French Wine Producers And Chinese Travel Agencies Teaming Up To Promote Wine Tourism In France

The wine market has grown rapidly in China, and wine tourism operators hope to entice the country's oenophiles with trips to French vineyards in coming years

Last month, we posted on the Sotheby’s auction of fine wines in Hong Kong, at which 100% of the bottles up for grabs sold, mostly to local Hong Kong and Mainland Chinese buyers. Over the past few years, as wine drinking has grown in popularity in China and the buyer base has grown accordingly, vineyards from around the globe have intensified their efforts to crack this vast yet still niche-oriented market.

While these vintners’ dreams may still be a bit naive in terms of the macro-level Chinese market — as BusinessWeek reflects with a quote by a Californian winery owner, “If we sold a bottle of wine to every Chinese millionaire, we’d run out of wine before we ran out of millionaires!” — it is a fact that Chinese buyers of fine wines are quickly joining the ranks of other global buyers, and companies from travel agencies to vineyards are keen to get in on this burgeoning business.

At this year’s SIAL Shanghai conference, China’s largest Food, Beverage and Hospitality exhibition, B-to-B companies like China Elite Focus are working to pair Chinese travel agencies with French wine producers, in the hopes of cashing in on the growing oenophile base in China. According to a press release, companies like China Elite Focus want to build up “wine tourism” — a growing industry that has already enjoyed surprising success in Japan and the US — in China. While many wine tourism operators have begun to target New World wine centers in Australia, Argentina, Chile, the US or South Africa, it appears that Chinese companies like China Elite Focus are only interested in France, apparently trying to tie their tours to the “romantic” image that France holds for many Chinese.

Chinese wineries have started to get into the wine tourism business as well, with companies like China Wine Tours offering tours in Xi’an, Yantai, Beijing, Shanghai, and Taigu. Although China’s wine industry is not well-promoted outside of the country, recent joint ventures like Chateau Lafite’s new vineyard in Shandong indicate that wine is quickly becoming a lucrative industry in China. From auctions of historical and vintage wines in Hong Kong to new vineyards in Shandong to wine tours in France and China, it looks like calls for “pútaojiǔ” will become more prevalent in restaurants throughout the Middle Kingdom.

It’s finals week at the University of Puget Sound, so I’m thinking about the question, what wine goes best with final exams and term papers?  A sweet wine, to capture the sweet taste of success?  Some bubbles to celebrate finishing one set of tasks and moving on?  Or maybe a bitter sweet wine, because moving on inevitably means leaving some people and relationships behind?  Hard to figure how best to match a wine with all these emotions. It’s a difficult question.

Dump Bucket Drills

But I know one wine that doesn’t match up very well.  My class on “The Idea of Wine” organized an informal tasting on Monday to celebrate finishing their term papers.  The main project was a blind tasting of inexpensive (some were very inexpensive) Merlots.  I was impressed with the students’ serious efforts to evaluate and score the wine and their recently acquired (and, for college students, somewhat unnatural) propensity to use the dump bucket.

We tasted other wines including a Chinese wine that Brian West personally hauled back from Beijing a few years ago.  It was a 1999 Changyu Cabernet Sauvignon.  Changyu is China’s oldest winery and a good example of a mid-market Chinese wine (I wrote about Changyu and the Chinese wine industry in The China Wine Syndrome).

I found a video review of this wine on the web (click here to view it, but be forewarned that there is some harsh language used by the reviewer) that described the wine as being all about ashtray and coffee ground flavors with aromas of urinal crust.  Hard to imagine.  Until you taste it, that is.  The description is right on the money.

I’ve read many optimistic reports on the Chinese wine industry, mostly based on high potential production volumes and not so much on quality.  The quality wasn’t there in 1999, based on this wine, but there is reason to believe that things are changing.  I sure hope they are! The dump bucket got good use on this one.

Hard Heads, Soft Hearts

I’m reading my students’ final papers now – they are quite good, by the way – and I thought you might be interested in their topics.  I gave them great freedom to choose topics that interested them or related to their academic majors.  You can find a list of the paper titles at the end of this post.

