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China's drinkers develop taste for premium local wines

asia.nikkei.com by DAVID CHAFFETZ04/01/2022  

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A waiter pours a wine from China's Ningxia Hui Autonomous Region into a glass for a judge at a tasting event in Beijing. The number of independently owned wineries in China has more than doubled since 2015, according to the China Alcoholic Drinks Association.   ? Reuters

In an oasis surrounded by the desolate Gobi Desert, vines are ripening. As the tiny buds swell into succulent sweet clusters of grapes, snowmelt from the Tian Shan Mountains flows through underground irrigation channels to supply precious water.

Grape varieties suitable for wine have been flourishing in Turpan for more than 1,000 years, but wine has struggled to build a following in modern China, eclipsed for centuries by a local preference for white spirit drinks such as baijiu. Now, though, wine is rapidly becoming a premium tipple for Chinese consumers.

The number of independently owned wineries has more than doubled since 2015, according to the China Alcoholic Drinks Association, the country's industry body. And sales of premium wines, priced at more than 600 yuan ($94) a bottle, grew by 27% in 2020, in spite of the impact of COVID-19-related lock downs.

Larger producers of ordinary wine are losing market share, according to Ma Yihan, a consultant at Statista, a Germany-based provider of business data. But the shift to premium wines is expected to drive a 100% increase in overall consumption by 2024, according to analysts from Global Data, a U.K.-based market research company.

"Having a bottle of homegrown wine on the dinner table now looks up to date; indeed, it shows an appreciation of wine," says Terry Xu, a Shanghai-based wine writer and former sommelier.

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Top: Workers sort grapes at a winery near Yinchuan, in China's Ningxia Hui Autonomous Region, on Oct. 12. Bottom: Barrels of wine are seen at the Legacy Peak winery near Yinchuan.   ? Reuters

With 6% of the world's landmass and the third-largest area under vine cultivation, China looks likely to emerge quickly as a major consumer and exporter of fine wines, according to the Paris-based International Organization of Vine and Wine. This is a dramatic shift from the traditional Chinese view of wine as a European drink, which dates to the arrival of Portuguese traders in the 1500s, eager to sell fortified port wines.

The Portuguese found few clients. Until the 1900s, Europeans exported wine to China mostly to satisfy European colonialists, and later the expatriate community. But that started to change about 25 years ago, when China's leadership began to praise the beneficial effects of red wine on a person's qi, or "vital energy."

Unsurprisingly, these early efforts sought to reproduce European-style wines. For example, Ao Yun, a subsidiary of French luxury goods conglomerate LVMH in Yunnan Province, makes excellent Bordeaux-style wines, proving that fine wine can be produced in China. Robert Parker, an influential American wine critic, has given his sought-after 90+ ratings to 10 Chinese wines, and Decanter, a wine reviewer, has awarded prizes to 168 Chinese wines, out of a field of 1,550 global entrants.

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Bottles of wine are lined up for a tasting session at Canaan Winery in Hebei Province on Oct. 9.   ? Reuters

The European heritage of China's wine industry has also led most vineyards vying for international recognition to rely heavily on the expertise of French and Italian winemakers. For example, production at Silver Heights, a prizewinning winery in the Ningxia Hui Autonomous Region, is under the control of French winemaker Thierry Courtade, who is married to owner Emma Gao.

As a result of this European legacy, red cabernet sauvignon and merlot grape varieties predominate in China's vineyards, and red wines account for eight of every 10 bottles sold in China, according to Statista. But the industry is responding to warnings from experts such as Ma Huiqin, a professor of oenology in the department of fruit tree sciences at Beijing's China Agricultural University, that long-term growth may be constrained unless winemakers provide lighter and sweeter offerings to attract younger drinkers.

In a recent contest run by Asian Wine Review, a guide to wines produced in Asia, two of the four Chinese winners were ice wines -- sweet dessert wines made from cold-climate grapes that are allowed to freeze on the vine before harvesting. Independent winemakers are also aware of social media trends pinpointing a growing interest in sweeter local wines, says Matthieu David-Experton, a market research expert in Shanghai.

