Ditton Wine Traders’ fine wine blog

I haved just returned from a trip to Shanghai. What a city. With 19 million people, it’s big and getting bigger rapidly. There’s building going on everywhere. From the moment you enter the immaculate, very modern airport, you can’t help but notice the sense of opportunity in the air. This place is booming. And the Shanghainese like to show it. For example, they have build the Maglev, a high-speed, elevated train that, suspended from the ground by magnetic fields, covers the 30 km to the airport in 7 minutes, reaching a top speed of 431 km/h.  The city struck me as very well organized, clean, buzzing with activity and full of people chasing their dream. In short, it's a very exciting place.

One of the things I was most interested in experiencing first hand is the alledgedly insatiable Chinese appetite for luxury brands. I can tell you,it's all true. The main shopping streets are about nothing else but the most famous brands. Whole malls are dedicated to them. Whilst China's middle class is still small and there are hordes of people that can't even afford half decent housing, there are also lots of people with a lot of money. Apparently 1 in every 1,700 Chinese is a millionaire. Out of 1.5 billion, that makes almost 1 million millionaires.

With wine, this translates into huge demand for those wines that have brand status. Almost invariably Bordeaux, these are not necessarily the best – they are the ones which have kudos attached to them. First and foremost Lafite and in its wake the other First Growths.

Lafite has a special status though. In China, deals don't just happen. They require a lot of hard work but they also need some "lubrication". And the lubricator of choice is Lafite, preferably of the great vintages. Westerners might think presenting your business partner, or indeed a government official, with a 40,000 pound case of 1982 Lafite as a present is outrageous. However, if that present will seal a 400 million pound deal it suddenly becomes good business...

On a more affordable level, there is huge demand for first growths and particularly for their second labels. Second labels are punching well above their (score) weight and have seen massive price increases. At the moment, it's Pavillon Rouge that's leading the charge. I could literally sell hundreds, if not thousands of cases if I had them. At the right price that is. Chinese customers might not think too much of buying and drinking hugely expensive bottles but they will never pay more than a fair and competitive price. And rightly so! Except in HK auction rooms of course...

There was also a wine fair on while I was in Shanhai. I managed to acquire some interesting leads but other than that it wasn't overly exciting. The one thing that really suprised me though that out of the 30 something booths, 3 were dedicated to fakes. Not a proper fake that would be hard to detect, but fakes where the original label is adulterated into something that vaguely resembles the original. You and I wouldn't fall for it, but I'm sure there a loads of people in inland China that do:

Trademark registration in China does very little to protect brand owners from this. Indeed, they show these fakes at an official wine fair! Apparently there is progress though. It's now possible to acquire "well-known trademark status" although only available to brands that are considered "truly famous". This prevents a third party from registering and using the same name or any similar word for commercial purposes in China. On top of that,there is now the possibility of acquiring a "geographical indication", imported Scotch whisky and Cognac being the first to have benefitted from this new, enhanced protection. Even so, fakes are still everywhere and pose a real threat to the wine business – as Jancis Robinson has eloquently as ever commented on. We often wonder about the amazing ride that top Bordeaux has had recently, fueled by the Chinese. Have we reached the top of the curve? Is it a bubble and if so, will it burst? Looking at the fundamentals and now having seen first hand how the Chinese think, I believe prices still have a long way to go. Probably the biggest threat to this happening though, is exactly these fakes.

Whilst second labels of the First Growth are popular now, I’m often asked what I think the next big thing is. So I asked the same question in Shanghai. The answer? Nobody really knows but l’Evangile, Cheval Blanc and Margaux were mentioned.