Examining Asian Wine Preferences and Their Tie to Cultural Differences Between Japan and China: How Preferences Affect Regional Production and Exports?

Research Assessing the deep tie between China and Bordeaux and Japan and Burgundy, and why these relatively new cultures to wine drinking have such strong ties to one specific wine region. Examine the cultural differences between the two countries and how that would affect their wine drinking preferences. Actual affect it is having within the wine region themselves such as Chinese and Japanese vineyard and chateau acquisitions and French exports to Asia. Examine the fluctuation in the dollar, Yen, Euro and Yuan over the last five years to see if the fluctuation in the currency could change the export markets away from the west towards Asia in the future for both Bordeaux and Burgundy.

Cultural History of Wine in Japan Japan and Burgundy Cultural History of Wine in Japan First introduced in 17th century through Portuguese missionaries, but did not become popular until the 19th century under the Meji Regime which introduced western culture.1 Burgundy and Japan In 2016 Currently Japan is third behind the United States and United Kingdom for Burgundy exports. Japan equates to 10% of burgundy exports.2 Meji Shrine Sake Offering “In Japan, sake has always been a way of bringing our gods and people together,” Tetsuo Hasuo of the Japan Sake Brewers Association explained. The Meiji shrine gets donations from all 1,800 sake breweries in Japan one of only two shrines to receive this amount of donations. Every December about 180 bottles of wine from 60 Burgundy producers are gifted to the shrine to include esteemed burgundy producers Domain Romanee Conti.3 Pop Culture Drops of God Anime Cartoon Focused on fine wine and the search of the 12 apostles (12 exclusive wines) which includes Burgundy producers as a focus. Shows a deep cultural connection between Japan and Burgundy.4 1. 2. https://www.eu-japan.eu/sites/default/files/publications/docs/japanwinemarketreport-2014.pdf 2. http://www.bourgogne-wines.com/press/gallery_files/site/289/1910/41824.pdf 3. http://www.greenshinto.com/wp/2015/06/14/meiji-shrine-wine/ 4. https://www.thedrinksbusiness.com/2016/06/12-wines-that-featured-in-the-drops-of-god/

Meiji Shrine Tokyo

Japan Terroir and Tradition Tea Traditional Tea Ceremony Called Chanoyu Dates back to 618 very traditional and rooted in connection of people and the sacredness of tea. “Cha Ching” is the correct temperature for the tea to be served at to express the teas flavor.5 Tea Terroir The Japanese are very meticulous about their tea regions and directly link quality to terroir. During the Meiji Era the “Fukamushi” treatment method was developed where the tea is steamed at the field to preserve the freshness of the terroir.6 Sake Rice There has been a trend in the Sake industry to use local rice to drive terroir in each sake from different regions.7 Burgundy Terroir Terroir based on 1131 classification system on the Monks of St Vivant.8 Modern classification from both Morelot and Lavell 1927 law “local, honest traditional” the basis for the AOC system of today defining Terroir.9 5. http://japanese-tea-ceremony.net/history.html 6. http://voyapon.com/japanese-green-tea-region/ 7. http://sakeexperiencejapan.com/sake-specific-terms/terroir/ 8. Romanee Conti. Olney, Richard. pg. 49-75 9. The Original Grand Crus of Burgundy. Curtis, Charles MW pg. 1-130

Status Symbol and Gifts China and Bordeaux Mianzi Meaning “face” in Chinese culture but translate to outward appearance or status symbols is extremely important in Chinese culture. Status symbols show your place in Chinese culture and has become increasingly more important as China has opened up in the last thirty years. 10 Bordeaux and China Unlike Japan fine wine was not introduced really until the 1982 vintage of Bordeaux. Status Symbol and Gifts Status symbol and gifts are very important in the Chinese culture even down to giving a business card can be rated by others in culture. Unlike in Burgundy the Grand Cru Class system of Bordeaux fits well within the Chinese culture because there is a direct correlation between “growths” and the importance of status in China. Robert Parker ratings of the 1982 vintage gave an added level of status tied to the bottle of Bordeaux. The 1982 vintage also coincided with the rising wealthy class in China expanding a new market for Bordeaux In 2008 Henry Tang a famous wine collector was able to drop all taxes on imports cementing a fine wine market in china.11 10. http://www.itsmichelleguo.com/chinese-status-symbols-a-car-a-home-and-a-mistress/ 11. https://www.thewinecellarinsider.com/wine-topics/china-bordeaux-wine-complete-story-current-situationtoday/

Chinese Acquisition vs Japanese Intellectual Approach Effects in Region Chinese Acquisition vs Japanese Intellectual Approach The Chinese recently have bought three out of the top five highest Bordeaux estates. The approach of the Chinese investor is for status but also for business Jack Ma owner of Alibaba has purchased one of theses estates as to cut out French middleman and have direct access to the product.12 The Japanese have a presence in Burgundy which is small, but they are not interested in acquiring properties but understanding the Burgundy culture. Example Domain Simone Bize run by Chisa Bize the widow of Patrick Bize, which are making very traditional burgundy wines. The Japanese are immersing themselves moving to Burgundy and learning the culture to make wine. These acquisitions are slower than the Chinese in Bordeaux but a drastically different approach.13 12. http://www.telegraph.co.uk/business/2017/06/11/chinese-investors-snapping-bordeaux-vineyards/ 13. https://www.saveur.com/japanese-food-burgundy-france#page-2

