Thursday, October 18, 2012

A fact-finding trip to Hong Kong & China. Part One


Along with Anthony Rose of Decanter Magazine and the Independent, I am helping to lead a group of members of the International Wine Clubs Association on a fact finding trip to Hong Kong and China, set up by Sophie Jump, the association’s dynamic head. The visitors include the heads of top global companies such as Laithwaites/Direct Wines and Hawesko and bosses of wine producers such as CUNE. Some already do business in the region; others are exploring it for the first time.

My own experience of China led me to warn the group that much of the information we heard would be contradictory and that was certainly the case on the first day. Over the course of 10 days, however, thanks to the calibre of the people we are meeting, some clarity will hopefully emerge. 
Yquem galore in a Watsons shop in Hong Kong

I am attempting to record our findings as we go along, without generally attributing of them to the people who may have provided the information. Contradictory information will appear as we encounter it.

Cover of a recent Sotheby's wine sale

The first days included meetings with Andrew Davis of Invest HK, Keith Cheng of the Hong Kong Trade Council; Debra Meiburg MW, the leading authority on Hong Kong and author of an invaluable guide to the Hong Kong wine trade; Greg de ‘Eb of Crown Cellars, creator of the former colony’s – and he would claim the world’s – best storage facility; James Hepple, head of retail at specialist retail chain Watsons wine: wine merchant and restaurateur Paolo Pong of Altaya and new retail chains Bordeaux etc and Champagne Etc; Richard Sutton of Armit, Doug Rumsam of Bordeaux Index, Robert Sleigh of Sotheby's; Lilian Haynes of Northeast wines; Patricio de la Fuente Saez of Links Concept; Laura Budlong of Force 8;  Luke Cianfarini of Corney & Barrow,  and David Wainright of Zachys Asia.



Debra Meiburg's bok: essential reading

 So what did we learn?
Some key points:

  • Of the 7m people in Hong Kong, half a million could be described as ex-pats (including non wine-consuming Muslims). Nationalities such as France (the largest group) and the UK represent would each amount to fewer than 30,000 people. Official consumption figures are 5 litres per person (compared to an impressive 1.3 for the mainland). This figure, however, includes much or all of the wine that is re-exported officially or unofficially.
  • Most fine wine in Hong Kong is consumed by 20,000 people but 2m qualify as wine drinkers.
  • The removal of all duty in 2008 has led to an explosion in the wine market (with growth of 240%) and of wine buying in Hong Kong by mainland Chinese who smuggle bottles back home and visitors from other parts of the region.
  • Huge amounts of wine are re-exported in this way. No-one knows how much wine is involved but it is almost certainly much higher than the 20% quoted officially. Significant amounts are smuggled by people crossing the border.
  • Wine is also smuggled by professionals (for HK$200 per bottle).
  • Readiness to accept bribes by officials also means that larger quantities are trucked across the border and shipped into China's many ports.
  • The Hong Kong and Chinese mainland buyers have – at least for the moment – fallen out of love with Bordeaux en primeur. Unless a very convincing case is made for it as an investment, it is unlikely that we will ever see them buying on the scale they did in 2009. It would be wrong to underestimate the anger they feel at being taken for fools by the pricing in 2010 and 2011. See my previous post about this.
  • The oft-quoted problem of Chinese buyers not liking the fact that they can’t touch and hold their en primeur purchase may be overstated. If an investment or gamble is attractive enough, they will buy at a distance.
  • The most serious Chinese fine wine buyers, with whom the Hong Kong-based people we spoke to deal, like the flavour of old wine and dislike tannin. (Unlike many of their counterparts in the US, for example). Anyone hosting a tasting or tutored wine dinner (of which there are huge numbers in Hong Kong) focused on young and current vintages risks low attendance and high disappointment. (Guests at a Barolo event were apparently unhappy not to taste anything earlier than 2000).
  • Younger, less experienced drinkers in mainland China are happier with younger wine
  • There is no question that high end buyers are switching from Bordeaux to Italy, the Rhone and particularly Burgundy, though there is also a market for top wines from Australia and California (despite what some find to be too alcoholic styles). One anecdote concerned a 28 year old Hong Kong trader who had drunk all the first growths back to the 40s and is now looking for something different.
  • Auction buyers generally only want the "right" wines and the "right" vintages (based on reputation and Parker/Spectator ratings). So, in sales of Gaja wines or Burgundies, disproportionate interest is given to the top wines.
  • Any talk of matching wine to “Chinese” food, is questionable, given the wide range of styles of cuisine (Hong Kong Chinese often find Szechuan food far too spicy for example) and the number of different dishes that make up the kind of banquet at which wine is likely to be served.
  • Wine now features at all big banquets such as weddings where it might not have been included in the past. It is however treated as an option rather than a staple, and beer and soft drinks will also be available.
  • Counterfeiting is a big problem – on the mainland, but so is handling (where 7 in 10 Lafites are said to be fake) and storage. Chinese buyers are now becoming obsessive about provenance.
  • Red is still THE colour. Despite a growing appreciation of good, off-dry Riesling by those moving into wine, white wine is handicapped in ways westerners may not expect. Its name, in Chinese, is easily confused with the strong Baiju spirit; Chinese medicine teaches that it is unhealthy to drink cold liquids with hot food; many Chinese (though far from all) cannot physically drink large quantities of wine and it is seen as easier to linger over a glass of red than a glass of white.
  • Champagne sales are growing, but sweet wine is still slow to take off, possibly because of its role at the end of a meal (when many Chinese drinkers will feel they have already had enough)
  • Buyers are very disloyal in their purchasing habits, shopping around between merchants and comparing prices on Wine Searcher. It is hard to get buyers here to sign up to a Wine Club programme that delivers a case every month, as in Europe and the US. 
  • Online use is growing rapidly, but more as an information resource than for purchasing. This is particularly true of Hong Kong, given its limited size.
  • Wine education is booming, especially among women, but unlike Japan, there are few female sommeliers.
     
