Can Burgundy wines be the next Bordeaux in China? Yes, but like shares, Premium is always for Liquidity and not Scarcity.

(More wine news on www.vitabella.fr) Every year, during the 3rd week-end of November, the Hospices de Beaune auction takes place in a beautiful historical city. It is an important event in the wine-world calendar which attracts not only wine merchants' eyeballs but also an increasingly large audience of wine lovers internationally. The 150th sale will take place on November 21, 2010 and will be the central event of Burgundy’s most spectacular annual celebration, known as the Trois Glorieuses. With the chinese film star Liu Ye co-hosting the auction this year and the fact that after Bordeaux 09 Burgundy may seem a bargain to Chinese, a question could be raised: Can Burgundy wines be the next Bordeaux in China?

1) History of Burgundy wines: Chinese are very much attached to such strong "historical ties". Just consider the beauty of the Hôtel Dieu in Beaune which was founded in 1443 by Nicolas Rolin, Chancellor to Duke Philip the Good of Burgundy (1419-1467), and you would understand what I mean by "historical ties".
2) The clever communication made around the burgundy wines in China. The comparison with the aromas and subtlety of the best fine teas from China (Longjin, Oolong...) is something I discovered in 1994 during my first visit in China. Every year, when I go tasting the most exclusive chinese teas from the new harvest, I feel the comparison is very evident.
3) Chateau Latour is now owner of a vineyard in Burgundy and promotes its Vosne Romanee based wine estate, Domaine Eugenie, in Hong Kong and other big chinese cities. With such a big name from Bordeaux, the image of Burgundy wines can only take benefits from this promotion.
4) Recently, a Memorandum of Understanding has been signed with the secretary for Commerce and Economic Development of the Hong Kong government to fortify the partnership between Hong Kong and Burgundy in wine- related businesses. It will provide a good anchor for Burgundy to showcase its fine wines to Asian consumers, particularly those from Chinese mainland.
5) The taste of asian wine lovers for reds is more and more oriented towards delicate and elegantly perfumed wines. The greatest red burgundy wines can offer this excitement and can pair magnificiently with the food served in the best restaurants in China.

All those points are very positive and will help burgundy wines in general (and not only those from the small parcels of Grands Crus) to succeed in a very promising market. So if the question is "Can Burgundy wines be the next Bordeaux in China?", the answer would be "Yes" at this point. But my last point may make this answer changed for a more adequate "Yes, but..."

Last point: Scarcity. Those who invest in Hong Kong and other places in China are more and more willing to pay incredibly high prices for rare fine wines. In fact what we see now is very similar to what happened in the rare tea auctions where some chinese buyers were not reluctant to spend tens of thousands of dollars for 500 grams of a 60 years'old Pu Erh teas. But thinking of a Burgundy market, with skyrocketing prices as we have seen with Bordeaux first growths, makes me skeptical. In fact, if you take a closer look to what happened in Hong Kong over the last 12 months, you find that a lot of chinese buyers are investing for a collection and are hopeful they will sell these wines at a much higher price in the future. This is exactly what happens every day with shares on stockmarkets. But as most investors are aware of, there is a premium on stockmarkets for liquidity and not scarcity. And the particularity of Burgundy Grands Crus is the rarity of the most delicious bottles. The extremely "fragmented" nature of Burgundy is a fact and makes this region very appealing. In that sense, Bordeaux First Growths are much more attractive for investors who want to make sure there is a liquid "secondary market" to cash in rapidly and not an "unliquid grey market" where high volatility and unpredictability are extremely negative points. This last point could explain a continuous premium for Bordeaux First Growths when compared to Burgundy Grands Crus.(More wine news on www.vitabella.fr)