A Chinese Vintage

Every week, a tutor visits Miguel Torres in his office in northern Spain to give a two-hour Chinese lesson. The wine-family patriarch does not have the time, or ambition, to attain fluency, but he feels learning simple phrases will help smooth the way on his frequent Middle Kingdom visits.

It is a small but significant example of Torres' attention to detail, and an insight into his long-term commitment to China. As many foreigners have discovered when investing in China, a fly-by-night attitude and an insouciant disregard for local culture and customs generally ends in unpleasantness or insolvency.

Torres, who heads the worldwide company of the same name, always took a long-term view. And in China this attitude ultimately paid dividends after years of trials and tribulations.

A BEGINNING

When Torres first established his business in China in the 1990s there was no real wine-drinking culture. Most imbibing occurred in city hotel bars from a limited selection of expensive bottles. Most of those partaking were expats or Chinese who had lived overseas.

As affluence grew during the late 1990s, a wine-drinking lifestyle began to take root, particularly among younger sophisticates who had developed a taste for the European custom of sharing an after-work bottle in a wine bar, or with dinner. But importers hoping to capitalize on that potential market faced numerous obstacles, not least of them prohibitive import duties, distribution headaches, slow revenue and a dearth of locals with even basic knowledge of wine or how to trade it.

It inevitably meant many hiccups for newcomers such as Torres. The Spanish company, which has been operating for four generations, had deep pockets, and a willingness to listen and learn, but little practical experience of how to do business in China. Initially, Torres was set up as a joint venture, with mixed results; but a decision to go it alone in the late 90s saw the company grow rapidly to reach its current status as the third-largest wine importer, with an annual turnover of EUR 12 million.

"We saw China as the future," recalls Torres, 68, a slight-built man with an endearingly gracious old-school manner. "But when we first started to import our wines, the market was very small and concentrated in Shanghai and Beijing. At first we had a joint venture where we sent wine here and bottled it. That was not a fantastic success but it helped us grow. In 1997 we decided that if we wanted to cover all of China we needed to have our own company, so Torres China was established. As well as bringing in Torres wine, we represent many other wineries.

"It cost us millions of dollars of losses in the early days, but we are in the black now, and have been for three years," says Torres. "The way of doing business in China was very different and we had to adapt. I remember experimenting by saying we will treat our partners as friends, and do everything like that, and it turned out to be a successful way of doing business. People became much more receptive."

LEARNING A COUNTRY

Torres is a regular visitor to China, most recently to the Sichuan capital of Chengdu, where he handed over checks for earthquake-victim relief. The event also saw the launch of a new wine, Symphony, by the Hong Kong-owned Grace Vineyard, located near Taiyuan, which has formed a successful partnership with Torres China. The Spanish big-boys use their distribution network to promote and sell the Shanxi vineyard's award-winning wines.

It is a natural business pairing, given that both companies are family-owned and operated. The partnership has proved to be fruitful, with the critically-acclaimed Grace Cabernet Sauvignon priced at a wallet-friendly RMB 75, regularly featuring as the best-seller on the torreschina.com website. "We have very good experiences with them and we think that the new wine will be a success," says Torres. "It is a good wine. There is nothing similar in China."

"I think Grace makes the best wine in China. It sells out all the time so we figured we should work with them more. I hope there will be more cooperation and possibly a red in the future."

Grace is a minnow by Torres standards, an international company that is one of the world's major players in the sector with annual turnover of around EUR 200 million. Its main operation is in the northern Spanish province of Catalonia, where the company has 1,300 hectares of land, with other vineyards in Chile and the United States.

The company has always been a pioneer of new production methods, most recently with the decision that it would go green in a major way. Miguel Torres was so struck by the pro-environmental message in former American Vice-President Al Gore's documentary An Inconvenient Truth that he vowed immediately to put more effort into making Torres cleaner and greener.

"After I saw the film, at the very next board meeting I proposed that we invest USD 10 million in energy and research and they approved it," recalls Torres. "That was an example of what a family company can do. As a private company we can reinvest the profits to make the company strong. You can make very quick decisions."

PLANNING THE FUTURE

Family protocol demands that Torres retire at the age of 70, in two years time, so speculation on the next company chairman has already started. To avoid any potential squabbles between members of the large extended family, the boss took the unusual step of hiring an American company that specializes in succession planning.

Whoever takes the corporate reins, China is likely to feature largely in the company's plans for many years to come. The company has now built up a solid China team, headed by Alberto Fernandez. "They say there are 40 million people [in China] who are wealthy and can afford good wines, jewelry or whatever," says Torres. "There is also more and more Chinese traveling – they come to the winery and to visit Barcelona. People are more educated about wines. They want to learn more and to some extent globalization means that the Chinese want to know more about the world and the European way of living, which includes wine, of course."

"For wine we have three growth areas for the future: China, India and Brazil. The growth in India is far behind China but we feel there is potential, there will be a huge increase. It would be good to double our China sales in three years but if we don't, no problem. We believe in China. We sponsor wine forums and have many sommeliers attending our courses. We hold over 150 events in China every year. Our new consumer brand division has wine courses, wine dinners, tastings and home delivery."

LOCAL TASTES

Torres is an enthusiastic consumer of his own products, albeit in more moderate quantities than he would like. Although he claims to have been tipsy only once — as a kid — wine has been a part of his life for more than half a century.

"I started to drink wine when I was ten years old. There was a party at home and two maids gave me some wine and I was totally drunk afterwards. I learned my lesson."

"Now I have a problem – my cardiologist does not allow me to drink more than half a bottle a day, just four glasses" says Torres rather ruefully. "Some days I say ‘let's make an exception' but he insists. We have just made a new non-alcohol wine which tastes good, and some days I drink two glasses before going on to real wine. I don't consider a meal without wine, it has to have wine."

As a long-time China visitor, Torres has a fair store of anecdotes about quirky local tastes. The habit of mixing fine wine with soft drinks, now less common, was very much in evidence when the wine boss first began his visits, a custom which both amazed and horrified him in equal measure.

"I recall being in a restaurant in Beijing with the Spanish ambassador, who pointed out that the people at the next table were drinking Mas la Plana. I had a look when leaving and noticed they were drinking it ... mixed with 7-Up!"

Torres's long-standing bullish beliefs on China's growth have certainly been vindicated. Indeed, as he hands over the stewardship of the company in two years time it is likely to have become even more important to revenues.

It is difficult to imagine that in the early days, the company sold fewer than 300 cases a year in China, hardly the makings of a thriving business. "We did have an idea back then that China would be the future, and it is satisfying to see that happening," says Torres.

"Our goal now is to remain one of the top leading industry players with the highest business integrity and passion."