  • The restaurant scene is also booming, but wine sales are suffering from an increased readiness to allow customers to bring their own wine and to pay corkage (BYO). This is now customary even in some of Hong Kong’s top restaurants, though high corkage prices are a deterrent for anyone not wanting to drink a very special bottle. Penetration of wine (imported or Chinese) is still weak in Chinese restaurants frequented by Hong Kong Chinese.
  • Despite the problems of selling white wine already described, it may benefit from the BYO trend and customers buy a bottle as part of a negociation to reduce corkage costs.
  • Hong Kong wine drinkers follow Parker, Wine Spectator and Decanter points. Despite the respect given to local experts like Debra Meiberg MW, Simon Tam of Christies and Jeanie Cho Lee MW, no local expert has the impact of these three publications. Medals from competitions have little impact.
  • This is a market where private labels have yet to take off. Established names plus high scores are definitely preferred.
  • Gifting is hugely important. Many great bottles pass through numerous hands without ever being drunk.
  • There is high understanding and appreciation of regionality in food (better crabs from one place rather than another), but few wine regions are known about. So it is hard to sell wine from regions such as Languedoc, or many DOs in Spain.
Watch this space - or subscribe - for the next part of this report: on mainland China.


9 comments:

  1. Really interesting! And I look forward to reading your next report.

    There is one comment, which I have come across many times, that I find truly staggering, not because it is not true, but because of the conclusion drawn. It relates to matching wine and Chinese food:

    I am Chinese, so are many of my friends, and we try to restrict attending banquets to no more than perhaps 3 times a year. They are never really enjoyable! Which means that for 362 days of the year, when we have Chinese food, the format usually involves onw, that's right, one main dish. Matching that meal with wine is a walk in the park. And is done regularly. In fact, we have wine with EVERY Chinese meal at home.

    I, irregularly, post my pairings on Weibo (since Twitter has already concluded that excercise is questionable : ) ), but if you are looking for an example, perhaps have a look at the postings of @cabfrancfreak on Twitter and Tumblr - sublime pairings of wine and Asian food.

    The trade will retort that we account for a tiny slice of the market. True. But there is no theoretical reason why that cannot change!