Barrier of Entry Bordeaux vs Burgundy Size 74,000 Acres under vine for Burgundy vs 300,000 for Bordeaux Bordeaux production about four times annually Ownership Bordeaux is primarily owned by large corporations vs. Burgundy which is mainly family owned vineyards or negotiates Barrier of Entry Bordeaux is much more open to foreign investment where money can buy you a chateau compared to Burgundy where money is not the primary factor. You have to be accepted by the culture to get access to grapes or land. Japanese and Chinese Connection In the relatively new status driven Chinese culture they want access to status symbols and Bordeaux is able to provide that to their economy. Japan through its culture wants a deeper spiritual connection which is what Burgundy provides through its demand for understanding its culture.14 14. https://vinepair.com/wine-blog/bordeaux-vs-burgundy-the-difference-between-frances-two-most-popular-wines/

Burgundy Export to Japan 2012-2017 Full year Crémant de Bourgogne White Wine Red Rose Wine Revenue 2008 243 4 405 3 394 76 829 2009 235 3 872 3 331 66 643 2010 237 4 331 3 130 70 774 2011 253 4 765 3 621 85 136 2012 386 5 607 4 031 102 099 2013 339 4 974 3 819 94 906 2014 306 4 422 3 535 98 135 2015 291 4 432 3 456 97 512 2016 314 4 489 3 054 97 862 2017 360 4 215 3 025 103 529 15. www.vins-bourgogne.fr  - www.bourgogne-wines.com (Email from Cecile Methiaud Head of PR)

Burgundy Export to United States 2012-2017 full year Crémant de Bourgogne White wines Red/ Rosé wines Revenue 2008 794 8 208 4 671 131 707 2009 480 6 254 3 419 85 600 2010 645 8 006 3 748 105 611 2011 1 011 8 789 5 048 141 373 2012 1 037 9 604 4 727 149 672 2013 1 261 10 511 4 659 160 892 2014 1 051 9 340 4 349 158 856 2015 1 270 10 365 4 387 182 270 2016 1 525 10 565 4 482 188 561 2017 1 689 10 079 4 955 207 503 16. www.vins-bourgogne.fr  - www.bourgogne-wines.com (Email from Cecile Methiaud Head of PR)

17. https://www.xe.com/currencycharts/?from=EUR&to=JPY&view=5Y Euro to Yen 2013-2018 17. https://www.xe.com/currencycharts/?from=EUR&to=JPY&view=5Y

Analysis Year Euro to Yen % Change Burgundy Japanese Export Revenue 2013 130 Yen NA 94906 2014 138 Yen 5.7% 98135 3.2% 2015 131 Yen 5.3% 97512 .6% 2016 0% 97862 .03% 2017 120 Yen 9.1% 103529 5.4% Year Euro to Dollar % Change Burgundy US Export Revenue 2013 1.30 Dollar NA 160892 2014 1.37 Dollar 9.1% 158865 1.2% 2015 1.13 Dollar 21.2% 182270 12.8% 2016 1.09 Dollar 3.6% 188561 3.3% 2017 1.07 Dollar 1.8% 207503 0.1%

18. https://www.xe.com/currencycharts/?from=EUR&to=USD&view=5Y. Dollar to Euro 2013-2018 2015 18. https://www.xe.com/currencycharts/?from=EUR&to=USD&view=5Y.

19. https://www.xe.com/currencycharts/?from=EUR&to=CNY&view=5Y. Euro to Yuan 2013-2018 2015 19. https://www.xe.com/currencycharts/?from=EUR&to=CNY&view=5Y.

Bordeaux Exports 2015 20. https://www.mon-viti.com/articles/commercialisation/les-vins-de-bordeaux-lexport-les-chiffres-2015

Bordeaux and China Analysis With the 2016 vintage you saw a slow in the Chinese imports of Bordeaux wine due to a 15% increase in Bordeaux futures pricing. The National Cereals, Oils and Foodstuff Corporation (COFCO) which is the government arm of imports has decided to cut Bordeaux imports by 50% starting in 2016. The shift will focus on older Bordeaux in storage at better pricing. Domestic Wine Production Chinese Government established the Estate Wine Mark similar to the AOC designating quality wine.21 Observation With the cut in imports of Bordeaux wine and the government focus on domestic fine wine it seems that the relationship between Bordeaux and China might be weakening. 21. https://www.forbes.com/sites/thomaspellechia/2017/07/10/bordeaux-luxury-wineries-may-lose-half-their-exports-to-china/#19a4a91c3c27

Observations and Conclusion Japan and Burgundy There is a deeper spiritual connection between the two cultures. The Japanese like thinks to have a sense of Terroir which Burgundy provides. There is a steady stream of imports that are not tied to currency. Japan does not want to change Burgundy they want to understand it and work together with Burgundy to improve it and vice versa. China and Bordeaux The relationship between Bordeaux and China is one of business and status. Bordeaux is a more straight forward status symbol for the Chinese culture (Grand Cru Classe vs AOC). Bordeaux barrier of entry is much lower and a new wine drinking culture in china can enter through purchase. Future Relationship Future relationship is rocky as domestic fine wine grows in China and a more isolationist approach is being taken.