Editors Note: This translated article reports on how China’s increasing demand for French wines, and the increasing amount of money that wealthy Chinese are willing to spend, is shocking the global wine market. The article also discusses the social rationale behind the purchase of these increasingly expensive bottles of wine, as well as the problems arising from the emerging ‘wino’ black market.

 

China’s nouveau riches are under constant watch by society to see how they spend their money. If they spend it "well", they might be regarded as classy and refined; as China’s trendsetters. If they blow it on frivolous purchases, however, others will view them with contempt. Likewise, these nouveau riche also understand that purchasing things like real estate or insanely expensive cars can be a bit too ostentatious, so they choose instead to buy all sorts of collectibles, or various antique furniture, paintings, scrolls, etc. As the wealthy have turned towards buying these sorts of "modest" things, the values of these new "luxury" items have skyrocketed.

China is "wine-crazy"

Recently, one of the hottest imports in China has been wine, with the most popular kind being those from the Lafite Winery in Bordeaux, France (apparently Chinese brands Great Wall, Dynasty, and Chengyu aren’t up to snuff). The Chinese upper class has been quite fond of European wines. Indeed, what better to define classiness and refined taste than a glass of fine wine in your hand?

As Lafite was already one of the world’s most famous wineries, it has always been sought after by wine connoisseurs (and those with money burning a hole in their pockets). But in recent years, China has rapidly increased the amount of Lafite wines that it imports. While the sellers couldn’t be happier with China’s increased interest in wines, the increased import of wines into China has also shocked the cost of fine wines in the global wine market.

The cost of being wealthy and "hip" in China

At the beginning of 2010, at an auction in Hong Kong, a phone call came in from Mainland China. The unknown bidder on the other end of the line was calling in to place a bid of 1.49 Million RMB for a single bottle of wine. The bottle in question was an 1869 Lafite. This price destroyed the previous highest bid for a bottle of wine (1.01 Million RMB). As if this mystery bid wasn’t enough, during the same auction, another bidder shelled out 450,000 RMB on a bottle of wine. But this wasn’t some rare bottle from the 1800s; it was merely a2009 Lafite. Also, prior to that auction, the case for a 2009 Lafite bottle fetched 116,000 RMB!

Even in the aftermath of the 2008 financial crisis, Lafite prices have continued to climb up. In 2001, a bottle of Lafite had a selling price of 2,895 RMB. In 2003, it rose to 3,933 RMB. By 2011, the same bottle of Lafite was priced at 50,341 RMB. Liang Hongye, a Sommelier (wine steward) for the Bordeaux Wine Industry Committee explained the rationale behind this ridiculous price increase: "Every year, the winery output is fixed. That is to say, if one bottle is consumed, then there is one less of bottle in the world for that year. As the remaining bottles of wine decrease, their price will increase. This is the basic idea of economic supply and demand."

The emerging black market

Many Chinese buyers have indicated that their purchase of a Lafite was not done as an investment per say, but because of its "value added". In Hong Kong, many (wealthy) people believe that a Lafite is the perfect gift to give an honorable guest. Liang Hongye commented: "Look at it this way, this is not just a "blind enthusiasm" that consumers have developed for buying Lafite wines; actually, they are buying it for the exact same reason that people buy Louis Vuitton bags. If you are holding an LV bag in your hand, not only does it help you 'gain face', but it also lets you climb the social ladder, so to speak. This also the reason that people want to purchase Lafite, for its social ‘value added’."

But, wherever there is a new "must have" item, there is also an emerging black market for buying and selling fakes of that item (ask Louis Vuitton about the fake bags you can buy in China!). If one compares the sales volume for Lafite in China with the import volume of Lafite, you will immediately notice that there seems to be a rather large discrepancy: in one urban district of Guangdong province, the sales volume of Lafite was more than five times its import volume. So if you bought a bottle of Lafite in Guangdong recently, there is a solid eighty percent chance that you just got ripped off! If you think back to a few paragraphs ago, you will remember that someone spent 116,000 RMB on a Lafite bottle’s case. This buyer no doubt was part of the group of black market sellers that takes used cases and bottles, and "recycles" them, reselling for tens of thousands of RMB. According to some reports, a single empty Lafite bottle can fetch 2,000 to 3,000 RMB China! As these Chinese fakes get progressively more convincing, how can consumers know for sure whether they are getting a genuine Lafite?
 

Source: sohu.com
 

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Keywords: French wine in China Lafite wine in China luxury items in China wine market and China