An increasing number of investors are looking to make money from the wine industry – particularly in China.
Then how about a spot of wine? Increasing numbers of investors are turning to the bottle – I mean as an investment of course. And – particularly at the top end of the market – there have been corking rewards.
Surging interest in wine has had dizzying effects. A growing number of wealthy individuals and investment funds have been pushing prices at the top end of the market to record levels. And much of the demand has come from Asia – particularly China.
Consumption of wine in China alone has more than doubled in the past five years. A report by KPMG this week identifies the Chinese as increasingly brand conscious and says China is set to be the world’s largest luxury market. China and Hong Kong together already make up the world’s largest volume importer of Bordeaux wines.
Of course there are only so many top vineyards in Europe and the amount they can produce is finite. The mushrooming demand for wine in China is leading to a redrawing of the industry with major European wine houses developing operations in China, Chinese businessmen investing in French vineyards and expansion and development by China of its existing wine industry.
In the past few days, Moët Hennessy has announced it will be producing sparkling wine in China; Spanish company Torres has announced an expansion of its Everwines sales operation in China and a Chinese wine has taken a top award at the London International Wine Fair.
In a joint venture deal with a Chinese state-owned company Moët Hennessy – part of the LVMH luxury goods group – will produce wine from a 67 hectare site in the north-west of the country. The company says the first wines could be ready in three years, that they will be the first sparkling wine in China made according to traditional French methods and could be sold under the Chandon label. The Chinese mainland is already the company’s biggest market for Cognac and the Champagne market is growing every year.
China is making concerted efforts to raise the quality of its own industry.The Decanter World Wide Wine Awards announced yesterday at the London International Wine Fair gave a wine from China top place in a significant category: the Red Middle East, Far East and Asian over £10 Trophy.
Chinese companies buying vineyards in France are not only profiting from production but also gaining expertise. Interestingly Torres and Moët Henessy have both highlighted education of the Chinese market through their new ventures. Sauternes producer Chateau Guiraud recently announced the opening of two storage cellars for its wines in China, with the aim of giving its sales teams ready access to stocks for tasting and education.
With burgeoning demand, the top end of the market is likely to stay strong, but may become increasingly expensive to enter.
Savvy investors, however, are likely to find an increasing range of opportunities for profiting as China’s love affair with wine matures.