April 28, 2011

Is China’s Château Lafite “Tide” Starting To Recede?

Signals Emerging That Demand For Popular Wine Is Easing

Chinese buyers have had a long-time love affair with 1982 Chateau Lafite

Chinese buyers have had a long-time love affair with 1982 Chateau Lafite

Anybody who follows the wine industry in China is well aware of the explosion in demand for Bordeaux, and more specifically Château Lafite among Chinese collectors, businesspeople, and budding wine aficionados. The strong demand for Bordeaux in China has not only seen prices for top bottles skyrocket at auctions in Hong Kong or at wine stores throughout the mainland, it’s sent shockwaves through the global wine market, particularly for Château Lafite. As Reuters points out this week, “between the en primeur sale and the arrival of the bottles last winter, the price of 2008 Chateau Lafite shot up 590 percent thanks to demand from China.” By all accounts, demand should remain strong for the upcoming 2010 vintage, with Reuters adding that the Chinese are expected to enter the Bordeaux futures market “in force this year” for the first time.

Clearly, interest in and demand for Bordeaux should stay strong in China for years to come. But as stocks of Château Lafite get lower, and if prices continue to spiral upward, will this long-time dominant player lose its primacy in the Chinese wine market?

For their part, Lafite’s competitors have been doing their best to court the Chinese, with some feeling that Lafite’s rise will, in the long run, improve their chances to crack the increasingly lucrative (yet complex) mainland China market. As Château Cos d’Estournel general manager Jean-Guillaume Prats recently quipped, “For this [success] to happen to my neighbor in Bordeaux is a good thing for me–it’s great news.” Last year, in the wake of Lafite’s announcement that their 2008 vintage would be imprinted with the Chinese character for the number eight (八), Château Mouton Rothschild commissioned the Beijing-based contemporary Chinese artist Xu Lei to design their 2008 label. Also last year, Château Margaux managing director Paul Pontallier dispatched his son Thibault to Hong Kong, where he will spend a two-year stint as brand ambassador for the Greater China region.

Interestingly enough, it appears that Lafite’s status as the pre-eminent Bordeaux in China is increasingly being threatened by its own success, rather than its competitors. Via ChinaLuxus (translation by Jing Daily team):

Counterfeiting is one of the challenges [facing Chateau Lafite]. A recent news investigation at a hotel in Beijing showed that trading in empty Lafite bottles is now a highly profitable business in China. Each of these precious empty bottles can be sold for as much as 2,900 yuan (US$446). However, a more serious problem in China is rampant trademark infringement. Some people think that if this problem continues unabated, it threatens to devalue Lafite’s brand experience.

Another noteworthy phenomenon signals that the craze for Lafite has begun to decline. “We’ve noted that some sophisticated collectors have made a break from Lafite because it’s already become too high-profile,” said one Hong Kong businessman.

In addition, due to a limited supply of vintage wines, some traders and fund managers predict that other comparable high-end wines will soon expand to catch up to Lafite in the China market.

Naturally, not everyone agrees that Lafite’s time is up in China. As renowned wine writer and critic Jancis Robinson recently told the Financial Times, ““Unless someone discovers that [Chateau Lafite] has poison in it, I can’t see how anything will put a brake on its success.” Bordeaux Index founder Gary Boom is also bullish on Lafite’s prospects, remarking that he does not foresee a decline in interest in Lafite unless the premium wine market falls, which he finds unlikely. However, with the rising interest we’re seeing in top-end Burgundy among some of China’s more sophisticated wine collectors, the scarcity of sought-after Lafite vintages (and the resultant skewing of prices for less well-received vintages at recent auctions), and the aforementioned expansion by Lafite’s competitors could see new leaders begin to emerge in China’s segmented, yet promising, premium wine market.

Food, Wine, & Spirits
Tag: auction, chateau lafite, chateau margaux, counterfeiting... , More
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