Features 27 February 2020

Bordeaux’s new investors

The last decade has seen a wealth of Chinese purchases across Bordeaux, causing alarm and intrigue in equal measure. Jane Anson lifts the lid on the reality of being an outsider in the Gironde

Words by Jane Anson

Photography by Noma Bar

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When Michael Huang bought Château Bonnange in the Côtes de Bordeaux in 2015, it was with a certain lifestyle in mind. ‘I wasn’t looking for a second career,’ the e-commerce magnate says. ‘Back home, I do the nine-nine-six working week,’ he says of the 9am–9pm, six-days-a-week Chinese work culture. ‘I had an image of holidays in the south of France, coming twice a year with my family… I thought that by buying a château in Bordeaux I could have a more relaxing life when outside China,’ he says, opening a bottle of his wine. ‘I was so naive.’

The nine-hectare Château Bonnange was losing money when Huang bought it for an estimated €170,000 ($187,000) in 2015. ‘But I thought, Hey, if I can run a 500-person business back in China, I can do this.’ He wasn’t looking for big profits, he says, and just needed to break even to make it work. ‘I thought I was being smart.’

He now realises that the running of a small Bordeaux château can’t be delegated. ‘If you don’t go all in, it’s never going to work. In China, on the key online shopping days, I can sell $14m worth of shoes in 12 hours. At a wine fair in France, I can stand there all day and not sell one bottle. I have accepted my fate,’ he says, in a resigned if good-humoured fashion.

Huang’s insights into owning a château were some of the smartest and most self-effacing I’ve heard in all my years covering the wines of Bordeaux. And they were coming from a 30-something Chinese owner with perfect English and a proven business brain, sporting three-day stubble and a pair of Converse.

His plan might have worked better, perhaps, if he hadn’t bought in the relatively obscure appellation of Blaye Côtes de Bordeaux. But he is far from the first person to have been caught up in the romance of buying a beautiful château without first doing their homework. Bordeaux has been a magnet for foreign investors for centuries; the Chinese are only the latest wave of arrivals that began with the Romans in AD56.

Over the past decade or so, close to 160 châteaux have shifted to Chinese ownership, around 2% of the region’s 6,500 properties. As ever with Bordeaux, the influx of nationalities reflects where bottles are being uncorked. The growth in the Asian market can be traced back to Suntory of Japan’s arrival at Château Lagrange back in 1983, through to Vietnamese- born, Hong Kong-based Peter Kwok buying his first estate, Château Haut-Brisson in St-Emilion, in 1997. The wave of mainland Chinese owners is more recent, beginning in 2008 with the reported €3m ($3.3m) purchase of Château Latour-Laguens, in the pretty but remote village of St-Martin-du-Puy, by Haiyan Cheng of property investor Longhai International. Some of the press stories at the time make for pretty excruciating reading now, with the New York Times reporting the buyer being wooed by the kidney-shaped pond at the estate because, as the agent explained, ‘the Chinese believe evil spirits don’t like crooked lines’. Such a view is not only fatuous, it blithely ignores the presence of the magic word ‘Latour’ in the name, which may have made for a rather more logical draw.

Peter Kwok

Over the following years, Chinese purchases snowballed, and it was hard not to question the high prices paid for beautiful but often run-down châteaux in appellations where bottle prices struggled to justify the money. There’s little doubt that unscrupulous agents were more than happy to talk up the possibility of making a return on investment and talk down the cash needed up front to make projects financially viable. Or perhaps they also believed the hype that Chinese owners would export the entirety of their production to China and bypass Bordeaux’s traditional sales network of brokers and merchants.

The reality is that any outside investor who buys in Bordeaux, whether from Beijing or Paris, shares many of the same experiences. Take Michel Reybier at Château Cos d’Estournel. A French entrepreneur who made his money in foods and hospitality, Reybier is founder of the Mama Shelter and La Réserve hotel groups and is the 81st-richest man in France, according to the 2019 Challenges magazine, with a net worth of somewhere around €1.2bn. He was unquestionably the kind of buyer who attracts reams of respectful press. In 2000, the magnate spent a reported €100m or more buying the St-Estèphe second growth, a property that had originally come on the market in 1998 due to a familiar story of family shareholding problems (as it happens, not dissimilar to events at Haiyan Cheng’s Latour-Laguens at the other end of the Bordeaux value tree).

‘It took me six years of research before buying this château,’ says Reybier over lunch at his newly opened La Maison d’Estournel hotel and restaurant. ‘I wanted to buy in Bordeaux because of its exceptional history and the proven market for its wines. I wasn’t in a rush and knew very clearly what I was looking for. When Cos d’Estournel became available, it fitted perfectly with the criteria for my search – in its history, its terroir and its potential.’

To succeed, you need a bit of humility and a bit of luck, but you also need to remember that some things don’t change

Observers expected him to be another absentee wealthy owner – after all, he had an extremely experienced director in the shape of Jean-Guillaume Prats (now CEO of DBR Lafite) for the first few years – but today Reybier is very much at the helm, making all key decisions along with technical director Dominique Arangoïts.

