from the first mover advantage of being buyers in Bordeaux while it is still fairly novel.
A downside - for a Bordeaux wine trade that has survived for centuries through local brokers, wine merchants and chateaux all supporting one another with a cosy network of sales and commissions - is that many of these new owners bypass the traditional routes and export directly.
Marc Sabate, partner at MK Finance in Paris, has advised on three sales (Grand Moueys, Richelieu and one other "confidential transaction"). He points out that many Chinese owners don't have a long history of working in the Bordeaux marketplace, so they don't see the need to support it. "But before the locals get upset about this, it is worth remembering that many of the estates that have been bought over the past three years were finding it tough to place their wines in traditional markets," he says.
Philippe Raoux, former owner of Chateau de Viaud, is an exception. He has built a strong relationship with Cofco since the sale of the chateau, with his wine merchant company becoming a partner in its plans. "Last year, I sold €3 million (HK$31 million) of wine in China," he recently told a French wine magazine. "In just the first two months of 2012, my company is already at €5 million worth of sales."
Many experts think that rather than worry about the long-term fallout, the Bordelais should be keen to embrace the possibilities while they last.
Eddie Yuan, Hong Kong-based adviser with Langfan Consulting (instrumental in five sales so far, with a few "key acquisitions" pending), thinks there will be a further rise in sales over the next few years before they peak.
"Private investors increasingly will be replaced by professional companies as the Chinese market matures, and spectacular gains on modest AOC Bordeaux wines will become more difficult," Yuan says. "Interest is already increasingly moving from Bordeaux towards other regions such as Burgundy's Cotes de Nuits. We should see a peak for the next two or three years, with the estates purchased becoming higher profile, before the numbers begin to reduce."
Chateau Grand Moueys, AOC Cadillac Cotes de Bordeaux (Zhang Jinshan of Ningxiahong group)
Chateau Latour Laguens, AOC Bordeaux (bought in 2008 by Haiyan Cheng, whose family own the property developers Group Longhai. She runs a wine importing company. The chateau produces 160,000 bottles per year, distributed solely in China)
Chateau Laulan Ducos, AOC Medoc (bought in April last year by jewellery magnate Richard Shen Dongjun of the group Tesiro, a chain of 400 jewellery shops around Shanghai and southeast China. He is also a partner in the Eurostar Diamond Traders)
Chateau Richelieu (bought in 2009 by An Yinghui of Hong Kong property developers A&A International)
Chateau Branda, Chateau de Grand Branet, Chateau Laurette, Chateau Thebot, Chateau Chenu Lafitte (all five owned by Qu Naijie, billionaire president of the Haichang Group. His first purchase, Chenu Lafitte, was in November 2010. Plans a wine-themed theme park in Dalian, Liaoning, and has already bought wine from more than 1,000 Bordeaux chateaux. Actively pursuing other purchases.)
Chateau de Viaud, AOC Lalande de Pomerol (bought in February last year by Cofco, China Oil & Foodstuffs Corporation for €10 million - or HK$102.6 million)
Chateau Lagarosse, AOC Cadillac Cotes de Bordeaux (bought last year in January by Hong Kong-based businessman Steve Loo Chung-keung of Carlico International)
Chateau Monlot, AOC Saint-Emilion (bought last year by Chinese actress Zhao Wei and her husband, Huang Youlong)
Chateau Barateau, AOC Medoc, Chateau Lafon (both Marvelake Wine, both bought last year)
Chateau La Patache, Chateau La Tour-St Christophe, Chateau Haut Brisson (all three by Taiwanese businessman Peter Kwok, who lives in Hong Kong and is managing director of USI Partners, a Hong Kong holding company whose investments include mainland hotels Sheraton and St Regis in Lhasa, Tibet, and The Westin Xian in Shaanxi)
Chateau Lezongars, AOC Cadillac Cotes de Bordeaux (bought by Dashang Group last year, owners of department stores and supermarkets based in Dalian, Liaoning)
Chateau La Roche-Pressac, AOC Castillon Cotes de Bordeaux, bought last year by Skyvast Properties, Hong Kong
Chateau de la Salle, AOC Blaye Cotes de Bordeaux (sold to Chinese property developer Zhongai in January last year)
Chateau Bertranon, AOC Saint Croix du Mont (Meng Gao, bought last year)
Chateau de Cugat, AOC Bordeaux Superieur bought by a consortium of Chinese investors last year)
Chateau Blanchet, AOC Entre deux Mers (Vast Fortune Limited, a shipping company based in Beijing, bought last year)
Chateau Vieux Brondeau, AOC Bordeaux (bought last year in February by Zhejiang C.Y. Industrial Group, a hardware and chemical company in Zhejiang producing buttons, staples, fasteners, paper)
Note: not definitive, as several owners prefer to remain anonymous, or final purchase documents not signed