Alexandre Bohas, ESSCA School of Management et Pierre-Xavier Meschi, IAE Aix-Marseille Graduate School of Management – Aix-Marseille Université, Le 26 mars 2024

Since 2012, more than 200 acquisitions have been made by Chinese investors in Bordeaux’s prestigious vineyards, mainly from the country’s economic, political and artistic elite. A leading example is Alibaba founder Jack Ma, who bought several châteaux, including Château de Sours in the Entre-Deux-Mers appellation. Actress Zhao Wei has set her sights on several châteaux in the Saint-Émilion appellation.

These transactions, involving members of China’s elite and prestigious assets in Europe, stand out in the world of mergers and acquisitions. Regarded indiscriminately as “ego deals”, “conspicuous consumption” or “self-interest transactions”, such atypical acquisitions are widely decried in the academic financial literature because they can produce few or no synergies, and are therefore doomed to failure. There have been instances of Bordeaux châteaux acquired by Chinese investors, which have been left to rot by their new owners. Reportedly, around 50 of them have been also put up for sale by their once-enthusiastic owners.

RTS report, November 2023.

However, a closer look shows that Chinese acquisitions in the Bordeaux vineyards are far from uniformly ending up in failures and selloffs. This is reflected by our recent research paper which analyses the post-acquisition performance of 123 Bordeaux châteaux acquired by Chinese investors between 2008 and 2015.

What motives for such acquisitions?

Applying a sociological approach to these acquisitions has allowed us to show that some of them did create value, not only economically but also symbolically. With the opportunity to gain social distinction, these properties were acquired for the prestige they confer to their owners.

The new owners perceive their prestigious possessions as an extension of themselves and so take particular care of them. They strongly commit to renovating the property, maintaining the cellars and, above all, enhancing the wine quality. We have many accounts of Chinese-owned châteaux investing in new winemaking techniques, hiring top oenologists such as Michel Rolland and Stéphane Derenoncourt, and replanting part of the vineyards. These acquisitions have often prevented these châteaux from getting bankrupt while improving their wine ranking in the major wine guides. For instance, the Hachette Wine Guide, which covers all French AOC vineyards, shows significant progress for the wines produced by some of these Chinese-owned châteaux.

A case in point is the Andrew and Melody Kuk couple, who in 2013 acquired La Commanderie in Pomerol. Having made their fortune in finance and communication in Hong Kong, they renovated the vineyard’s winemaking facilities and refurbished the property’s building. After just a few years, the wine from this château, once described as a “sleeping beauty”, is regularly featured in the rankings of the best Bordeaux wines.

These acquisitions, integrated in a clear strategy aiming to climb up the social ladder, are distinct from the few Bordeaux château acquisitions conducted by Chinese billionaires, which attract most of the media covering. Standing already at the top of the social hierarchy, these distinctive acquirers have little commitment to their wineries and frequently change their conspicuous hobbies as their social position does not depend on the success of their acquired assets. For this specific category of elite acquirers, the post-acquisition outcome is often a deterioration in performance.

Statistically, we reported a significant correlation between upward social mobility strategies and improved wine quality in the rankings.

In the wine industry and beyond

More generally, our sociological approach provides keys to understanding the motives behind these “conspicuous acquisitions” that were conducted on an international scale by the economic, sporting and artistic elites. This concept, dating back to the end of the 19th century, has been coined by the American economist and sociologist Thorstein Veblen, who analysed the lifestyle and purchasing behaviour of the elite class at that time. While some of the purchasing behaviour of this elite class does not seem rational from the point of view of economic science, Veblen provided an alternative rationale, mostly based on strategies of social affirmation.

Concentrated in industries such as sport, luxury hotels, resorts and real estate, these prestigious acquisitions are made by “high net-worth individuals”, whose number is estimated to 22 million worldwide, with combined wealth hovering around 83 trillion dollars. Their continuously growing number results from the macroeconomic implementation of neoliberal policies since the late 1970s, the collapse of the USSR and the rise of emerging economies.

Part of this fortune is spent on socially motivated acquisitions. Two of the major European football clubs, Paris Saint-Germain and Manchester City, are owned by sovereign wealth funds linked to the ruling Qatari and Emirati families, and until recently Chelsea FC was owned by the Russian oligarch Roman Abramovitch. In the hotel industry, French palace hotels such as the Bristol, the George V and the Meurice are owned by wealthy foreigners (respectively, the German family group Oetker, Saudi Prince Al-Walid Ben Talal Al Saoud and the Sultan of Brunei).

These are all personalities whose wealth does not originate from the target industry and who made the acquisitions to gain access to, or reaffirm their affiliation with, the international elite.

Alexandre Bohas, Professeur d’Affaires internationales, ESSCA School of Management et Pierre-Xavier Meschi, Professeur des Universités en sciences de gestion, Affillié à Skema Business School, IAE Aix-Marseille Graduate School of Management – Aix-Marseille Université

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