‘Nothing replaces the engagement of an owner who is prepared to invest his time in the property,’ he says. ‘It’s tough to enter a new industry. The bureaucracy of any French business is difficult, and I can only imagine how hard it must be for overseas investors. In many ways, Bordeaux has its own language, and perhaps the Bordelais don’t always see how lucky they are to be here. Coming from the outside, that was clear to me.

‘To succeed, you need a bit of humility and a bit of luck, but you also need to remember that some things don’t change – namely, you need a team that believes in the same things that you do and is prepared to work hard.’

There are still some elements that surprise him. ‘For a start, the system of brokers and merchants that stand between châteaux and consumers can pose problems. In my other businesses, I can see directly what my customers want, and I respond. In Bordeaux there are layers that obscure this.’ At first he wondered if he should use his existing network to sell direct, before he saw the huge value of the Bordeaux négociant system. At the same time, he says, it is essential to be in control of your own product. ‘Many château owners don’t seem to go out into the vineyards enough to see the process of growing the grapes, to really check on the quality of their raw material. But today, simply having a high price is not enough, even for classified growths. Consumers want to know what stands behind the price, and an owner needs to be able to answer those questions.’

Michael Huang

In the end, buying a cru classé estate means you inherit many centuries of this kind of smart decision-making by previous owners. Shi Yuzhu, a billionaire online games developer and software engineer from Anhui Province in eastern China, bought Château Plain-Point in the modest appellation of Fronsac, on the Right Bank, in 2013. He is employing similar strategies to those that have well served the more glamorous Left Bank names for centuries, but doing much of it from scratch.

The list of changes implemented by Yuzhu over the past six years would not be out of place in the archives of any of the big Médoc estates. For a start, he has bought neighbouring châteaux La Fontaine, Chadenne, Moulin des Tonnelles, Haut- Mazeris and Arnauton to increase his vineyard size and so improve economies of scale, while retaining only Château Plain-Point on the label. At the same time, he has brought in big-name consultants: Hubert de Boüard of Château Angélus, along with terroir specialists Claude and Lydia Bourguignon, and hired interior architects Chadebost Créations, who worked on Cheval Blanc, to create a sprawling, spanking- new winery. And although he is creating a Château Plain-Point Chairman’s Selection that will go to China as the top bottling, his wider distribution strategy will be to ‘adapt to the local customs, and go through local renowned wine merchants in Bordeaux to promote Château Plain Point internationally’.

His original reasons for buying also sound very similar to those of Reybier. ‘As a wine lover, the first red wine I came into contact with was a Bordeaux. Where else has been so long famed for its deep-rooted wine culture?’

Back at Château Bonnange, in contrast, there are no plans to expand rapidly or to build a vast winery. In fact, when originally considering his purchase, Huang was not even immediately tied to Bordeaux. He looked at 12 châteaux across the Loire, Languedoc and the Rhône before deciding on Bonnange. The previous owner was the founder of TBWA advertising agency, and Huang used to work for Ogilvy, which gave them a connection. ‘We got on personally, and he knew I wanted this estate,’ he says.

Huang retained the original winemaker (as did Shi at Plain-Point and Reybier at Cos, where Arangoïts has been in the role since 2002). The biggest change he has made has been the decision to focus on Malbec, which was the leading variety in the area in the 19th century but has almost disappeared today. Bonnange already had some old Malbec vines with extremely low yields, and it was tasting these that, as Huang likes to put it, ‘changed my life’.

The idea of a quick turnaround is feasible with e-commerce in China, but in wine it’s impossible

‘I’m not a typical Chinese owner,’ he says. ‘I’m trying to restore traditions in Blaye and, at the same time, bring an open mind and fresh ideas. When I arrived, it quickly became clear that the sales network had not been maintained for many years, so I am looking to build that back up. But it has never been my intention to sell everything in China. It doesn’t make sense commercially, because two types of wine sell in China: either very expensive, like Lafite, or very cheap. My wine is in the middle, which is a more difficult price point. So I want to focus on selling in markets like France, where I can build a brand.’

It sounds like a sensible strategy. China’s economy grew at the slowest pace in the past two decades in 2018. Bordeaux wine exports to China, its biggest export market by value, dropped by 31% in volume and 22% in value – enough to make anyone start looking at other territories as a safety valve.

Today, Huang’s holiday plans have changed. ‘Now I spend every vacation in wine regions – but not just Bordeaux,’ he says. ‘In the past 12 months I’ve been to Gaillac, Alsace, Burgundy and Tuscany.’ His neighbours in Blaye, he says, ‘have not been particularly helpful, often because they are simply focusing on trying to make a living themselves’. But, he says, it feels good to be making something that lasts. ‘I just want to make a great wine and am happy to let it age at the château while I build the brand. I can use my income from China to support the business here for the next 10–15 years, and my aim now is to make great Malbec. The idea of a quick turnaround is feasible with e-commerce in China, but in wine it’s impossible. But I’m starting to appreciate the benefits of that.’

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