China looks to become a global wine supplier

May 20, 2015

 

China has edged ahead of France in the amount of land devoted to vineyards, according to the International Vine and Wine Organisation, although France still produces more than four times the volume of wine that China does.

China now ranks second only to Spain, accounting for nearly 11 per cent of the land devoted to vineyards in the world, according to the organisation, which is known by its French initials, OIV. That is up from 3.9 per cent in 2000.

One problem: the global wine industry already suffers from weak demand and oversupply, which may explain why production last year was down from 2013 in five of the world’s top 10 winemaking countries, including China, according to OIV estimates. Estimated 2014 production was 5.1 per cent lower than in 2013, and down 17 per cent from its 2012 peak.

Still, the planting rolls on. The positive view is that China — already the world’s fifth-largest consumer of wine and on track to be No 1 — will drink nearly all its coming flood of homegrown wine, and plenty more beyond that. Optimists point to what happened when good coffee came to this country of tea drinkers. Shanghai now has more Starbucks outlets than any other city in the world.

But some believe there will be too many vineyards even if ­Chinese embrace wine the way they have coffee.

Qingyun Ma, dean of the University of Southern California School of Architecture and the owner of a Chinese winery, likens China’s grape mania to the recent solar-power craze. Propelled by government incentives, China became the world’s largest solar-panel maker — and created an industry that now suffers badly from overcapacity.

“Grape is the new solar ball in China,” said Mr Ma, whose Jade Valley winery is in western China’s Shaanxi province. Among the incentives for domestic ­production: a 40 per cent duty on imported wines.

Wine merchants and experts say China now reminds them of California in the 1970s, with entrepreneurs, bankers and international luxury-goods makers ploughing millions of dollars into vineyards. Giant state-owned enterprises with no wine experience are also getting into the game. These deep-pocketed novices include electronics maker Midea Group and Shandong conglomerate Nanshan Group.

Some of the production may be absorbed by export demand. China’s wine exports are tiny, but that may change. Two years ago, British wine merchant Berry Bros & Rudd gave Chinese wines a permanent place on its shelves in London. Quality is improving and Chinese wines have started to win awards outside China. Three wine experts, in a blind tasting at a Wall Street Journal subscriber event, said they were pleasantly surprised by a Bordeaux-style red from Silver Heights, a winery in Ningxia province, one of China’s most respected wine regions.

Professional winemakers are raising the standard in China. French luxury-goods conglomerate LVMH Moet Hennessy Louis Vuitton has built a winery in a place called Shangri-La in the Himalayan foothills that aims to produce China’s best, and probably most expensive, wine. Moet Hennessy, the LVMH unit that makes Dom Perignon Champagne, already produces sparkling wine in Ningxia. A bottle sells for $US27 ($34).

For all the planting enthusiasm, China is a country with few areas whose climate is considered suitable for producing the best grapes. Where there is abundant sun, it is often too cold. Where the weather is warm enough, conditions are too wet. Combine a poor climate with a lack of infrastructure and, often, of experience, and it can be a real challenge to come up with a drinkable wine.

Chris Ruffle built Treaty Port Vineyards in the seaside province of Shandong with the goal of making China’s best wine. But his first crop, in 2007, was damaged by heavy late-season rains that caused many grapes to split open and rot on the vine. Then the area was hit by the tail end of a typhoon, which flattened several of the trellises. Having expected a harvest of 25 tonnes, Mr Ruffle ended up with five tonnes that became some “frankly unpleasant” red wine, as he recounts in his coming book A Decent Bottle of Wine in China.

The weather has been better in recent years, but Mr Ruffle has faced many other problems, including high staff turnover and construction delays. “It is a challenge,” said the Shanghai-based fund manager. “Fortunately, that’s not where I make money.”

Despite his struggles, new players are coming to open vineyards near Mr Ruffle’s. They include Domaines Barons de Rothschild (Lafite), a Taiwanese private-equity investor and a Singapore agro-tourism company. To Mr Ruffle’s delight, the local government will open a new airport nearby this month.

Source: The Australian