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A vineyard operated by Canaan Winery in Huailai County, Hebei Province.   ? Reuters

But Chinese winemakers know that they must be patient. It can take three generations to establish a storied brand, according to Hong Kong-based wine expert Jeannie Cho Lee. And winemaking remains significantly less profitable than the white spirits industry.

China's flagship distillery, Kweichow Maotai, which makes a leading brand of baijiu, attracts investors with a claimed gross profit margin of 90%. But fine wineries promise significant returns only when they reach scale and enjoy widespread name recognition. That dampens investor interest, even in prestige projects.

France's Chateau Lafitte Rothschild group's Long Dai winery in Shandong Province lost its initial partner CITIC Group -- a major state-owned Chinese investment company -- before the first bottle was produced, apparently because of the low level of forecast returns.

Many Chinese estates are trying to overcome the market perception that fine wine must be patterned on European varietals. Independent winemakers are experimenting with local varieties and crossbreeds and investigating styles that reflect the unique features of their native grapes and terroirs -- the combination of factors including soil, climate and sunlight that gives wine grapes their distinctive character.

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Workers harvest grapes for winemaker Ian Dai at a vineyard near Yinchuan in Oct. 11.   ? Reuters

With its vast landmass, China is full of terroirs where vines can grow and flourish -- even if some environments are extreme. Growers in frosty Ningxia must bury their vines under earth in the winter. The moldy humidity of Yunnan Province, in the southwest, can only be avoided by planting vines above 2,000 meters. In the northeast, growers are experimenting with indigenous mountain grapes. The native Amur grape, which withstands cold to minus 40 C and is highly disease-resistant, produces a full-bodied fragrant ruby wine.

In Turpan, the Wang family has been developing the Puchang Winery since 2008, trying different grapes and varying vinification techniques. Clara Wang, the winery's second-generation manager, is committed to this long-term mission. "It is amazing how a purely Chinese wine can emerge, even out of the sands of the Gobi Desert, says Wang.

In this climate, pesticides and mildew are unknown, and hardy beichun grapes have evolved to withstand drought and not require burial for protection against the icy winter winds. These grapes produce Puchang's medium-bodied red with crisp tannins, subtle structure and balance.

Loris Tartaglia, Puchang Winery's Italian winemaker, believes that red saparavi and white rkatsiteli grapes have been growing in the oasis for centuries, probably providing the wines that tavern keepers offered the Buddhist monk Xuanzhang during a famous journey along the Silk Road to the West in the seventh century. "It's exciting to be making wine with such a long history," says Tartaglia.

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Workers prepare a 2021 wine vintage at a winery near Yinchuan in October.   ? Reuters

Asked about Puchang's international expansion plans, Wang diplomatically ducks the question. "I have wonderful clients and enthusiastic sommeliers in Hong Kong keeping me busy," she says. But some Chinese winemakers have already taken the plunge into the export market.

Silver Heights, which is rated at 91 by Parker, sells its magnum (equivalent to two standard bottles) to sophisticated drinkers in the U.K. for 400 pounds ($529). Berry Brothers & Russ, a London-based leader in the European wine trade, offers the upscale Changyu Ice Wine for 65 pounds a bottle, and LVMH's Ao Yun for 250 pounds -- a price that does not discourage aficionados, according to BBR. "Good wine can be grown anywhere," says Siggi Gunnlaugsson, BBR's wine and spirits adviser.

Chinese winemakers have another reason for long-term confidence -- climate change and severe weather is already hurting European winemakers. In 2021 France lost 25% of its harvest, according to the French agriculture ministry, with at least one grower in the Languedoc area reporting losses closer to 75%.

China is also likely to suffer long-term climate problems. But the sturdy vines of Turpan and Ningxia may help it to become a sustainable long-term challenger in the European wine market.