Champagne’s battle plan for China

Marketing a “white” and “sparkling” wine in China isn’t quite what it seems, writes Jeremy Oliver.

Over lunch the other day I was talking to Olivier Krug from the Champagne House of Krug and his man for China, Julien Pepin Lehalleur. How was Krug, my favourite Champagne, I wondered, faring in Mainland China? It isn’t, came the reply. While the brand, perhaps the most prestigious of all in Champagne, is simply flying along in Hong Kong, sales in China remain surprisingly low.
An uber-prestigious brand not selling in China? Really? How come? It is the attitude of Krug’s parent company, LVMH (which also owns Moet Hennessey), that tells us a great deal about the future of the wine market in China. For today, as far as Mainland China is concerned, the market needs to be convinced of two things: that wine can indeed be white, and wine can also be sparkling. Current estimates place the China market for Champagne at a mere million bottles, but it is difficult to determine how much of that figure is actually taken by Hong Kong and Macau.

This leaves all Champagne brands like Krug and Moet et Chandon with those two significant issues to overcome.

Overcome them it certainly should, at least according to those who run LVMH. It is now around a year since the company, Moet Hennessey, announced a joint venture to produce high-end Chinese sparkling wines with Ningixia-based SOE Nongken. So, while there is very little understanding at the present time in Mainland China of the quality factors, image and prestige around Champagne, one of the largest companies in Europe expects all this to change fairly quickly.
I entirely agree. In the four thousand years or so since wine was first made and sold for commercial gain, there has perhaps been only two historical parallels to the emergence of China: England and America. England, which was a wine producer during its Roman occupation, had a significant role in shaping what is today’s European wine industry. For much of the last century, the US has been the key influence on world wine, although around a decade ago it became a net exporter for the first time. Today China, albeit already the fifth largest wine producer in the world, is reshaping the entire world’s trading and consumption patterns for wine, at a rate and a depth that has never been seen before.
It is China that has given Australia’s largest wine exporter (by value), Treasury Wine Estates, the confidence to increase the prices around the world of the key Bin labels in its Penfolds range.

These price increases, which have raised the ire of trade and commentators in the US and Australia, enable Treasury to price these wines at their true value for the first time in years. As one who wants to see the Australian wine industry make profit, instead of just spinning its wheels as it has been over the last decade, I entirely support the company’s approach.

Back to Moet. Its operation in the Helan Shan district of Ningxia will ultimately see the conversion of 67 hectares of land previously cultivated to watermelons and berries to pinot noir and chardonnay. Its partner Nongken already has 670 hectares under vine in the district, which it expects to increase to 2010 ha. While Moet Hennessy owns 60 percent of the new vineyard and Nongken 40 percent, Moet Hennessy is the sole owner of the winery.
Lying just south of the Mongolian steppe and the Gobi desert on the floodplains of the Yellow River, Ningxia has a continental climate and the typical winter extremes of northern China. It is a poor and largely desert region, but has access to irrigation from nearby major rivers. It is home to He Lan Qing Xue’s brilliant Jia Bei Lan 2009 Cabernet Blend, the first Chinese wine I have ever rated at 19.0/20. Furthermore, this region also boasts the thoroughly professional Domaine Helan Mountain venture in which Pernod Ricard is deeply involved (usually employing Australian winemakers to produce the vintage) and another high-end Chinese producer, Silver Heights.
As we have seen with Moet’s various operations outside France, the techniques used to make its wine will come straight from the Champagne textbook. At this time, it is likely to be sold under the internationally recognised Chandon label. The date for the first sales is sometime in 2014, which is when Moet will launch its real strategy to convert more Chinese to Champagne: firsttwr_helan_winery_china_webcapture the younger Chinese who are perhaps unable to purchase Champagne today, then upgrade them to the Champagne of the same name when they can in future.
 

*Pictured right: The Helan Qingxue Vineyard (reproduced courtesy of The Wine Republic)
The Americans are not sitting back idly watching. Well-known Sonoma-based Iron Horse Vineyards shipped 880 cases (now where did they get that number from?) of their 2007 vintage ‘Year of the Dragon Chinese Cuvée’ to Beijing just in time for this year’s Chinese New Year.

The winery’s winemaker David Munksgard said that the wine (which was made sweeter than the company’s wines for the American market) was assembled with ‘Chinese cuisine in mind’. A limited run of this wine is to be sent to China every year. Very clever!

Australian wine producers and marketers should take note of all this. While there’s a view that China is currently the place to profit from cheap, lacklustre wine often sold with copycat labels, it simply misses the long-term point. China’s wine market is heading uptown, and not just for French wine. That’s why Don St. Pierre Jr., CEO of China’s leading importer ASC-Fine Wines, recently said ‘I see China becoming the number-one consumer of super-premium wines in the world over the next 10 years’.
So should Olivier Krug start looking for an apartment in Shanghai? Why not?
 

*Jeremy Oliver has been a professional wine critic for 25 years and is one of Australia’s foremost wine writers and presenters. He is the author of best selling guidebook, the Australian Wine Annual and most recently published Wine with Jeremy in Mandarin – the first western wine critic to create and publish a book in China especially for the Chinese audience.
For more information, visit Jeremy’s website: www.jeremyoliver.com

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