Fine wine storage in Hong Kong is becoming increasingly sophisticated and this in keeping with the need for provenance at auction.
ON THE face of it, with its premium on space and often sweltering temperatures, Hong Kong must be a nightmare place for collecting, storing and distributing fine wines and yet it is now one of the biggest international hubs (though Singapore may be catching up fast, see box out). Since the abolition of wine VAT and general sales tax in February 2008, Hong Kong has shot up in terms of importance in the fine wine world.
According to the Hong Kong Commerce and Economic Development Bureau, between 2008 and 2013 wine imports by value went up from HK$2.8 billion to $8bn (though the peak was $9.7bn in 2011), while volume went up from 30.4m litres to 50.1m over the same period. However, re-exports don’t take up quite as much of the value, $1.6bn in 2013 but they do rather more of the volume, 19.1m litres, so around 20% and 38% of their respective totals.
As Hong Kong has abolished tax the concept of “bonded” warehouses is no longer relevant there but that does not mean that reliable storage isn’t, in fact it’s as important as ever. There’s no doubt that the recent austerity drive in China has hit the wine and luxury drinks market hard and it has affected Hong Kong too.
As Carol Wing, managing director of Golden Vintage International, points out: “Hong Kong was one of the key suppliers of fine wine to China in the past through different distribution channels. Indirectly, HK’s fine wine market was always influenced.”
However, Hong Kong is not completely dependent on China or even Hong Kongers. Hubert Li, managing director of Hong Kong Wine Vault, points out the reality: “Demand is strong for quality wine storage, and this demand is not just from locals, but also private clients from China, Taiwan, Thailand and other surrounding countries.”
Not everything is so rosy though, Jeremy Pearson of London City Bond reports: “Bonded warehousing has changed as the trade has become more competitive.”
Bonded warehouses in the UK now need several hubs to deal with clients across the sovereign state as well as installing systems that can deal with everything from a single bottle to hundreds of pallets at a time. “LCB handles 17 million cases a year,” he says. “That gives us critical mass.”
Those who don’t have this or who failed to adapt have closed down and in Hong Kong the story is much the same. Li comments: “Today, there are still new people opening storage companies, but I also see storage companies closing down.
After all, the capital investment is high and not many of them had the reputation, economies of scale and customer base to make it a sustainable business.”
Fine wine is now so valuable that fine wine storage and warehouse operators cannot afford to be slow off the mark. Despite many forecasting a contraction in the Hong Kong market (and expansion elsewhere in Asia) Asian collectors want good storage and many have exacting standards.
HK’s ideal storage solution
Hong Kong’s Crown Wine Cellars is home to some of the most valuable wine in the world, safely stored underground, and protected by the bunker’s one-metre thick concrete walls, as well as sophisticated climate control systems.“This is not air conditioning,” explains Gregory De ’Eb, who manages the facility, “and our system constantly bleeds out air at the right temperature and humidity; it is not reactive, it is never switched off.”
But storage is just one aspect of Crown Wine Cellars. Back in March 2004, just five months after the storage facility was completed, an on-site fine wine club complete with fine dining was added, elevating Crown Wine Cellars to a sought-after place for fine wine lovers to relax, visiting winemakers to regularly host intimate private dinners as well as tastings, and a range of people to hold events.
“It’s rare not to have something going on,” says founder of the facility Jim Thompson, who describes it as “a unique place in Hong Kong”.
“It’s not for flashy wine collections, but rather for the simple celebration of wine,” points out De ‘Eb.
So, as well as storage, the wine cellars provide a cosseting and extremely comfortable environment in which to talk and taste.
Li explains: “Fine wine storage is very important to private collectors in Hong Kong, so we now operate three storage facilities in the city to serve them (the third was opened in October last year). Wine lovers will eventually drink the wines they bought, so they often ship back the ready-to-drink wines to Hong Kong.” Li states: “What customers value most are of course the storage environment and security.”
As a result the Hong Kong Quality Assurance Agency (HKQAA) was quick to adopt a Wine Storage Management Systems Certification Scheme (WSMSCS) in late 2009 (see box out), to which the vast majority of Hong Kong’s leading wine companies are signed up to, and which effectively guarantees storage and transportation conditions.
Conditions are strict too, controlling average temperatures, humidity, the accuracy of the sensors, how regularly the sensors need to be calibrated as well as the usual requirements for avoidance of equipment that might cause unnecessary vibration and light. Li points out: “I have had guests from wineries visiting and they find our facilities to be even cooler than their own cellars.”
The transportation requirements also extend across national borders so cover all reexports out of Hong Kong as well (see box out). With space at such a premium a few cellars catering to private clients in Hong Kong also fulfil a role unheard of in the UK, doubling up as tasting and dining rooms and even hosting wine education seminars too.
Crown Wine Cellars, for example, is a private club as well as one of the region’s leading cellars. In fact the WSMSCS covers restaurants, tasting rooms, shops, showrooms and hotels as any of those establishments can hold as much stock as they like now they are freed of the obligation to pay tax on their stock.