Wine Talk

Snooth User: dmcker

Another shoe drops: Chinese buy up distressed Napa winery

Posted by dmcker, Apr 25, 2011.

Japanese back in the '80s, UK and French money from before that, Australia and Chile more recently. Not too surprising, but I suppose it is a milestone of sorts.

From the April 24 issue of Wine Industry insight...

 

Chinese Investors Buy Into Napa Valley

Chinese investors have made international headlines over the past year buying chateaux in France along with vineyards and wineries in Australia and New Zealand. Now a Chinese investment group has purchased Napa Valley's Frazier Winery along with vineyards, land and an adjacent estate home.

The sale was purchased out of three interrelated Chapter 11 bankruptcy proceedings and was brokered by Napa Valley brokers Robyn Bentley of Pacific Union and Peggy Burgess of Sotheby's International. Ming Hua of Dawa Investment & Realty of Pasadena represented the buyer

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Replies

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Reply by gregt, Apr 26, 2011.

Well if they ever do have one of those Jasmine Revolutions, where will all the apparachiks go?  I'm surprised the Russian oligarchs haven't picked up some wineries.  Gotta park your money somewhere. 

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Reply by dmcker, Apr 26, 2011.

Russians are a whole different animal. They have to keep their private armies (often of KGB OBs) fed, plus they use vodka for everything, anyway. Disinfectant, fuel, lubricant, all-purpose medicine, etc. The favored beverage for any time of day. Who needs wine?

OK, the first Japanese purchases I was aware of in CA back in the day were Firestone and Ridge. How does Frazier stack up?

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Reply by gregt, Apr 27, 2011.

Good point about the vodka.

Frazier isn't in the league of the other 2, even Firestone, but who knows what the motivation was?  I went to a celebration of the first Chinese-owned winery in Napa - Howell Mt.  The family had moved to the US tho.  In the case you cite, it may really just be an investment. It may also be more.  Possibly a place to park some money.  But maybe also a way to learn.  If that's the case, it could be really interesting and it would be a really smart move.

France might still have the cachet in China, but wine marketing and wine tourism was perfected by the US.  There's nowhere in France that does it as well as CA.  And these days, that's a more realistic approach for China than  waiting 200 years to develop some mystique for their wine.  They're already like the fifth largest producer of wine in the world (besides being perhaps the first or second largest producer of Petrus) and they're going to be wanting to learn about building a wine industry from scratch.

All just idle speculation obviously, and after way too much wine tonight, but who knows?

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Reply by cigarman168, Apr 27, 2011.

The investment in Winery is for the property investment rather than the wine making business.

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Reply by gregt, Apr 27, 2011.

That makes perfect sense too and I overlooked that.  The mere fact that it's in wine country isn't necessarily important. 

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Reply by dmcker, Apr 28, 2011.

Not too sure that's the best place for flipping property. Can think of six dozen or so better options off the top of my head, and I haven't even started. Assume there is some interest in the wine business behind it. Or is it just that the purchasers literally have so much money they don't know what to efficiently do with it?

Greg, how do you know some Russian oligarch doesn't already own a winery or three? They all have ridiculously large houses all around the world, passports galore, private jets (and the aforementioned armies), their own banks, etc. and plenty of multi-tiered corporate structures established to ensure cushioned privacy. Just was talking yesterday over a bucket of mussels and some muscadet to a broker who helped one of them buy a monster estate outside of San Diego. So maybe there's a winery or two out there with a silent Muskovite partner...

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Reply by gregt, Apr 28, 2011.

I don't know but wouldn't be surprised.  There's a guy who bought the NY Nets and is building a huge new stadium not far from my house. Fairly young, worth a few billion, and I'm 100% certain it's all legit. I guess it would be more surprising if there weren't  a few "silent" partners as you suggest.

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Reply by napagirl68, May 1, 2011.

"I guess it would be more surprising if there weren't a few "silent" partners as you suggest."    

Took the words out of my mouth...

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Reply by tulaw, May 3, 2011.

Do I sense a bit of xenophobia in this thread?

Do I really care about the nationality of the winery owner, or do I judge the wine by itself?  Hmmm, what exactly was the April 24th edition of Wine Industry really getting at?

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Reply by dmcker, May 4, 2011.

Not so simplistic as that, tulaw. Merely an observation on a new business trend, plus injection of capital from a new source, always something to be aware of. Knowhow and business practices are certainly of interest, though. The Japanese had a steep learning curve back in the '80s and they (esp. Suntory) are mostly pulled out of California now. Not clear how the Chinese interest will evolve, but it's certainly something to watch. Don't be so quick to demonize... ;-)

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Reply by Stephen Harvey, May 16, 2011.

Ahh Nationalism and Xenophobia - the mainsteam weapon of the extreme right [and with the close relation to the tadpole declaring he may run for the Republican presidential ticket along with "lefty lady from Alaska"] - US presidential politics will provide plenty of intriguing satellite news for us outside of the US!!!

Mind you - Chinese investment in Australian Food assets creating lots of Xenophobic commentary on talkback radio in my part of the world

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Reply by tulaw, May 16, 2011.

