Friday, February 19, 2016

Book Review: Suzanne Mustacich's Thirsty Dragon

This book is the War and Peace of wine literature. I had to read it twice in order to tease out the many threads and fully internalize and embrace the story that it relates. It is a tour de force, throughly researched and impeccably sourced with 40 pages of chapter-specific notes and an index; but the fullest potential is unrealized.

My issue is not with the content. Rather, it is with the presentation, the style chosen by the author with which to convey the story. This is an incredibly complex story with many moving parts and multiple individuals and entities cutting across geographical boundaries. Add to this the fact that many of the Chinese state-owned companies covered in the book will be unfamiliar to a large swath of the potential target audience, and the cultural difficulty that many western readers have with Chinese names, and it increases the difficulty of keeping up with the story. In my opinion, the reader would have been better served by a straightforward writing style rather than the Tom-Clancy-like, multi-threaded plot-line approach that was employed. But, unlike a Clancy novel, the threads do not converge.

The style made it difficult to put the book down and pick it up again if any length of time had transpired between those two acts. In the cases where I had set the book aside, I had to read a few pages back from where I had left off in order to regain the cadence of the story. And in my second pass through the book, I made lists of Chinese companies, joint ventures, Chinese winemakers, and distribution entities so that I could keep track of the players (I had resisted doing that on my first pass through but this is a necessary evil if you are reading this book seriously.).

That being said, the reporting and analysis contained within the book are exceptional. The epilogue, titled Shangri La, is an especially cogent and insightful piece of analysis.

The core story here is about the Chinese wine market that was realized after Li Peng's speech at the 1996 Party conclave wherein he lauds the benefits of wine drinking and essentially gives approval for consumption of said beverage. Susan leads off with an institution -- the Place de Bordeaux -- which had, for centuries, been the marketplace for wines produced in Bordeaux, one in which the players knew the rules and their places within the system (The chart below was developed mostly from Susan's description in the book's initial chapter.).

It is a story of how that institution and system became corrupted by (i) the promise of a vast Chinese wine market and (ii) the pursuit of of that market potential by traditional players and new entrants -- well-meaning or criminal-minded. And it is a story of how markedly different than imagined is the market that does emerge, a product of fickleness and the reward structure of state-influenced "market forces".

There are no heroes in this story. Or at least none that transcends it. There are four honorable characters -- only one of whom ends up better off than when we first encountered them -- and their "goodness-contribution" is drowned out by all the nefarious and selfish acts which undergird the tome.

According to Susan, China had been a "lilliputian" wine market prior to Premier Li Peng's speech at the 1996 National People's Conferrence wherein he stipulated that it was okay to drink wine. Between that period and an effective closing of the window for high-priced Bordeaux brought about by the anti-corruption initiatives of Xi Jinping, we saw the evolution of two markets in China: First Growths purchased primarily for gift-giving and lower-cost Bordeaux (plonk according to the author) and local wine bought to be consumed. We also saw a number of new players enter the market to help service the needs: Individuals, industrialists, state-owned companies, Chinese regional governments, wine distributors, Chinese grower/producers, and French-Chinese joint ventures.

Bordeaux wines had historically been sold as shown in the chart above but the Chinese wanted to cut out the middleman and we see many a Chateau cooperating in this venture by cutting out everyone downstream and selling to a Chinese wholesaler or "club." We see negotiants bypassing their clients and selling direct to distribution companies. According to the author, the environment devolved into a "four-way wrestling match" between the "state-run conglomerates", "entrepreunerial charlatans", the Bordelais establishment, and rogue wineries (Latour deserting en primeur being a prime example of this latter category).

The book goes into exquisite detail on Chinese initiatives to gain the high ground to include brand-squatting, counterfeiting, rogue tax authorities, officials on the take, joint ventures with technology training and technology transfer commitments, technology/material/means-of-production confiscation, and intimidation to force a partner out. The French on the other hand, cut out their long-term business partners to pursue this business. As the Chateau's pursued the Chinese market they not only cut out their negotiants and courtiers, they also cut out the businesses to which the negotiants would sell their wines. And as the hot money pursued the wines, the prices continued to rise. This was a disaster for American Bordeaux consumers as their suppliers were getting access to a much smaller amount of the wine and at ridiculously high prices.

I had asked Sarah Kemp, Publishing Director of Decanter, about some of these issues in an interview I did with her in February of 2011. In response to a question on demand, Sarah said:
... the issue at hand is its (China's) seemingly insatiable appetite for First Growth Bordeauxs ... 60% of the production of a particular St. Emilion chateau is going to China while 40% of Farr Vintners (UK wine merchant specializing in the purchase and sale of top Bordeaux wines) 2010 revenue was attributable to sales into the Asian market.  ... the business being done with China is under-reported because no one is tracking wines that come into the UK before being re-exported to China.  This increased demand is impacting the price of both new and old vintages of Bordeaux First Growths.
In response to a question on how the Bordelaise would balance new markets versus old, Sarah said:
... top proprietors do not want to lose their traditional markets because the Chinese market is still immature and may not be able to withstand a shock at this early stage. Snubbing traditional markets could prove to be a flawed strategy if such a shock were to occur.
Well the Bordelaise did not read that interview and went ahead and snubbed their traditional markets in pursuit of the cash. The conclusion: these guys deserved each other.

As regards the book, buy it, read it slowly and carefully and with pen and paper at hand.

©Wine -- Mise en abyme

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