March 13 (Bloomberg) -- Domaines Barons de Rothschild Lafite began construction of a winery with a local partner in China, its first in Asia, as appetite for premium wine increases in the world’s second-largest economy.
The 1.73 hectare (4.3 acre) winery in Penglai in eastern China’s Shandong province, one of China’s largest wine-producing areas, will be Rothschild’s third Lafite production base after Argentina and Chile, according to a government statement. The first phase will cost 100 million yuan ($15.8 million), it said.
China is the fifth-biggest wine market by volume and will help accelerate global wine consumption in the next five years as wealthy Chinese increase purchases of high-end vintages such as Chateau Lafite Rothschild, according to research commissioned by industry exhibitor Vinexpo from International Wine and Spirit Research. Appetite by affluent Chinese for luxury goods has surged as a result of decades of growth in the world’s most populous nation.
“The world’s top luxury brands are all very interested in the Chinese market, Rothschild is no exception,” said Zhang Lu, a Shanghai-based analyst at Capital Securities Corp. “The winery underscores its confidence in demand for high-end wine in China.”
Chateau Lafite Rothschild teamed up with CITIC East China (Group) Co. to build the production base which will include a vineyard, winery and related facilities, according to the government statement. It didn’t give a date for completion of the project.
Wine production in Penglai, a coastal city located in Bohai-Rim in eastern China, has doubled to 140,000 tons in 2011 from 2005 and the number of wine makers increased to 70 from 39 in the same period, according to the statement.
Value Outpaces Volume
The value of wine purchases may outpace volume in the next four years, helped by high-end consumption in China, Robert Beynat, the chief executive of Vinexpo, said in a January interview. Chinese, including people in Hong Kong, will increase the amount of wine they drink by 54 percent by 2015 as consumption reaches 1.9 to 2 liters per person, the Vinexpo study shows. The U.S. is the largest wine market by volume, followed by Italy and France.
China imported $1.27 billion worth of wine in the first 11 months of 2011, an increase of 88 percent from a year earlier, Xinhua News Agency reported, citing customs data.
A case of Lafite-Rothschild 1982 fetched a record HK$1.03 million ($132,770) at a Sotheby’s auction in Hong Kong in October last year, while another case of the same vintage sold for HK$720,000 at a Christie’s sale in the same city the following month.
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