Hong Kong’s cup overflows as Chinese get a taste for high-class wines
The clink of glasses; the swoosh of ruby liquid. They are welcome sounds to many – but in Hong Kong, the authorities enjoy them perhaps even more than the drinkers.
As the economic crisis rippled across the globe two years ago, the territory’s leaders slashed its 40% wine duty to zero. Their aim was not only to cheer the gloomy but to boost trade.
If sober officials doubted the wisdom of that move, they were soon proved wrong. It has transformed Hong Kong into Asia’s wine centre and a force for driving up prices round the globe. Industry stalwarts watched in shock at the Mandarin Oriental hotel last month as lot after lot at a record-breaking Sotheby’s auction hit or outstripped its high-end estimate. Then came the star of the evening: the Chateau Lafite 1869.
When three bidders fought up the price to a new world high for a single bottle of wine, the well-heeled buyers present gasped and applauded. Three bottles each sold for a stratospheric HK$1.8m (£143,000), easily beating the 1985 record of £105,000.
Even those in the trade describe that as a “bonkers” price; perhaps three times a European merchant’s. “It’s not a reflection of where the market is, but of the fact that anything’s possible if you hit the right buyers in China,” said Doug Rumsam, managing director of Bordeaux Index in Hong Kong.
Though eradicating taxes was the trigger, the real driver is new wealth on the mainland: Chinese property tycoons and mine owners are replacing New York’s hedge fund millionaires.
“Wine is much more expensive now the brakes are off on demand than it was when there was 40% tax,” said David Elswood, international head of wine for Christie’s. The two auction houses report that Hong Kong, the only major economy to grant wine tax-free status, has become their single largest market.
Sotheby’s has sold £32.3m worth there this year – almost four times last year’s total and more than twice its London and New York sales combined.
Sales of lower-priced wines are rising, too. In all, wine imports shot up 80% in 2008, 40% last year, and 72% in the first nine months of this year, reaching $600m (£375m), according to the Hong Kong trade development council.
This month’s bustling wine exhibition was packed with mainland buyers who began shopping in the territory following the tax cuts. Fu Jing of the Tianjin Outongsheng company swirled her glass with a practised hand before taking a sip of a red from Australia’s Angove and nodding approvingly.
She has been enjoying wine since 2002, but acknowledges she is a rarity. “People who can appreciate good wine are still in the minority, although the number is growing,” she said.
“For westerners, wine is just something ordinary, just like beer. They have a more thorough knowledge and are much more tolerant to different flavours.
“For Chinese people wine, especially a good imported wine, is still a luxury. Consumers like softer or milder tastes and sweeter ones.”
Most of her clients want wines priced 100-200 yuan (£9.50-£19) a bottle, she says; only a handful pick out those costing more than 10,000 yuan (£950).
But at the top of the market, the price is itself a selling point. Some are buying to store or speculate. Many, perhaps most, are buying for business purposes: to grease the wheels of projects or woo new clients. They need a wine that recipients can recognise as outrageously expensive.
“Orders that five years ago would have been staggering are arriving with startling regularity,” said Rumsam.
“This morning I had someone wanting 10 cases of the Lafite 08. I got a call from a client looking for 100 cases of Chateau Mouton-Rothschild 2007 [which sells for £3,000 a case].”
The problem these days is finding the wine, not the customers, he added.
The mainland’s 50% duty on wine imports does little to deter buyers. Some bribe customs officials, or use workers to individually carry bottles to them. Others are happy to pay extra because they fear being cheated by counterfeit products from suppliers closer to home.
Renowned French reds dominate the market and Lafite is the unchallenged emperor. Some say the ease of pronouncing its Chinese name, La Fei, has helped, but smart marketing has certainly been a factor.
Recently its makers announced that 2008′s labels would include the Chinese character for 8, considered highly auspicious. In days, the price had risen from £9,000 a case to £13,500.
“They are power brands. If the wine was Rolex or Ferrari, they would buy it,” said Elswood.
But Robert Sleigh, Sotheby’s head of wine for Asia, sees “a thirst for knowledge and budding entrepreneurship”.
Either way, traders predict it will be years before mainland demand begins to flatten.
In 2007 China imported 2 million cases of wine. Estimates suggest the country could be buying 50m cases by 2017. And there are plenty of people in Hong Kong who will raise a glass to that.