Chinese Investors In Burgundy: Keep A Low Profile

HK Gambling Tycoon’s Recent Purchase Has The French On Edge 

Wealthy Chinese investors are looking from Bordeaux to Burgundy

While a number of Chinese companies and individual investors have purchased property in Bordeaux in recent years, an ambitious handful are starting to turn their attention to vineyards and chateaux in Burgundy.

By now, news of Chinese investments in French chateaux should come as no surprise, as China becomes an increasingly significant consumer of top-tier French wine exports. Intent on securing a steady supply of high-quality raw materials while boosting the legitimacy of their own wine-making businesses, Chinese wine manufacturers in particular have made great efforts to establish a presence in the French wine industry, most prominently in Bordeaux — where the majority of China’s current high-end imported wine is produced.

As Jing Daily pointed out in May, not only does China rank as Bordeaux’s largest export market, surpassing Germany and the UK, but “around 20 [Bordeaux] chateaux have been bought by Chinese businessmen and even a government-owned company” over the past five years. Even high-profile Chinese celebrities like actress Zhao Wei have recently jumped on the Bordeaux bandwagon, with Zhao buying a St. Emilion chateau back in December 2011. (Former basketballer Yao Ming himself has expanded into the wine industry, though Yao is focusing his efforts on Napa Valley.)

Gevrey Chambertin castle (Photo: AP)

For the most part, Chinese activities in Bordeaux have been met largely with ambivalence, as they’re not the only foreign investors in the region (and their presence is minuscule compared to American, British and Japanese buyers) and, by and large, they’re interested in investing the time and money needed to turn around vineyards and chateaux that have fallen into disrepair. Recent developments, however, may mark changing tides in these Chinese-French investments. Over the past week, a minor uproar has broken out in another French wine-growing region regarding the latest Chinese vineyard venture — this time in Burgundy.

Outbidding a group of local vintners, Louis Ng, the 60-year-old Hong Kong COO of gambling tycoon Stanley Ho’s SJM Holdings, purchased Château de Gevrey-Chambertin from the Miteran family in Burgundy’s Côte de Nuits for a reported US$10 million. However, the acquisition, which includes a 12th century château and five acres of vines, has stirred a vicious backlash against foreign investments by some residents in Burgundy as well as greater France.

While Ng claims to have honorable intentions to “respect local traditions and restore Chateau Gevrey-Chambertin to its former glory,” many Burgundians fear that the growing foreign ownership of chateaux may inevitably taint and dilute Burgundy’s “purebred” heritage. As the AFP recently reported:

Unlike its rival Bordeaux, Burgundy remains dominated by relatively small estates run by winemakers who, regardless of how prosperous they may have become in recent years, regard themselves as farmers first and foremost.

Properties generally get passed down from generation to generation, making foreign ownership relatively rare, again in contrast to Bordeaux where Chinese investors have established a strong presence.

Gevrey Chambertin castle (Image: AP)

Since his acquisition, Ng has been targeted by the ultra-conservative Front National (FN) along with an assemblage of disgruntled winegrowers. As Florian Philipot, vice president of FN warned, “This acquisition is emblematic of the dangers that threaten French heritage.” Philipot is now pushing for legislation to impede foreign investment in Burgundian vineyards, clarifying that his main concern is a rise in inheritance taxes due to the growing number of foreign buyers, which could make it more difficult for land owners to transfer properties to their families. Taking Philipot’s objections a step further, Jean-Michel Guillon, president of the union of Gevrey-Chambertin wine producers, said of Ng’s acquisition, “It is a despoliation. Our heritage is going out of the window…How would the Chinese feel if a French investor bought 10 metres, or 50 metres, of the Great Wall of China?”

Despite the noise being made by some in Burgundy about the deal, as Decanter points out this week, Château de Gevrey-Chambertin is far from a prestige acquisition, as Burgundy chateaux go:

[Château de Gevrey-Chambertin] is not a well-known property. ‘I can’t understand what all the fuss is about,’ one importer told ‘No one has ever heard of Chateau de Gevrey-Chambertin, and suddenly they are saying it’s a national icon.’ He added, ‘It’s a storm in a tea-cup.’

Another said, ‘I’m sure it has symbolic importance – people get emotionally charged up about Burgundy – but I personally had not heard of it.’

Richard Shen and the "face" of Chateau Laulan Ducos, Zhang Ziyi

To us, Chinese investors can really only move in one of two directions: They can either follow the examples of Ng and actress Zhao Wei, who plan to maintain yet improve their winery’s status quo — keeping winemakers on staff and keeping production focused on existing, traditional markets — or go the way of Richard Shen (Shen Dongjun, 沈东军), owner of the Chinese jewelry chain TESiRO. Purchasing Château Laulan Ducos in Bordeaux last summer, Shen decided to send the domain’s entire production to China rather than preserving existing distribution deals. This Chinese strategy, as the Telegraph put it, is for investors to  “[buy] up entire vineyards to ensure they get what they want…then [send] the domain’s entire production to China.” Shen trumpeted his plans back home by flying Chinese actress Zhang Ziyi out to his chateau for a promotional photo shoot.

While Shen’s comparatively self-promotional activities — which border on publicity stunts — might fly in Bordeaux (or even Napa Valley, a region in which Chinese investors have sunk millions in recent years), a more “low profile” approach may be what it takes to gradually enter Burgundy. As Jing Daily previously advised, preserving already “locked-in” traditional consumer segments may be a wiser plan of action, especially when “the crowded yet young nature of the Chinese wine market means shifting exports fully to China is far from a sure bet.” Until Burgundy warms up to incoming Chinese investors, those who have already entered may want to take note of local anxieties and demand so as not to step on the wrong feet. After all, with major Hong Kong and mainland Chinese wine collectors shifting from Bordeaux to Burgundy, securing quality Burgundy vineyards could prove a highly lucrative investment in the years ahead.


Market Analysis, Retail