    What is missing is putting wine-food matching in the context of everyday dinning. Theorectical analysis and attempts at matching in lab-like conditions completely misses the point.

    If I have the means, I will find 20 Asian wine-lovers and document (with video) a year in their lives. From simple meals with the family, to a road-side bowl of noodle, showing how wine has made a difference to how they are enjoying Asian cuisine. If done properly, that will really transform the market?

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  2. Thank you for the (as ever) thoughtful response. I think the issue with food and wine matching is takes up too much and too little attention. Set China aside for a moment. In the developed wine markets which have all been bombarded with various kinds of education about what to drink with what, very few people take much notice. Worst of all, they slavishly follow the red-with-meat/white-with-fish edict. Most treat wine most of the time for what most of it is: a moderately-priced beverage to enjoy with or without food. (And yes, even in the older, wine producing parts of Europe, wine is not inevitably paired with meals).

    The exceptions to this rule are wine enthusiasts who, like people who REALLY care about the way they look, obsess about getting it "right" - and represent a tiny proportion of the market. And a much larger number who, like most of us who dress rapidly and relatively robotically for most of the time, take pains to try to get it right on more special occasions such as when they are giving a dinner party.

    In other words, according to research we've been doing, food-and-wine-matching probably really matters to most consumers fewer than a dozen times per year. However, on those occasions, it really DOES matter, and they need advice.

    I'll support my belief in the lack of western interest in the issue by citing the poor sales of books dedicated to the subject (I speak as someone who has researched and included sections dedicated to it in almost all the books I've written, certainly over 20).

    Of course it is dangerous to generalise. Anglo Saxon non-enthusiasts seem to be particularly uninterested. There is far greater interst in France than Germany and people seem to give the subject more attention in Denmark. China, like other parts of Asia, may be ripe for education - partly because wine is new and we all are more focused on something we've just discovered; party because knowledge is very valued; and partly because many new drinkers are consuming wines for social reasons: to be seen to be doing the right thing.

    So, I'll certainly include the subject in projects I'm planning for China. And, going back to my point about the occasional dinner party, I've made this kind of advice central to an exciting campaign we're putting together for a client that involves QR Codes on many millions of bottles. That project will also include some video clips.

    But, and I am sure of this, the essential task for the wine industry is to get consumers to feel comfortable with wine and not frightened and confused, as most are at the moment. Food-and-wine-matching should be an optional focus, not one that makes people feel that wine is a mysterious complicated area that can't be enterd properly without "education".

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    1. Thank you!

      Agree that making consumers feel comfortable with wine is essential. Which is why I think overly theoretical discussion of flavours and how that can pair with Asian food, or how the Asian "palate" is different is really not helping at all.

      The critical difference in Asia is that wine has never been a "normal" part of the local life. Merchants focusing on the exclusivity and social-aspirational aspect of wine is not really helping in developing the market.

      If consumers constantly see (not read about) people enjoying (in real life, not in an ad!) say Albarinho w/ Teochew steam fish, Pinot Noir w/ a plate of roast duck over rice or fino sherry w/ mee goreng, they will soon realise that wine is first and foremost an enjoyable and refreshing drink. One that can be enjoyed casually and simply with friends and family. One that is as "normal" as beer, coffee and calamansi juice. There is much more to it, but it is then up to the consumers to find out more if they wish.

      That attitude and approach to wine already exist in Asia. Just needs highlighting?

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  3. ...And good luck with the video! I'd love to hear more if you make it happen.

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    1. Thanks! Needs funding ... : )

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  4. From @vinternet
    Great report on fact-finding trip to Hong Kong & China by @robertjoseph

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  5. From @chrislosh Much of what you need to know about the HK/Chinese wine market. Thought-provoking stuff

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  6. From @JamesSuckling excellent blog Robert. That about sums up Hong Kong at the moment.
    On my way to HK now from Auckland. I would like to post it on my site with link to your site. Okay with you? Safe travels.

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    1. Thank James, I really appreciate your feedback because you're one of the few people who knows HK

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