Posts Tagged ‘Luxury Goods’
As China’s President Hu Jintao visits the US we thought it’d be a good time to look at the phenomenal new wealth in China and how this translates to luxury goods and our favorite indulgence WINE.
For China’s expanding club of millionaires, luxury goods are no longer the trifles of the foreign bourgeoisie, they are the indicators of a life lived well.
The number of Chinese with accrued wealth totaling at least 10 million yuan is now hovering just below the million-person mark and a large number of them are showing that their parents’ forced frugality is not in their genes. Instead, they are opting for the brands that have defined the good life for many a well-heeled westerner.
Shanghai-based luxury publishing company Hurun Report conducted a poll in 2010 that found China’s wealthy covet familiar names: Louis Vuitton, Cartier, and Gucci. They want to drive Rolls-Royce’s Phantom and wear a Patek Philippe on their wrist. And when it comes to drinks, they’ll shell out thousands for Bordeaux reds and cognacs.
They are young, averaging just 39 years old. Their average wealth is growing faster than their foreign counterparts. They travel and they golf; they send their children to Great Britain for secondary school and to the U.S. for university. They spend an average of 1.9 million yuan a year on luxuries. They each own three cars and 4.4 luxury watches. They are educated about what they want—gone are the days of using a broad brush to paint Chinese luxuries buyers as the nouveau riche.
And there’s no plateau in sight indicating when the appetites of more and more Chinese citizens of means will begin to be appeased. Figures just released by International Wine and Spirit Research show that Chinese consumption of wine increased by 100 percent from 2005 to 2009. The good times are rolling for the new leisure class and they swallowed it down with nearly 96 million cases of wine last year. Reporting on the numbers, decanter.com said the country is expected to be drinking more than 126 million cases a year by 2014.
In Shanghai alone, wine imports increased by 51 percent in 2010 compared to the year before and the value of that imported product was 76 percent higher than the previous year, winechina.com reported.
While the country’s authorities proudly say that 90 percent of all wine consumed in China is produced domestically—a huge potential market pushing the biggest chateaux all over the world to try to gain a toehold by developing partnerships with Chinese vintners—that 10 percent remaining is still big stakes.
“We have an office in Hong Kong and I recently attended a team dinner there,” Gary Boom, with vintner Bordeaux Index, told The Daily Telegraph. “On every table in that restaurant was a bottle of wine. Young Chinese men and women were at the bar having a glass before their meal – 10 years ago they would have been drinking tea. We are selling £100,000 worth of wine a day to China.”
Vice-premier Li Keqiang just returned to Beijing from one of several high-level buying trips Chinese officials are making all over the world. At the same time, the country reported that its foreign exchange reserves had reached an all-time high of $2.85 trillion at the end of 2010—an unprecedented sum burning a hole in China’s pocket—Li’s delegation placed $20 billion in orders for European luxury goods. As just one example of the Chinese elites’ strong affinity for upmarket goods, the group penned a $7.5-billion deal with Spain to purchase, among other things, fine wine, ham, and olives. It seems that the makings for the finest tapas spread outside of San Sebastian will be in Shanghai or Shenzhen.
“The last decade could be characterized by the three words, ‘made in China’,” Gerard Lyons, the chief economist and group head of global research at Standard Chartered, told the Mail & Guardian. “In this next decade it will be ‘owned by China’.”
As Wine Portfolio’s episode on Wine in China proved there is a large and ever growing market for fine wine in the Middle Kingdom. The rapidly expanding economy, Chinese love for luxury brands, and a new appreciation for wine (especially French wine) make the market attractive for foreign investment. And Chateau Lafite Rothchild has responded in a big way demonstrating that they understand the direction of the global luxury market for the next 20 years.
A spokesperson for Lafite owner Domaines Barons de Rothschild said Chateau Lafite Rothschild’s 2008 bottle is to feature the Chinese symbol for the figure eight in celebration of the First Growth’s new vineyard venture in China. The symbol reflects Lafite ‘s partnership with CTIC, China’s largest state-owned investment company. The company has acquired 25 hectares in a joint venture on the peninsula of Penglai in Shandong province, an area we featured in our Chinese episode that is said to be China’s Bordeaux.
The spokesperson explained the reasoning for adding the auspices figure to their bottles was to, “remind all those who will have the pleasure of drinking these wines in a few years of this exciting undertaking.”
As Jody and the team saw when we visited Penglai, China is an emerging consumer of wine and wants to be an emerging producer. Lafite clearly gets this.