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The Invasion of French Wine Country

Throughout history the French have fought wars and dealt with invaders.  Romans, Germans, Austrians, British and Spaniards have taken a shot at them.  The Romans of course did more than take a shot and stayed for a few hundred years.  Now a new invasion is underway, fought without swords or guns and far more insidious; the Chinese have come to town, bearing vast sums of ready cash, and they’re not afraid to use it.

Lettie Teague’s recent article at wsj.com on the shake up at the Wine Advocate jogged my mind into assembling some of the pieces that have fallen over the past year or so.  Robert Parker is selling an interest in the Wine Advocate to a Singapore based investor group.  They’ll be moving the headquarters there too, making this now a Southeast Asian wine publication.  It will also only be an online publication probably by the end of 2013.  Change is coming, fast.  While wine has certainly grown tremendously in popularity among the well to do in Asia, it is hard to imagine one of the most influential wine rating subscriptions in the world will soon be based there.  It seems too soon.  Perhaps not, however, when one considers that some of the most hallowed wine producing land in the world is also slowly going to the Far East.

Over the past two years the Chinese have purchased some 30 estates in Bordeaux.  Arguments abound on both sides as to whether this is a good thing, and after all it’s not like there haven’t been foreign investors in Bordeaux before.  Yet this is different.  It is more systematic, and certainly seems like it could become pandemic.  Certainly there is good, as the investors bring money and in most cases are reinvigorating declining properties.  They create some jobs and pump some money back into the local economy.  They also appear to be shifting the wines to a more easy drinking and smoother profile, getting away from the tannins and ‘wait a few years’ quality of many Bordeaux wines.

Even more important, however, is that they are sending all the production to China.  This creates a different aspect to the saga, for while they are revitalizing properties, they are effectively removing them entirely from the fabric of the wine world, unless you happen to have a summer house in Beijing.  I don’t think this is a good thing.

Another mitigating factor is that they have, until recently, purchased lower tier properties, or Cru Bourgeois.  They have not taken down any giants, and in fact will only account for a tiny fraction of the region’s output with their current portfolio.  Ah, but things they do change.  In November Chinese investors purchased Chateau Bellfont-Belcier, a Grands Crus Classe property in St. Emilion on the right bank.  This is different.  This is a ranked Chateau.  This is not a neglected patch on the edge of the Medoc.  This is Bordeaux.

Then consider another revelation;  earlier this year a Chinese casino magnate purchased Chateau de Gevrey-Chambertin for 8 million euros.  This trumped a bid of 5 million euros from a Bugundian consortium to keep the property in local hands.  The offer from the guys in Burgundy was over market value itself, making the Chinese offer a grossly inflated example of cash waving.  As usual, someone with deeper pockets got serious attention and won the day.  A Chinese investor was also part of a group that purchased vines in Vosne-Romanee.  I am no expert on Burgundy, but these are names I know, and know to be pretty special.  There are rumors of other properties being put quietly on the block.  This is serious.  This is Burgundy.

If you take a look at the world economy, and I’ll admit it is not a pretty sight, you’ll quickly realize the current state of asset distribution is unlikely to change anytime soon.  The Chinese will continue to pump out mega-millionaires who can show up and throw a bazillion dollars at piece of property simply because they want it and they can (which is, of course, what every country’s mega-millionaires do as well). Wine, and especially Bordeaux wine, is quite the rage with them.  They are building a theme park based on St. Emilion, so the fascination is unlikely to end.  There is, of course, nothing wrong with it legally, and they can buy whatever is for sale.  They will likely continue to modernize these properties and ship the production to China.

Investing in a property is one thing, absconding with it is another entirely, and that seems to be what is going on.  The sale in Burgundy caused enough ire that the politicians have received notice.  It doesn’t seem like the Bordelaise are there yet.  Wait until one of the really high fliers gets picked off though, something like a Lagrange or a Gruard Larose.   It is going to happen,  and probably within the next year or two.  Then it should get very, very interesting.

 

Sources of information for this article:

‘Chinese Investors snap up Burgundy Vineyard as thirst for Fench wine grows’, Henry Samuel, www.telegraph.co.uk

‘Chateau de Chine: Chinese buy prestige Bordeaux Vineyard’, rt.com

‘Chinese buyers snapping up French vineyards’, Kim Willsher, www.telegraph.co.uk

‘Big Shake-Up at Robert Parkers Wine Advocate’, Lettie Teague, online.wsj.com

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