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  • Apr 17, 2014
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FRANCE

Chinese buyers are honing their taste for quality vineyards in France

As they buy higher-value rather than mediocre French vineyards, wealthy individuals and companies are showing increasing maturity

PUBLISHED : Wednesday, 11 September, 2013, 12:00am
UPDATED : Monday, 09 December, 2013, 10:52pm
 

The quality and prices of French vineyards targeted by wealthy Chinese individuals and companies is rising, say industry players.

"Chinese are increasingly buying higher-quality vineyards. They are starting to understand quality," said Jerome Arbault, business development director of IFL, an international firm specialising in French properties including vineyards.

In December 2011, Chinese actress Vicky Zhao Wei and her husband, Huang Youlong, bought Chateau Monlot, a seven-hectare vineyard with a chateau in St Emilion, for about €5 million.

"This estate produces good- quality wine," Arbault said. "Previously, Chinese firms bought vineyards of so-so quality."

For example, in 2010, a Chinese billionaire, Cheng Qu, and other investors bought five chateaus with vineyards in France, including Chenu Lafitte, according to the wine trade press. The latter produces wine of only average quality, said Arbault. "It appears they bought the estate for the Lafitte name."

In 2008, a Chinese firm owned by the Cheng family in Qingdao, Longhai International Trading, bought Chateau Latour Laguens, a 60-hectare vineyard in Entre deux Mers in Bordeaux, The Washington Post reported. The estate produces 160,000 bottles per year, and the wine was of average quality, said Arbault.

Most Chinese investors buy French vineyards with a view to expanding wine sales in China, Arbault observed. "That's the big interest in terms of money."

A bottle of Bordeaux wine that costs €2.50 to €3 at the French vineyard can be sold for €15 to €40 in Beijing, Arbault pointed out. China's anti-dumping probe into European wine imports has driven up orders from Chinese wine merchants who are betting on an increase in prices, the South China Morning Post reported earlier. Buyers of vineyards from China have not always received a warm welcome in France.

Last year, Louis Ng Chi-sing, chief operating officer of SJM Holdings, a Hong Kong-listed gaming firm controlled by Macau casino mogul Stanley Ho Hung-sun, bought Chateau de Gevrey-Chambertin in Burgundy, for an estimated €8 million.

"The transaction in one of Burgundy's top vineyards triggered an angry backlash from local wine makers," said Arbault. "In Burgundy, the vineyards are inherited and they don't like outsiders to buy the land, even from other parts of France.

"Burgundy is less open than Bordeaux. The backlash is not against Chinese per se. If the buyer is smart and can continue the business well, the seller will be happy."

Chinese people put a lot of emphasis on face, but French winemakers want even more face, Arbault said.

"They value their family tradition, not only money. Most of the time, they want to keep the name of their wine. They want to make sure the image does not deteriorate after being sold to foreigners."

Chinese companies are also acquiring French vineyards. Chateau Richelieu, a one-hectare vineyard-cum-chateau once owned by Cardinal Richelieu, the 17th century French chief minister, was sold to a Chinese luxury- goods company, Hong Kong A & A International Holding, in September 2009, The Washington Post reported.

In February 2011, Cofco, the largest Chinese state-owned food company, bought a 21-hectare vineyard in Lalande-de-Pomerol for roughly €10 million, with the intention of creating wine with the Great Wall brand; and in June last year, Bright Food, a Chinese state-owned conglomerate, acquired 70 per cent of French wine trader Diva Bordeaux for an undisclosed sum.

This was the first acquisition by a Chinese company of a French wine merchant, said Emmanuel Gros, head of China and Asia Pacific at Benoit & Associates a French cross-border mergers and acquisition advisory bank. B&A was appointed by Diva to facilitate the sale of Diva's majority stake to Bright Food.

"Since Diva was looking for a new majority investor to fuel its development in emerging markets, we thought a Chinese investor would make a lot of sense. On the other end, we knew that Bright Food, China's second-biggest food conglomerate, was seeking overseas opportunities to strengthen its sourcing of high-end wine," Gros said.

The acquisition had given Bright Food access to French wine at a wholesale price, which helped feed the growing Chinese demand for wine, said Gros. It also helped Bright Food internationalise its market, since half the turnover of Diva was in Europe, he said.

Diva's revenue was €30.1 million last year, its website said.

China is now the world's fifth-largest consumer of wine, according to International Wine and Spirit Research. Sales of wine in China rose 20 per cent, to 257 billion yuan (HK$322.6 billion), last year, research firm Euromonitor International said.

Chinese acquisitions of French vineyards are still a drop in the bucket. The number of French Bordeaux vineyards bought by Chinese buyers is around 40, while the total number of Bordeaux vineyards is around 8,000, Gros said.


Correction

In an earlier version of this article, we mistakenly identified Wang Yifang, Chairman of Hebei Iron & Steel Group Co. Ltd, as having paid 30 million euros to acquire the Chateau Bellefont Bellecier wine estate. We regret the error.

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