In 2019, Australia has surpassed France to become China’s biggest wine supplier for the first time, thanks to a Free Trade Agreement and Australia’s extensive marketing campaigns. China now ranks as Australia’s most profitable export market, worth more than twice as much as the second most valuable market, the US.
Penfolds, the flagship brand of Australia’s biggest wine company, Treasury Wine Estates, with its auspiciously sounding Chinese name ‘chasing prosperity’ and red-themed packaging became arguably the country’s best-known imported wine brand. Its popularity in China is so immense that TWE owed nearly half of its annual earnings to Asia, primarily China. Regrettably, this also inspired legions of fraudsters churning out Penfolds lookalikes and counterfeit wines in both China and Australia.
Riding on the back of Australia’s exceptional wine boom in China, it’s no surprise Chinese investment started to pour in. The increased demand for Australian wine in China, which now enjoys zero tariff, has fueled winery sales to Chinese, with savvy-investors wanting to stabilize the supply of bulk and bottled wine for their Chinese market.
As a result, the buyings and transactions happened “at unprecedented levels”, wrote Australia’s ABC News, with up to 10% of South Australia’s iconic Barossa Valley now in Chinese hands. Additionally, it’s estimated that about 15% of Yarra vineyards are Chinese-owned.
“A lot of the original parties were looking for trophy assets and the Barossa was number one, but progressively that has changed and other regions like McLaren Vale, the Yarra Valley, there’s been strong interest in Margaret River, and a little bit in Coonawarra, so Australia’s other regions are starting to have some significant success in China,” says Stephen Strachan, director of Langley and Co, a company dealing in wine industry acquisitions.
Some of the most prominent sales involve China’s biggest wine and drinks companies, hoping to crush Australian grapes and bottle them for Chinese wine drinkers. Changyu Pioneer Wine Company bought 80% stake in Clare Valley’s Kilikannon winery in 2017 for an undisclosed amount. China’s largest organic wine producer and third biggest winery, Weilong Grape Wine Company spent AU$120 million on a winery in Victoria, in what local described as biggest foreign investment in Australian wine in the past 10 years. The winery is expected to crush 170,000 tonnes annually destined for seemingly insatiable Chinese drinkers.
Another destination for Chinese investors to park their money is Chile, which for years ranked as China’s biggest wine supplier in terms of volume and is known for its superb value for money.
Most investors who purchased wineries in Chile did so with the goal to secure bulk wine supply in order to bottle wines under a new Chinese wine label or mix the bulk with Chinese wine to sell through their established distribution channels.
COFCO for instance, in 2010 bought Biscottes vineyard in Chile for US$18 million and bottled the wines under a new brand for the Chinese market. Changyu in 2017 signed an agreement with Chile’s Bethia group to buy three vineyards in the South American country for over US$50 million.
The country’s baijiu producer, Yanghe Distillery, also spent US$66 million and bought Viña San Pedro as a part of its strategy to expand its wine business on top of its existing Chilean wine range called Sidus.
China’s NBA star Yao Ming was among the first Chinese nationals buying California vineyards. The basketball star apparently developed an interest in wine during his years playing centre for Houston Rockets where his teammate would often order a red wine from California to go with steaks. In 2009, his interest was immortalized and Yao Family Wines was born in Napa Valley.
A few other estates in Napa are also in Chinese hands. Firefly Vineyards was sold to Chinese businessman Joe Chuang, and Heston Vineyards is owned by Stanley Cheng. Hong Kong businessman Pan Sutong expanded his vineyard holdings in Bordeaux and bought Sloan Estate for US$40 million. Bialla Vineyards and Quixote Winery are among some smaller vineyards sold to the Chinese before 2015.
But Chinese ownership of Napa wineries remains tiny as market share for American wines in general in China remains less than 3%. Taste for American wines is soured when the two countries engaged in a prolonged trade war that saw Chinese government slapping close to 100% punitive taxes on American wines, essentially corking Chinese’s American wine dream.
In other parts of the world such as Spain and Italy, interest for winery ownership is not as zealous as Bordeaux or Australia but changing of hands to Chinese owners can still be found.
Changyu spent €35 million (US$40 million) on the purchase of a 75% stake in Spain’s Marques del Atrio winery, aiming to make it the No.1 Spanish wine brand in China, according to the winery. Fosun Group bought a 20% stake in Spanish wine and food producer Osborne Group.
Vineyard owners from China are also getting younger, and have grander ambitions to turn their operation global, not just limited to China. Tycoon Peter Kwok’s wineries in Bordeaux Right Bank have been entrusted to his son Howard Kwok, 33, to manage wineries’ day to day operation.
Lang Sailing, a 29-year-old Chinese, whose family has co-owned Dominio de Cair, in Ribera del Duero in Spain, with the Luis Cañas family since 2013, is also among the young-generation owners.
As wealth swells in China, wine investment in global vineyards is expected to continue. More Chinese flags perhaps will be hoisted atop a historical chateau whether in Saint-Emilion or Barossa or Tuscany.
The article is originally written in English and translated in Italian for Civiltà del ber magazine and can be viewed here.