The Inside Story from Italian Wine Merchants

Wine Supply and Wine Demand in Asia

Posted on | May 27, 2011 | Written by Josh Rubenstein | No Comments

An interesting article by Malcolm Moore, published in the London Telegraph last week, shares with us the mindset of one of France’s first-growth chateaus during this 2010 En Primeur season. Moore writes in his evocatively titled piece “Not Enough Wine in France to Satisfy Chinese Thirst”:

Xavier de Eizaguirre, who manages Chateau Mouton Rothschild, one of France’s five “Premier Cru” estates, said it has been a “huge struggle to stay fair” to his customers. “When the Chinese are willing to buy your entire year’s production, it is difficult to resist,” he said.

The five Premier Cru estates, which also include Chateau Lafite Rothschild, Chateau Margaux, Chateau Latour and Chateau Haut-Brion, produce just 180,000 bottles to 200,000 bottles of wine each year, and there is only so much to go around.

Moore’s article clearly points out the practical ways that demand for wine in China outstrips its production, and the implications of this supply/demand quandary are myriad.

In Hong Kong, we love to speculate, and the recent explosions of the fine wine and real estate markets show that if there’s money to be made, we’re interested. As Moore notes in the case of 2009 Lafite, a point that I have personally witnessed at live auctions, buyers often have no qualms about acting irrationally in the name of sport and exclusivity.

It is refreshing to see the concern of the winemakers that while high prices can be commanded and easily received in China that there are loyal customers around the world who deserve allocation. And yet this recognition raises a host of questions: At what point do wines become priced so highly, or allocated too much to any one region, that you risk antagonizing your most tried and true supporters? At what point are we just flipping commodities, and wine simply becomes widget?

The suggestion that making more wine in China is a possible piece of the solution is a fair assessment. Certainly wines made in the USA and Australia are most in-demand by wine lovers in those countries, whether by sense of patriotism or brand familiarity.  If wines produced in China can achieve the brand esteem of first-growth Bordeaux, whether real or perceived, this may satisfy some of the local demand for such wines.  But ultimately, the chateau will need to put their feet down on how far out of touch they are willing to get with the rest of the world in the name of commanding highest possible prices and at what point it does more harm than good to their own reputations.

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