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Jefford on Monday: Behind the boom

Asia was the wine story of 2010. The present crisis in Japan will dent regional confidence in Asia, but not for long.

I’m off to Singapore soon to take part in a series of Pinot and Chardonnay tasting events whose lustre is rarely if ever duplicated in France, despite most of those wines being born on French soil.

You just don’t find that combination of uncomplicated curiosity and uncomplicated wealth in France any more.

Almost every UK fine-wine merchant I talk to seems to have been shuttling to Hong Kong or China over the past 18 months.

Farr Vintners now has more customers called ‘Chan’ than ‘Smith’, and 57% of its sales (of £155.8 million, including 2009 en primeur sales of £65 million) in the year to October 2010 were to accounts with Asian addresses. Bordeaux Index has seen its sales to Asia double every year for the last five years. I’ll spare you the auction news, but it’s just as breathless.

The superconducting magnet sucking all that wine east is, of course, Hong Kong’s decision to abolish sales tax on wine in February 2008. Great, of course, for the seven million people living there. But what about the rest?

For the rest, wines of even modest quality remain a very expensive luxury item. The moment a bottle of wine crosses the border into China, for example, it becomes liable for a 14 per cent duty, then 17 per cent sales tax on top of the cost price and duty, then a 10 per cent ‘consumption tax’ on top of everything else.

That means that the Lafite `09 which will leave France at £1,166 (€;1,337; $1,902) a bottle will arrive in Shanghai at £1,710 (€;1,960; $2,789) a bottle plus shipment costs.

Not only that, but local hygiene departments in China are allowed to take two bottles out of every case to test that the wine is fit for human consumption – and those two hi-jacked bottles (which, strangely enough, will often be re-sold intact, adding to the grey-market chaos in China) could put the price of the remaining 10 up to £2,052 (€;2,352; $3,347) each.

That makes even Britain look like a cheap place to buy wine. It’s just as well that China has almost 500,000 millionaires, as fine wine will remain the preserve of the exceedingly wealthy there for the foreseeable future.

The fraudulent and the counterfeit goes hand-in-hand with this boom, as those attending trade fairs in China know only too well (see, for example, my column in the August 2010 edition of Decanter).

Even if accurately labelled, ordinary Chinese drinkers are cutting their wine teeth on some of Europe’s least attractive wines, as I found out in eating out with Chinese friends in Hangzhou a year or two ago.

Meanwhile, fraud issues combined with storage challenges mean the re-sale prospects for fine wine shipped to Asia are dismal. Farr Vintners, for example, won’t list anything bought from Asia on its main list, and a special list for Hong Kong-stored wines of guaranteed provenance (the best professional storage in Hong Kong is excellent) is nonetheless discounted. Wine travels from Europe to Asia on a one-way ticket.

These issues may well pass – or the sheer scale of Asian populations may render them insignificant. There is much good-value wine in both hemispheres looking for appreciation, and the survival of many struggling wine growers may depend on relationships with Asian customers.

Forging those relationships, though, will be a difficult, complicated and time-consuming process.

Jefford on Monday

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Award-winning writer Andrew Jefford's Monday column on Decanter.com

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