Most people think education is about learning the right answers, and this is certainly important, but I think the more valuable skill is learning to ask the right questions, and this is true about wine.  I was impressed by the creativity of the questions my students asked.

One student, a Finance major, asked why Treasury bill auctions and wine auctions have different structures and what the impacts might be? A very interesting theoretical treatment. Another student did fieldwork in three wine retailers to try to understand the actions and interactions of wine buyers and wine sellers. The result was a revealing first person account of wine consumer behavior.  An economics student who grew up in Napa Valley examined issues relating to migrant labor there, combining economic theory, empirical data and personal observation very effectively.

All the papers were very interesting. My favorite title: “How corks are being screwed over” (an analysis of the cork versus screw cap debate).  Imagine, I get paid to read this!

Looking at the list of paper titles, I’m struck by how many students were drawn to issues of sustainable or ethical production and consumption:  organic wine, climate change, biodynamic wine, fair trade wine and so forth.  In general their analysis was thorough, pointed and objective.  They have “soft hearts” and “hard heads,” as Princeton Economist Alan Blinder would say.  They care about social issues, but think about them critically.  Blinder says (and I agree) that’s better than the other possible combinations: soft head/hard heart, soft heart/soft head or hard head and heart.

• Comparative analysis of changes in Treasury auctions versus global wine auctions
• An ethnographic study of wine consumer trends
• Hispanic workers in California’s wine industry
• Climate Change: what it means for Spanish vineyards.
• Climate change and the wine industry
• TetraPaks and cans: the alternative packaging of wine
• Movement from niche markets to mainstream: prospects and challenges for ethical consumption in the wine market
• The terroir of equality: fair trade wine
• Organic wine: the beginning of redefining fine wine
• Oak in Wine: an exploration into differences.
• Green wine: ideas and details of sustainable wine
• Wine’s historical and modern role in religion
• Of vines and witchcraft: biodynamic wine
• India’s wine prospects
• Old world crash: wine’s changing face in the globalized market
• What makes that bottle so expensive?
• How corks are being screwed over
• Aging wines: from barrels to bottles
• Drowning in the wine lake
• Wine brands: friend or foe?
• Wine tourism and economic development
• Bordeaux versus Burgundy: why the rivalry matters
• Transitioning wine industries: assessing development strategies in the wine industry

Cuando escuchamos hablar de China no podemos dejar de evocar una imagen con ciertas connotaciones ambivalentes que en el mejor de los casos resultan polémicas. ¿Vinos de China? Seguramente imaginaremos que son vinos de baja calidad, o que recientemente están incursionando en esa industria para competir con todo el mundo, o bien que China no tiene vocación vitivinícola…

Sin embargo pocos saben ciertas cosas que aparentemente se ocultan tras “Wanli Changcheng” (uno de los centenares de nombres con los que los chinos conocen La Gran Muralla).

Para empezar, aunque no lo crean, algunas regiones de China han cultivado viñas desde hace mas de 4,000 años.

Sin embargo debido a las bajas y extremas temperaturas que se soportaban en Beijín, la producción se usaba para licores de alta graduación, y solo fue hasta finales del s. XIX que se empezó a producir vinos al estilo europeo.

Los alquimistas chinos inventaron el brandy -como muchas otras cosas que consumimos aún hoy en día-. Hay textos del s. VII d.C. que describen detalladamente su fabricación y que a ese producto le llamaban “vino quemado”. De hecho la palabra “brandy” viene del flamenco “brandewijin” que también significa vino quemado, una probable traducción literal de los marineros holandeses de la palabra “shao chiu” que es exáctamente lo mismo.

Otro gran dato es que el imperio chino fue el primero en crear una gran embotelladora en todo el mundo entre los años 9 y 13 d.C. en la cual destilaban licor.

A Europa llegó esta ciencia de la destilación de la mano de los árabes (la palabra alcohol significa al=El, kohol=Sutil) la cual los chinos usaban desde miles de años atrás para producir perfumes y alcohol antiséptico.

China dejó de lado la producción de vinos, y fueron los egipcios quienes le dieron forma a la vitivinicultura como la conocieron los europeos y la conocemos hoy en día.

China está desde hace mas de dos décadas produciendo vinos de muy buena calidad, y definitivamente también está produciendo mucha cantidad.

