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Where, oh where, can I invest in Chinese wine?

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I had a little extra cash in my checking account (woo hoo!) and decided to invest it in something that pays more than 0.2% interest. But where? Everything is so weird these days. So I met with Henry, the investment guy, at my bank, and he wanted to put me into a high tech mutual fund. I asked him why he didn’t diversify my investments by going someplace beyond stocks. Bonds? Nope, he said; as soon as interest rates go up, bonds will go down. Gold? He shook his head. Gold is really high now; not the right time. I thought, what else is out of the box? And then I thought, I’ve been reporting and blogging on Chinese wine for years — how the market over there is exploding, how all the California wineries want to be there. So how about investing in something related to Chinese wine?

Henry stared at me like I’d reported being abducted by aliens. Chinese wine? I babbled a few words about two billion middle class Chinese people with western-style aspirations and disposable income. He pecked out a few keystrokes on his computer. “Hmm,” he murmured. “___ is up 16 percent just today.” It was some Chinese wine company whose name I didn’t get. Sixteen percent in one day! “You see, that’s what I’m talking about,” I told Henry. He was suitably impressed, vowed to get “his investment department” looking into Chinese wine. I told him I’d do the same with my investment department (total employees: 1). We parked my cash in a temporary money market until we figured out what to do next.

So I go home and Google “Chinese wine stocks.” Stumble across a company called Legacy Wine & Spirits, with offices in Beijing and Tianjin and a North American branch in Quebec. Find an online article that says Legacy “has a goal of being the largest wine importer, wholesale [sic] and retailer with a chain of wine stores throughout China Wine [sic],” but the article is poorly written, filled with misspellings, grammatical mistakes and run-on sentences. I note that it’s on the website of a penny-stock company. I go to Charles Schwab; Legacy’s stock has been mired at about 24 cents for most of this year. In early 2008 it hit $1.10, but fell off the cliff during the recession and may not have hit the ground yet. So would Legacy be a good buy?

Back to Google. Who is Legacy, anyway? I find their website. Fancy home page, with a coat of arms and a big, Old English “L” on a golden crest. Quotes about wine’s goodness from Clifton Fadiman, Ernest Hemingway and Anonymous. (Clifton Fadiman? Is there anyone in China who’s heard of Clifton Fadiman?) I click on the “Wine” link to see what Legacy sells. Looks like only one brand: Hacienda. Aha! Now we’re getting somewhere. I know Hacienda, or used to; a vague memory of a Sonoma County winery comes to mind. They made pretty good wine, didn’t they? I look up my scores on Wine Enthusiast’s database. The last Hacienda wine I reviewed was six years ago. It was a Sauvignon Blanc with a California appellation that I gave 83 points to. My other scores over the years ranged from 82 points to 85 points.

Not very encouraging. But is Hacienda making better wine now? After all, things might have improved. Back to Legacy’s website. After a little historical background about Count Haraszthy and Buena Vista (which supposedly have something to do with Hacienda), I read the following: “In 1992, the Franzia family (Bronco Wine Company) purchased the rights to the Hacienda label and cased goods inventory.” Then there’s a list of medals and honors Hacienda wines have earned, including a Bronze medal for their Viognier at the 2006 West Coast Wine Competition and a Bronze for their Claire de Lune White Zinfandel at the 2008 California State Fair. There are “Wine & Food Pairings” recommendations: click on “Valpolicella” (does Hacienda make a Valpolicella they export to China? Is that legal?), and the reccos are, among others, meatloaf, turkey burgers and lentil patties. “Chardonnay” turns up about 100 recommended pairings, ranging from turkey burgers (again) to raw oysters (with an oaky Chardonnay? I don’t think so) and Challah and Potato Kugel (for, I suppose, all those Chinese Hasidic Jews).

O.K., so now I‘m confused. Freddy Franzia is betting that the future of Chinese wine consumption lies in the Chinese equivalent of Two-Buck Chuck, and that Chinese wine consumers are basically ignoramuses who think that anything from California with a French name (Claire de Lune) and a fancy crest must be good. But how do you square that with the perception we get here in California that China’s rising middle class wants good wine? Maybe China is so big that they want both Two-Buck Chuck and Lafite. Just like here, only with eight times the population. But how does this help me decide whether or not to invest in Chinese wine, and what stock to buy?

Clearly, this is going to be harder than I thought.

  1. King Freddy of Franzia is really Chinese? Who knew?

  2. Steve,
    I think Grace Vineyard (distributed by Torres-China), in the Shanxi region, is one of the few wineries producing decent wine in China.
    On the low-end/commodity side, Cofco, China’s agribusiness (and winemaking) giant, seems to be (?) the only stock available (Yahoo Code: 600737.SS).
    Its short term performance/graph looks pretty good compared to the Shanghai Comp. Index. I’d be extra careful with (the highly volatile) Chinese stocks, though.

  3. Carlos Toledo says:

    Steve, i saw the birth of a market some 20 years ago. In this third world country, packed with corrupt politicians, thirsty consumers for import goods, beverages and food (the international trading was forbidden) the following happened, wine-wise:

    We started with the obnoxious blue bottle german wines. Then we went for the best beer america had to offer: colt 45, Milwaukee’s best, budweiser… After that we began buying anything that had the name valpolicella and chateau on the bottle.

    Ah, some jurassic wine critics told us the that all was crap. We should go for Chile and Argentina’s wines. Wow, the world now made sense. We were drinking the best buck wines concha y toro and winery joe blow from argentina could make.

    People here are now learning to drink champagne. The more expensive the better as they have to show their friends they know all about wines.

    More and more wine magazines and really poorly written wine bloggers are in every corner.

    My take is just like you wrote: poor people and middle class will go for the ”fancy” named/looked like wines while some will go for the latours and champagnes.

    Given the same conditions, opportunities, environmental temperature and air pressure we’ll behave in the same way, everywhere….

  4. Carlos, you’re right. As we say, what goes around, comes around. Every new generation — and every new wine-drinking culture — has to learn the old lessons from scratch.

  5. I believe the this brand “Hacienda” was the one that around 30 years ago, threatened a small startup winery in the Russian River called, “Hacienda Del Rio” .
    That wineries name was changed to …. Williams Selyem!

    http://www.williamsselyem.com/story/history.html

  6. Steve,
    Do follow up on this and let us know.
    And check SEC.
    http://www.sec.gov/Archives/edgar/data/1089565/000109181810000339/lwsp08091010q.htm

  7. Kathy: not sure how to follow up on the statements, but thanks for sending!

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