Now selling more fine and rare wines than London and New York together, business in Hong Kong is booming, writes CLIFFORD COONAN

THE CELLAR was the last place to fall to the Japanese during the invasion of Hong Kong in the second World War in December 1941, a munitions bunker near the former British army base at Aberdeen.

Nowadays, it is home to equally precious but far less explosive stock.

Here, cached 60 feet below ground in the vaults of the Crown Wine Cellar at Deep Water Bay Drive Bunkers, lie two bottles of 1869 Château Lafite worth €162,000 each. These are the most expensive bottles of wine in the world – for security reasons, their owners are not even told the exact location of the bottles.

Hong Kong is not the first place you think of when you think of quaffing a bottle of Krug, but the former crown colony has overtaken London and New York as the world’s biggest auction market for top labels such as Château Lafite Rothschild and Domaine Romanée-Conti.

“On a pure wine market retail basis, just for the rare and fine wine market, we in Hong Kong are probably the centre of the world right now,” said Greg De’Eb, general manager of Crown Wine Cellars.

Since the Hong Kong government slashed the duty on wine from 40 per cent to zero, back in February 2008, Hong Kong has become the world’s capital for wine auction.

As in so much of the luxury market in Hong Kong, the expansion is being driven by money from across the border in mainland China, where decades of strong economic growth has created a new breed of wine investor.

Although some collectors still tell horrified tales of mainland Chinese collectors dumping €53,000 bottles of Château d’Yquem into punch at parties, there are just as many stories about canny Chinese investors becoming better at understanding the market.

Compare the situation in Hong Kong to China, where imported wine is taxed at a whopping 45 per cent.

This tax-free status means that wine storage has really taken off, and around the city state, at least 15 wine repositories have sprung up to keep the wine safely stored away from the near-tropical heat.

And the growth in auction business means that Hong Kong now sells more fine and rare wines than London and New York together.

“When we started lobbying in the 1990s, never did we imagine this could happen. The amount of business we were turning over and our estimates didn’t match what has happened now and come true. Since the zero taxation policy, everything has exploded,” said De’Eb.

Former diplomat De’Eb opened the company’s first cellar in Hong Kong in 2003 with Jim Thompson, chairman and owner of the Crown Worldwide Group and it now has three sites in Hong Kong.

The group ships at least one container a month from the UK alone, with an average of 700 cases of investment-grade rare and fine wines, plus others coming in from Europe and the US. The values range from a few hundred US dollars to €41,750 a bottle.

While Hong Kong is expanding rapidly as a fine wine venue, it already had a strong wine tradition.

“It’s not just the tax. Back in 2000 to 2002, we did a huge amount of market research and all the research indicated that 15 per cent of the rare and fine wines in the world were owned by Hong Kong collectors.

The foundations were there. We have a depth of knowledge and a resource of collectors and knowledgeable people here, it was a success waiting to happen,” said De’Eb.

“Fine wine auction houses really set the pace.

Simply because a lot of the sales that are currently booked to European or UK merchants, those sales take place in Hong Kong and the people buying the wines are located here in China, Taiwan or Korea,” he said.

Other cellars include Modern Wine Cellar, a 3,800 sq m storage facility which recently opened in the New Territories, and which uses a Chubb’s burglar alarm system, closed circuit television, fingerprint access control and other security devices to keep the wines safe.

Here each wine is bar-coded to protect ownership – people in the business are still talking about an incident which occurred a few years ago in London when a case of 1986 Château Lafite Rothschild was discovered to have unlabelled bottles.

The Hong Kong Wine Vault, in Aberdeen, a 2,800 sq m facility set up by wine lovers in the city, has tasting rooms, with fully fitted kitchens for tastings. Members can have dinner parties using outside caterers, and it also sells wine. It even advertises the fact that it is near a bus stop – the

idea of a wine collector taking the bus seems to go against the traditional image somewhat, but all kinds of people are getting involved in wine in Hong Kong these days.

One of the companies that uses Crown to store its wine is the auction house, Sotheby’s.

Robert Sleigh, who runs Sotheby’s Asia wine business, believes Hong Kong now has world-class wine storage facilities that reflect its status as the world wine auction capital.

Its location at the heart of the booming Asian economies helps too.

“The wine vaults have expanded rapidly. You have the large industrial scale and the small collector model, where you either keep a few cases, or you have a room with a door you can go in yourself. These are expanding,” said Sleigh.

“The infrastructure here is good. It has expanded over the last few years, they know how to ship it, and they know how to store it,” he said.

“We have a strong market in the very new Asian markets, like mainland China, Vietnam, Indonesia, Thailand, and the traditional wine-consuming markets like Hong Kong, Taiwan, Singapore. So you can’t just say Asia anymore,” said Sleigh.

“These are not traditionally wine-consuming nations. They started with premium liquor, like Hennessy XO, so it’s going to take time. It’s part of a lifestyle – Lafite, Margaux, La Tour, mentioned in the same breath,” said Sleigh.

“We deal with an elite group, whether it be paintings or ceramics.

“Although we sell expensive wine here, it’s still the cheapest thing you can buy at Sotheby’s. You can still buy a case of wine here for HK$10,000 (€890), a good case of second growth.

You get a lot of people in finance, lawyers, doctors, they are our typical demographic,” said Sleigh.

As with anywhere else, no one knows how much fine wine buyers drink and how much is kept for investment purposes. But one thing people storing their wine in Hong Kong want is big names.

“There are people who have acquired a lot of wine in a short period of time. We sell a very narrow range of wines here – New York or London are extremely diverse and esoteric, but here it’s very focused,” said Sleigh.

De’Eb says that there are also Irish collectors who store their wine in his cellar.

“They have been members for 2½ years already,” he said.