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California vintners thirsty for a taste of China's booming wine market

Demand for foreign wines is growing among the swelling middle class. French exports dominate in a market that has been largely polarized — drinkers buy very cheap bottles or very expensive ones.

May 24, 2010|John Boudreau

BEIJING, China — — At a time when recession-pinched Americans are swilling Trader Joe's Two Buck Chuck, Sun Xiao thinks nothing of entertaining his friends with $150 bottles of wine at his private club.

"I like wine — very rich wine," Sun, chief executive of a real estate investment firm, said one recent evening as attendants — young women in traditional Chinese gowns — stood nearby, ready to serve up an expensive bottle at his beckon. "It's the perfect example of humanity and nature living in harmony."

Sun's appreciation of foreign wine is increasingly shared by others in China's swelling middle class, many of whom are replacing the long-popular "baijiu" grain liquor and beer at their dinner tables with French Bordeaux and Napa Valley Zinfandels. And that has the California wine industry tipsy with anticipation.

"More and more Chinese want to take good care of their health and are shifting from baijiu to the grape," said Jimmy Ye, an executive in a Shanghai investment fund and a wine convert.

Opening up an expensive bottle — say, a $4,000 Chateau Petrus — to seal a business deal signals the seriousness of the relationship, said Wu Jianxin, owner of the Beijing private wine club QingPingHuiGuan, which serves only the most revered French wines. "It shows generosity and indicates you are cultured."

But China's new appreciation of foreign wine also reflects "a nouveau riche mentality that the most expensive must be the best" that is prevalent in China's booming economy, he added.

"People ask me, 'What's the most expensive wine you have?' " said Gaylen Richardson, vice president of Via Pacifica Selections, a wine exporter started by David Duckhorn, a member of the prominent Napa Valley wine family who set up a Shanghai store about two years ago that replicates a Northern California tasting room. "I'll say Quintessa, about 2,500 yuan ($366). They'll say, 'That's not expensive enough.' "

Richardson, a former wine buyer at Market restaurant in St. Helena, is among a growing group of pioneers seeking business in China after wine sales for California wineries last year fell for the first time in 16 years, according to wine industry consultants Gomberg, Fredrikson & Associates in Woodside, Calif.

"I get a call from wineries all the time. They are sitting on inventory," said Christopher Beros, managing director of California-China Wine Trading Co., which has offices in San Francisco and Shanghai. He holds regular wine tastings with his nine-person China staff to both educate them on the subtleties of vintages and educate himself about the Chinese palate. One reason Chinese have a strong preference for red wine, he has learned, is that they believe the color signifies good luck.

"China is literally the 'Wild, Wild West' of the wine world," said Eric Pope, who overseas international wine programs for the San Francisco-based Wine Institute, a trade group representing more than 1,000 California wineries.

Wine consumption in China, promoted in part by a small but growing domestic wine industry, nearly doubled from 2004 to 2008 to about 900 million bottles, making it the eighth-largest wine market in the world, according to Vinexpo, organizer of one of the world's largest wine and spirits conferences. Over the next three years, consumption is expected to soar 32% to 1.26 billion bottles. The United States, the world's second-largest wine market, currently consumes about three times as much wine as China.

Much of China's wine market is polarized — consumers either buy cheap bottles for a few dollars or dole out more than $1,000 per bottle for elite French vintages, Duckhorn said. "Our job is to open up the middle market, $15 to $100 a bottle," he said.

Imported wine in China is slapped with a 50% tax, so it's pricier for Chinese to explore California vintages than it is for Americans.

Cost is not the only challenge. California wine makers face tough competition in China, especially from the French, who have been selling wine in China for decades and who aren't above a little vinous trash-talking. They promote their wine as superior to all others, ignoring the historic 1976 "Judgment of Paris" blind tasting in which California chardonnays and cabernet sauvignons triumphed over their French counterparts.

"The French wines always come in first in China," said Yanguang Jin, general manager of AWA Shanghai Trading Co., a 1-year-old company that is importing California wine. In 2008, French wine represented 46% of all imported bottled wines, while the United States had only 5% of the market, according to the U.S. Department of Agriculture.

The Wine Institute has launched a marketing push in China to educate the newly wealthy masses about California wine, whose fruity intensity is more in line with the Chinese palate, some sellers say.

Napa and Sonoma counties may be unfamiliar to many in this nation of 1.3 billion people, but California and the American spirit are well known.

"When I taste the red wine of America, I can feel the American culture," said Sun, the successful Beijing executive who is discovering California wine. "The wine produced by the Americans is more connected to the age — the times — than the French wine."

Boudreau writes for the San Jose Mercury News/McClatchy.

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