China’s Palate Ripens for European Vineyards

As China’s local vineyards try to meet growing demand for wine, consumers have their sights on foreign wines from France, Italy, and Spain . Due to this increase in demand for foreign , both state-owned firms and private corporations have invested in foreign vineyards. Reuters reports:

David Guillon, of IFL, a Hong Kong based firm that sells French vineyards, castles and luxury properties, said IFL completed six multi-million euro (dollar) transactions of vineyards in France’s Bordeaux region with Chinese investors in 2011, including state-owned grain trading giant COFCO. He expects this number could double in the coming year.

IFL is currently in close negotiations with two major state-owned companies, multiple private firms as well as Chinese celebrities and football players.

Chinese investors have tended to buy “smaller ticket” vineyards in the range of 2-10 million euros, as opposed to institutional European and private investors who buy properties worth over 100 million euros, he said. But he expects Chinese buyers to rapidly move into a higher price range of 10-30 million euros in the coming year.

French residents welcome Chinese and Asian investors buying up acres of traditional vineyards and palaces, say industry experts, as the new money helps to improve the vineyard and wine-making facilities and results in better quality wine.

As Chinese firms move into foreign markets, foreign wineries are partnering with their local counterparts to meet the increasing demand. Domaines Barons de Rothschild Lafite began construction of the first winery of this kind in Shandong Province. Businessweek adds:

The 1.73 hectare (4.3 acre) winery in Penglai in eastern China’s Shandong province, one of China’s largest wine-producing areas, will be Rothschild’s third Lafite production base after Argentina and Chile, according to a government statement. The first phase will cost 100 million yuan ($15.8 million), it said.

China is the fifth-biggest wine market by volume and will help accelerate global wine consumption in the next five years as wealthy Chinese increase purchases of high-end vintages such as Chateau Lafite Rothschild, according to research commissioned by industry exhibitor Vinexpo from International Wine and Spirit Research. Appetite by affluent Chinese for luxury goods has surged as a result of decades of growth in the world’s most populous nation.

Chateau Lafite Rothschild teamed up with CITIC East China (Group) Co. to build the production base which will include a vineyard, winery and related facilities, according to the government statement. It didn’t give a date for completion of the project.

Wine production in Penglai, a coastal city located in Bohai-Rim in eastern China, has doubled to 140,000 tons in 2011 from 2005 and the number of wine makers increased to 70 from 39 in the same period, according to the statement.

Aside from the Chinese investment in foreign vineyards and foreign investments in Chinese vineyards, fake wines or wines with additives have continued to be sold on the market. According to another Reuters article, wine counterfeits have emerged that seek to take advantage of inexperienced consumers as the popularity of wine grows.

See more coverage about China’s wine industry and demand via CDT.