China's taste for fine wine

LEADING wine authority James Halliday has a message for local grape growers: if you're a fine-wine producer, invest heavily to get even better; if you're a cheap-wine maker, consider closing down now, because you'll risk heavy losses over the next decade, as your margins shrink further.

"Wine has emerged as a major status symbol in China," said Halliday, who has just returned from a trip to Shanghai. "As the Chinese have grown richer, so has their appetite for fine wines.

"So my message is: don't grow grapes unless they're of good quality. There will not be a profitable market for inferior wine and grapes in five years."

China is now Australia's fourth-largest export market for wine, and we could make it our No 1 export market, Halliday said.

"The UK may still be our largest market but the strength of supermarkets there means that margins are hyper fine. They're already being mercilessly screwed and it's going to get worse. Unless the wheels fall off China, the future lies in Asia."

France may still be king of the wine world, with 40 per cent of imports into the Chinese market, but Australia is now second with 18 per cent, with the more expensive wines being increasingly bought up by the Chinese.

The potential lies in cities of four million or more that are increasingly sophisticated, Halliday said. China's own wine producers control more than 60 per cent of the market but they typically specialise in cheap, mass-produced brews.

"The Chinese are just getting their heads around wine," Halliday said. "They're still mainly spirit drinkers and in wine, they overwhelmingly favour reds, perhaps because they see red as their lucky colour.

"But a growing number of trophy hunters are snapping up bottles of $1000 or more. In sheer volume, though, it's the Australian reds and whites over $20 a bottle that can do particularly well."

James Halliday's Top 100, published today in The Weekend Australian Magazine, lists his favoured selections for wines above and below $20.

"The upside of a wet but cool 2011 vintage in eastern Australia has meant some good quality wines under $20," he said. "Western Australia didn't have the rain that hit the rest of the country, so it has some particularly good reds this year."

For whites over $20, 402 wines were submitted and 20 selected; for reds over $20, 700 wines were submitted and 20 selected.