New Asian Wealth Changing the Balance of Power in the Wine Market

New Asian Wealth Changing the Balance of Power in the Wine MarketDoes anyone remember that Germany and the UK were once two of the world’s largest importers of fine wine from Bordeaux? It wasn’t that long ago, but their places on the list have now been lowered as China took over the fifth spot. When the Chinese entered the wine market, few believed that it would cause such a major upset in the balance of wine consumption, but it has succeeded to do just that. And when it comes to the region’s Bordeaux exports, China and Hong Kong hold the keys, as they account for more than 60% of that market. New York, which was once considered to be the world’s wine auction capital, had to pass that title on to Hong Kong when its total sales amounted to some USD $155m. According to Hon John Tsang Chun-Wah, who is the financial secretary in Hong Kong, through newly developed ties with the wine world, Hong Kong now views wine as not only good for the stomach, but for the bank account as well.

Triggering Change

Since 2009, China has been gaining strength in the wine world after hosting a series of wildly successful auctions, an event which lasted six days. Following some record-breaking sales that took place during those days, China has been steadily emerging as a powerful player in the market. The Chinese people have changed from buying fine wine only for consumption and now consider it to be a worthy investment as well as a top choice in gifting. Senior Market Analyst, Daniel Paterson, points to three points that helped trigger these buying trends. The first is the generous government stimulus, the second is soaring stocks in Shanghai and the third is an explosive property market. Put these three together and you get Chinese tycoons that are the world’s highest net worth individuals, who view wine as a prestigious “must have.”

In short, Asians now have a lot of money, and are making the decision to invest it in something that not only safeguards its value, but is likely to appreciate in the coming years.

2013 Has Been a Great Year for Wine Consumers

wineriesPoor weather was not kind to the 2012 grape harvest, but global production of wine in 2013 has noted the highest prices seen in seven years. Wine production in Portugal increased by 6.7 Mhl, France saw an increase of 7%, Italy’s production passed that of 2012 by 2% and Spain recorded its highest level of wine production ever with 40 Mhl. Record productions of wine were also recorded in Chile and New Zealand, and the US is continuing to develop its winemaking industry. These were the stats presented by Frederico Castellucci, who is the Organization of Vine and Wine’s Director General.

Europe Remains in the Lead

Even with a significant increase in wine production throughout the world, Europe continues to supply some 60% of the wine in the world. While wine is being produced in other areas of the globe, those wineries are not able to grow fast enough to make a significant contribution. Even though Australia, Argentina, the US, South Africa, New Zealand and Chile, known as the New World market, accounts for about 30% of total wine exports, their percentages of wine production are even less.

Good Time to Invest in Fine Wines

The New World’s wine consumption is still growing faster than its ability to produce good quality vintage. The stats published so far don’t even take into account the markets that may be emerging in the near future, such as in India. However, when it comes to investment, don’t rely on the wines that are produced outside of Europe. For a reliable addition to a financial portfolio, nothing compares to the fine vintage that comes from the established Bordeaux estates. With the global consumption levels increasing, there is little doubt that fine wine purchased and put aside for investment will continue to render handsome profits in the years to come.