Stephen, yes, I was tickled by the inability of people to see the xenophobic nature of the article.  If it is not fear (or spite) of foreigners, why the headline "another shoe drops" ?  Why the comparison in the comments to other foreign nationals buying property/wineries?  If it was just about investment, similar articles would claim that "another shoe dropped" every time another winery sold to any other "white guy" in California not already owning property in Napa/Sonoma.  The whole connotation of the article was xenophobia, but that is, indeed, so prevalent in conservative circles in America that it goes unnoticed and defended as nationalism and curiosity.

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Reply by dmcker, May 16, 2011.

The other shoe dropping was a reference to how Chinese buyers have skyrocketed the prices of First Growth Bordeaux and a few other prestige wine labels out of France. Buying up wineries was the next logical step past a certain threshold. If you want to debate prejudice and jingoism, we can, but trust me I've lived in or done business in Asia for more than 30 years, have literally married into this part of the world, and the talk will get very nuanced.

Your reaction I see as being simplistic in a reverse prejudicial way. It comes across as mindless PC-speak, with your response preprogammed to certain subjects you think you see without taking the trouble to read and think in detail.

Oh yeah, and I'm as far from a conservative as you are likely ever to meet. ;-)

Cheers

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Reply by tulaw, May 17, 2011.

The dictionary of idioms would disagree with you there, dm.

http://idioms.thefreedictionary.com/wait+for+the+other+shoe+to+drop

"wait for the other shoe to drop  (American)

to wait for something bad to happen.  Once a company starts laying of employees, those who are still working feel they are waiting for the other shoe to drop. See also: drop, other, shoe, wait " I think I can match you on the ties to Asia, and I only see xenophobia in this discussion.  The notion is clearly that it is a bad thing to have the Chinese invest in Californian wineries/properties, and with that I disagree and find prejudice.  I have lived in Malaysia, Indonesia, Afghanistan, spent considerable time in Singapore and China, I am married to a Chinese woman, and I have a Malaysian-American daughter.  So while I am not challenging your personal ties to Asia, I respectfully disagree with you on the fact of whether this article was written with a xenophobic view of foreign investment in the lily white world of Sonoma/Napa.
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Reply by tulaw, May 17, 2011.

dm, I apologize.  I see the shoe dropping comment was not in the article but in your attention grabbing headline.  I will take you at your word for what you intended it to mean. 

 

 

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Reply by dmcker, May 17, 2011.

I've encountered use of the term in non-pejorative contexts as well, and mine was meant that way. It's an evolving language form, as many are. It usually means, in my experience, that when one event happens, another is likely to, and people with foresight to anticipate that are waiting for it.

My time in Afghanistan was likely before yours, it was even before the Russian invasion. But have stayed for extended periods and done various forms of business all the way from SWAsia to East Asia during that period, in approx. two dozen countries. All the way from the lowliest exchange barter to government project negotiations. Lots of just traveling, climbing, etc. as well. And have two Japanese-American daughters, living in Tokyo as I do. Not the place for it so won't discuss book projects with US academics, etc.

Have also done plenty of business at the same levels in the States, in a number of industries and contexts. Everyone is interested in new capital flows, because they affect the market and sometimes even business practices. Some of that concern may be xenophobic, but other batches of it are just plain practical. I have no respect for jingoistic politicians who play on fear of the foreign. That is certainly the furthest thing from my position in the discussion I initiated.

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Reply by Richard Foxall, May 17, 2011.

a propos of dmcker being a xenophobe (guffaw), I offer this line from my favorite movie:

Major Strasser: What is your nationality?
Rick: I'm a drunkard.
Captain Renault: That makes Rick a citizen of the world.

I took "the other shoe" to simply mean "the expected next step." The Chinese have money, they are interested in the wine business, they have bought properties of other sorts, and paid dearly for access to natural resources in anticipation of future needs.  This happens whenever a country has lots of foreign currency reserves from running such a huge trade imbalance.  There are already reports that there's worries in China about a bubble in their real estate market--it's probably state policy to buy agricultural land outside the homeland.  Also, there are, according to a climate scientist I know, reasons to buy ag land in North America, specifically the continental US, as global warming changes where things can be grown.  Moving upslope will work here better than elsewhere.  China is very fearful of famine-access to arable land is a strategic concern right up there with our need for access to oil.

This cycle will repeat with whoever, although the Russian oligarchs almost immediately started diversifying their holdings--they were used to having a currency that was unreliable.

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Reply by dmcker, May 17, 2011.

As another example of market sentiment regarding Chinese as buyers, here's a recent piece from the BBC.

Certainly the supercedence of London and New York as wine trading centers is of interest to a range of folks.....

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Reply by Richard Foxall, May 17, 2011.

"But could China's thirst for fine wine empty the cellars of the Western world?"

Not as long as they keep producing fine Bordeaux themselves, enough to replenish what they are buying/consuming. If they hire Hardy Rodenstock, they may be able to replenish virtually any vintage.  ;-)

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Reply by Richard Foxall, May 17, 2011.

I'm sure at one time the ascent of New York as a trading center (centre, if you prefer) appalled the Brits and the French.  Plus ca change...

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