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Champagne, Bordeaux... Ningxia?

Earlier this month Moët Hennessy became the latest French winemaker to announce a Chinese joint venture, this time to produce sparkling wine in the remote north-western Ningxia, but some wine experts believe the world is not quite ready for Asian wine.

Wine glass
Wine glass

Vintner and contributing editor at Decanter magazine Steven Spurrier told CNBC.com that the West’s insatiable appetite for cheap Chinese goods is unlikely to be matched by a foreign market for Chinese produced wine.

“I think that it will be a long time before the Chinese market and the Chinese export their wines; they might export them in a very small amount, but the European and other New World wine producers have been educating the wine drinkers for the last thousand years - or the last fifty years - and the market’s not ready for Chinese wine,” Spurrier said.

“You have to think of the great wine regions, so one is Bordeaux, one is Burgundy, one is Rioja, one is Chianti, one is possibly the Barossa Valley, one is Marlborough in New Zealand … these are regions which have become known for their wine production and they’re visually recognizable by everyone,” he explained.

“Chinese vineyards or Indian vineyards is something which people can hardly conceive of and this is what I mean, it’s difficult to get into the market.”

Brand Power

However, with brands like Moët lending their name to Chinese produced wines, Spurrier conceded that a foreign export market could develop sooner rather than later.

“People consume what they know, they really do, that’s the strength of the brand… In China, it’s the big players that are going to be investing because they know they can help create the market and the smaller players will come in once the big players create the market,” he said.

“The big players have a model which has worked all over the world and Moët is in Australia, it’s in Argentina, so they can apply that model and make it work,” he added.

French firms have been investing in China for several years, aware of the opportunities in a country where wine consumption increased by over 100 percent between 2005 and 2009 and is predicted to rise by a further 20 percent by 2014, according to wine exhibition organizers Vinexpo.

Château Lafite-Rothschild entered into a joint venture with CITIC China’s largest state-owned investment firm, on a 60-acre project on China’s east coast and Pernod Ricard already grows in the region targeted by Moët.

Given China’s new found appetite for wine and luxury brands, it is not hard to see why LVMH-owned Moët and others are not satisfied with simply exporting to the country, but Sarah Kemp, publishing director of Decanter, says only leading brands will be able to establish businesses there in the short term.

“China is a difficult market so I think at the moment you would need a lot of corporate power and expertise to establish a business model there. Certainly Chinese wine consumption is growing as they move away from spirits and it is the great hope of the international wine market that they will consume more quality wines, both imported and domestic,” she told CNBC.com.

Domestic Demand

In 2010 China overtook Britain as the world’s number one importer of French Bordeaux wines, but Kemp believes the Chinese will follow the trend of most wine producing countries and favour domestically produced wine over imports.

“If you look at Europe; in France it is French, in Spain it’s mainly Spanish and in Italy it’s mainly Italian. It’s only in England where you’ve not had a domestic wine industry of any significance. We have been known for importing wine from all over the world… but a lot of countries that do have large acreage will drink their own wine and I think this is probably what is going to happen to China and other places in the world.”

Despite a dramatic improvement in the quality of Asian wines, Steven Spurrier says that established wines will withstand the rise of Asian produced varieties and European wine remains the benchmark of the wine world, due mainly to its diversity.

“The individuality of European wine, it beats anything else… the rationality and the individuality of wine is never ending. I think that’s Europe’s strongest card, because of the variation between the vineyards. You can walk 10 meters from one vineyard to another and the wine won’t be the same.”

Contact Europe: Economy

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