China's palate ripens for European vineyards, chateaux

Tue Mar 13, 2012 8:27am EDT
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By Farah Master

HONG KONG (Reuters) - Chinese state-owned firms, private corporations and wealthy individuals are buying European vineyards as they look to capitalize on a growing domestic thirst for foreign wine.

Demand for French, Italian and Spanish wines has boomed in the world's second largest economy over the last few years, bolstered by the growth of China's super-rich and burgeoning middle class, who are knocking back the vino and the vin in record quantities.

David Guillon, of IFL, a Hong Kong based firm that sells French vineyards, castles and luxury properties, said IFL completed six multi-million euro (dollar) transactions of vineyards in France's Bordeaux region with Chinese investors in 2011, including state-owned grain trading giant COFCO. He expects this number could double in the coming year.

IFL is currently in close negotiations with two major state-owned companies, multiple private firms as well as Chinese celebrities and football players.

"The demand is getting very huge and it has been a very rapid evolution," said Guillon, adding that 80 percent of IFL's buyers in Asia come from Hong Kong and China.

"For the state-owned companies, these firms can be conglomerates which have nothing to do with the wine industry, hold a large amount of cash and want steady returns," he said.

While global wine prices have softened from skyrocketing levels set in the last two years, private auction house Christie's sold all lots at its February wine sale in Hong Kong, fetching results that were more than triple pre-sale estimates.

In a testament to the strength of Chinese drinkers, the country usurped the United Kingdom as the world's fifth largest wine-consuming nation at the end of 2011 and is forecast to grow to nearly 250 million cases by 2016, according to International Wine & Spirit Research.   Continued...

A worker loads a trailer with grapes for wine during harvest at a vineyard in the village of Sabue in Kakheti region of Georgia about 130 km (80 miles) west of Tbilisi, September 14, 2011. REUTERS/David Mdzinarishvili