A leading business columnist in Hong Kong, SCMP’s Tom Holland, recently pointed out that the recent slide in wine prices at a series of premium wine auctions in Hong Kong may be another leading indicator of a slowing economy.
He cites research data which indicates a close correlation between wine price trends and property price trends on the Chinese mainland, and quotes Deutche Bank’s Ajay Kapur as saying “Fine wine prices are an excellent real-time indicator of excess liquidity in China.”
Apart from potentially serious implications of all this for the Chinese economy, at least lovers of fine wines and those looking for a first-time home purchase may be in for some more affordable prices.
In the meantime, reports from Australia suggest a new trend gaining momentum. Instead of just focusing on buying premium grade wines at auction, Chinese buyers are now snapping up whole vineyards in Australia.
According to real estate brokers in Australia, delegations of potential Chinese seeking to acquire prime Hunter Valley vineyards surged in 2011, and are still going strong.
This trend is based on more than the romance associated with good wine. Australian wine exports to China are second only to France in terms of volume as well as value. A large share of Australian wine exports to China is sold wholesale, under private label.
One hopes that the day will come when the dominance of this wholesale part of China’s wine trade will give way to a more normal, healthy pattern.
Given serious food safety scandals in recent years with everything from milk to cooking oil and a host of other food products, it’s asking a leap of faith for Chinese consumers to spend big bucks on a bottle of fine wine which was imported, blended and bottled locally. It’s not likely to happen any time soon.
Meanwhile, that explains why wine business at the Duty Free Shops at airports in and around China is flourishing.
As I overheard one mainland passenger en route to Beijing from Hong Kong say to his friends: “I bought these two bottles of wine at DFS not because they’re cheaper here, but because I have confidence they’re the real thing.”
Hopefully some of China’s new investors in the business of producing fine wines from the vineyard through to the table will pick up on the opportunity to develop strong brands which earn the trust of Chinese (and other) consumers. That’s where the ultimate big opportunity is in the business of wines.
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