“Changyu”, “Dinasty”, “Great Wall”, “Huadong” y “Dragon Seal”, serán nombres de bodegas que oiremos muy pronto, y ahora con el exposure mediático que tendrán Los Juegos Olímpicos de Beijín será aún más común familiarizarnos con los vinos del lejano oriente. De hecho la marca “Great Wall” es uno de los patrocinadores de los Juegos Olímpicos de Beijín 2008, ni mas ni menos.

Otra cosa es que el cambio climático ha estado ayudando mucho a que muchos volteen a ver las condiciones climáticas que poseé China y su tremenda geografía montañosa y desértica… apta para la vitivinicultura.

El Dragón Rojo ya ha despertado.

I’ve never tasted Chinese wine, but that’s going to change quite soon. I have two bottles, both hand-carried from China by my former student Brian West. One is a 1999 Cabernet Sauvignon from China’s oldest winery, Changyu (founded in 1892). The other is a 2003 Tasya’s Reserve Cabernet Franc from what many people say is China’s best winery, Grace Vineyard (or Shanxi Grace Vineyard to differentiate it from a Japanese winery with the same name — Shanxi is the region of China where Grace Vineyard is located).

I have heard a lot of stories about Chinese wine — about how bad it is, how prestige-seeking Shanghai yuppies mix expensive first growth Bordeaux with Coca Cola and of vast vineyards in China that threaten to flood world markets with cheap wine (as Chinese exports have flooded some other markets already). The prospect of drinking Chinese wine for the first time gave me an incentive to see what I could find out about the Chinese wine industry and market. Here is a brief account of what I have learned.

Wine has a long history in China, reaching back more than 2000 years to the first wine imported from Ferghana in what is now Uzbekistan. It wasn’t until the 19th century, however, that more than a trickle of wine was produced or consumed. Western missionaries brought grapes and wine to China along with their bibles (as they did in California, Argentina and Chile). The real roots of today’s industry were planted in the late 1800s, however, when Changyu and other wineries were founded, mainly to produce wines for the foreign communities in the commercial centers.

The communist government expanded wine production after the 1949 revolution. Wine was promoted as a form of alcohol made from abundant fruit sources (grapes, both vitis and indigenous Asian varieties, and other fruits) in order to reduce use of precious food grains for alcohol production. Wine was meant to replace beer or grain spirits in the diet. Wine was typically made from a combination of grapes and other fruits. I understand that it is still sometimes necessary to specify grape wine in China, since generic wine may be made out of any number of fruits. It is probably not surprising that Chinese who were brought up on these mixed-fruit wines might today mix dry grape wine with fruit juice or Coke to get a more familiar flavor.

China’s vineyards are indeed vast, totaling six percent of the world total. There are 453,000 hectares of vineyards in China, which is roughly equal to the U.S. (380,000 hectares) plus Germany (98,000 hectares) or just over the half the vineyard area of France, the world leader. But 80 percent of the grapes are grown as fruit for the table grape market. About 10 percent of the grapes are dried to make raisins. The remaining 10 percent are wine grapes. China’s wine production is relatively small — 730 million liters compared to 2,546 million liters for the U.S. and 898 million liters for Germany. China produces about as much wine as Moldova and Romania combined — a lot of wine, but still just 2.6 percent of the global total.

Comparative wine production statistics for China are a bit problematic because (1) much of the wine produced is not pure grape wine but may be mixed fruit wine and (2) the rules on what can be labeled Chinese wine are quite lax. Grape wine needs to be only 50% grape and Chinese wine needs to be only 50% from Chinese-produced juice, according to one report I found. This means that a great deal of the bad wine that tourist report being served is not really grape wine and may be a blend of a little Chinese grape wine and a lot of imported bulk wine of undetermined origin. Rules get bent and outright fraud is not uncommon, I understand.

China has about 450 wine producers, which is approximately the number here in Washington State. The industry is highly concentrated with four wineries accounting for 60 percent of domestic production and sales. The big four are Great Wall, Dragon Seal, Changyu and Huadong. Foreign partnerships are common, giving Chinese winemakers access to international technology and expertise. The French multinational Pernod Ricard helped create Dragon Seal in 1987, for example, and Seagrams and Remy Martin have also been involved in joint ventures.

