Xinjiang taps into booming red wine market

PUBLISHED : Sunday, 28 November, 2010, 12:00am
UPDATED : Sunday, 28 November, 2010, 12:00am

Grapes in Bordeaux, California and Xinjiang have met with vastly different fates for years.

The French have turned them into tasty and profitable red wine for more than 300 years and the Americans followed suit in the late 19th century, but in western China they've usually ended up dried, as raisins.

That could all be about the change with Chinese wine merchants keen to show the world that Xinjiang can become one of the world's premier red wine production bases.

'Xinjiang is located at roughly the same latitude as Bordeaux and California, making it an ideal place for growing grapes,' said Fred Nauleau, a French winemaker hired by the Citic Guoan Wine Company, who has spent five years in the autonomous region. 'And I was surprised to find that red wine I made here could inherit the fine and elegant style which once just belonged to old world, French wine.'

Nauleau said he was attracted to Xinjiang by its ebullient culture and the freedom to make different styles and tastes of wine.

Mainland demand for red wine has soared in the past decade, with Beverage World Magazine saying it has seen the highest growth in consumption globally since 2008. In the first four months of this year, the mainland imported 41,809 kilolitres of bottled wine, worth US$177.51 million, the magazine said. The volume was up 76.5 per cent year on year and the value up 91.1 per cent.

Citic Guoan Wine chairman Li Jianyi said average red wine consumption on the mainland had grown by between 30 and 40 per cent in recent years, attracting a lot of business interest. 'We aim to have our red wine, made in the unique geographic location of Xinjiang, grab 20 per cent of market share,' he said.

Compared with the main domestic wine producers - Zhangyu, Dynasty and Great Wall - Citic Guoan Wine, a subsidiary of state-owned Citic Group, is a newcomer. But Li said its predecessor, Suntime International Wine, built a strong foundation over more than a decade.

Suntime was a subsidiary of the semi-military Xinjiang Production and Construction Corps, which own the richest and largest tracts of farmland in western China. The corps' former commander, Wang Zhen, imported chardonnay, merlot, cabernet sauvignon, riesling and other famous wine grapes from France when he decided to set up a 10,000-hectare vineyard, the largest in Asia, more than 12 years ago.

Wang's idea was sparked by Xinjiang's geographical advantages and its history. An archaeological site in Niya - a key fortress on the Silk Route - discovered early last century by archaeologists from Britain, Japan and China proved that Xinjiang was once a cradle of red wine production.

Yue Feng, former director of Xinjiang's Cultural Heritage Bureau, said archaeologists found a great deal of evidence showing that the people of Niya produced and appreciated red wine as early as 300BC.

'We also found many ruins of vineyards, grape pips and even brewing equipment and alcohol containers at the Niya site,' Yue said. 'Some wall pictures even showed the Niya people were doing some grape wine-related business, which told us that people in the western region of China had a long wine history.'

But the historical record also showed that the red wine base suddenly disappeared 1,600 years ago, without any evidence of the reasons for its demise.

That early history also become part of Citic Guoan Wine's branding strategy, with Niya Wine, made using imported French vines, now one of its products.

When Islam, with its prohibition on alcohol, reached Xinjiang more than 1,000 years ago, the immediate future of the region's grapes was sealed. But with more and more Han Chinese moving to Xinjiang to seek opportunities under Beijing's development blueprint for the western region since 2000, the Citic group decided it was a good opportunity to turn back the clock and revive Xinjiang's wine industry.

Last year, it bought a stake of more than 90 per cent in Suntime.

'I think we made a smart decision to enter the wine market because now is the golden time for China's red wine consumption,' Li said.

But the newcomer is also aware of the challenges. 'We must admit that our red wine market is still dominated by a great number of irrational consumers, especially this year, with the price of Carruades de Lafite soaring to 3,500 yuan (HK$4,075) a bottle,' said Zhao Xin , general manager of Citic Guoan Wine Sales.

Lafite, Latour, Haut-Brion, Margaux and Mouton Rothschild are five fine wines in France, but most mainland consumers just know Lafite and have pushed its prices higher. The China Wine website, the biggest business-to-business wine marketplace on the mainland, said one bottle of Lafite sold for 8,800 yuan last year.

It says Carruades de Lafite prices increased tenfold on the mainland in the past five years, with wine lovers in Zhejiang consuming nearly 100,000 bottles last year, a third of its annual output.

But imported wines only account for 12 per cent of the mainland market by volume, with more affordable wines from Dynasty, Great Wall and Zhangyu making up the rest. By value, foreign wine accounted for 40 per cent of mainland sales.

Guoan faces some strong competition. Last month, the century-old wine producer Zhangyu expanded its mainland vineyards to nearly 17,000 hectares, with more than 1,300 hectares in Shihezi, Xinjiang, very close to Guoan's wine base.

Hong Kong-based wine expert Peter Chow said it was a good time for Chinese wine makers to start planting their own vines.

'I know there is an open secret that many mainland wine makers bought raw wine from France, the US, Chile, Australia and other countries to mix with their own brand wines,' he said. 'However, there is a rule that those countries would never provide you the best raw wine.

'I think Guoan might be among the very few Chinese wine makers insisting on cultivating their own brand wine, but there's still a long way to go for it and other Chinese producers to reach the international standard because both Zhangyu and Citic Guoan's grapevines are still too young. In France and other famous chateaus, only vineyards with grapevines a few decades old can produce high-end wine grapes.'

Vintage growth

In recent years, average red wine consumption on the mainland has grown by up to: 40%