If the quality of the large scale wineries is disappointing, as many tourists report, the reason can be found in the supply chain. Wine is only as good as the grapes that go into it, or so growers tell me, and the grape supply situation in China is difficult. Most of the wine grapes are grown by families that lease about an acre of land from their local agricultural commune. That acre is tyically divided into four or five small plots that are planted with different crops so as to minimize risk. One or perhaps two of the plots may be wine grapes in the vineyard regions. So vineyard scale is impossibly small — smaller even than in the south of France.

These small growers insist on calling the shots, which is natural since they are so dependent upon the success of their tiny farms. The wine producers have no control over what these hundreds of thousands of micro-vineyards produce, how they are cropped, and when the grapes are picked. Researchers suggest that the grapes are chosen and grown to maximize quantity not quality and that the grapes are picked as soon as possible to minimize risk of poor weather than could destroy the crop. So small crops of flavorful fully ripe grapes — the winemaker’s dream — that’s not going to happen in a typical Chinese vineyard. One study I found suggested that the grapes sell for as little as $80 a ton.

There is not much incentive for individual growers to sacrifice quantity for quality because their grapes are sold by weight to agents who lump together fruit from dozens or hundreds of individual growers. Good fruit would quickly get mixed with inferior fruit, so why pay more? The local agents often then resell the fruit to regional agents who sell again to the large winemakers. You can just imagine the condition of the fruit by the time it finally gets to the winemaking facility having passed through so many hands. This system is worse than the European cooperatives I have read about (and I didn’t think anything could be worse than that).

Wine is sold in all sorts of ways. The Changyu website offers to let me buy wine by the barrel, which is perhaps what I would do if I owned a restaurant or a village drinks shop where I could decant the wine into bottles, jugs, or any other available container. Economists who study the Chinese wine market are increasingly focusing on supermarkets as a growing distribution vector. Partly I think this is because grocery store sales of wine are increasing, but also I think because these economists are interested in the potential for foreign wine imports. I don’t think relatively expensive French or California wines have much chance of penetrating the traditional bulk distribution system where a lot of Chinese wine goes, so supermarkets are their best bet. Supermarkets may also eventually play an important role in educating Chinese consumers about wine in general and foreign wine in particular.

A small number of boutique winemakers have appeared, often financed by Hong Kong Chinese families and using international “flying winemaker” expertise. This is the basic story of my Grace Vineyard Cabernet Franc. Hong Kong businessman C.K. Chan invested USD 7 million to build a French-style Chateau. He hired Bordeaux winemaker Gerard Colin to supervise production full time. Output is now more than 40,000 cases. My bottle of reserve wine says that it is estate bottled from grapes grown on the estate and this may suggest why Grace Vineyard wines are often rated the best in China: control of the supply chain. If Grace controls the quality of the grapes then they can better control the quality of the wine. People say that Grace Vineyards is the best French wine made in China. I’m looking forward to trying it.

The bottom line is that the future of wine in China is difficult to predict. Surely wine consumption will grow as China gets richer and Chinese adopt more western consumption habits. Wine production will grow, too, and quality will rise as better technology is adopted. But it will be interesting to how quickly Chinese consumers accept dry western grape wines after their long experience with mixed fruit wines. And it will be interesting to see how quickly the quality of grapes can be raised.

It seems to me that the biggest barriers to quality wine are not in the stores or even in the habit of mixing red wine and Coke. The biggest problem remains the sorry state of rural Chinese agriculture — a good reminder that wine is fundamentally a product of the soil.

Note: Special thanks to Brian West for bringing wine back from China where he was teaching with a University of Montana law school program. Thanks as well to Judy Leissner, who runs Grace Vineyard, for her assistance in locating Grace Vineyard products. Click here to view an interview with Judy about running a family wine business in China.

Special Note (added 1/13/2008). Click here to read an interview with Judy Leissner on the a blog called The Grape Wall of China, which is a good resource on the changing Chinese wine industry. Thanks to Jim Boyce (a.k.a. Beijing Boyce) for this link.