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Hong Kong: Welcome to wine country?

By Pauline Chiou, CNN Correspondent
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Hong Kong opens first winery
  • Hong Kong's first winery opens to tap into the burgeoning Chinese demand
  • The 8th Estate Winery imports grapes from around the world
  • Hong Kong and mainland China now drink 60 percent of all wine consumed in Asia

Hong Kong, China (CNN) -- When you think of a winery, you probably imagine the bucolic Napa Valley or the dangling vineyard grapes in French wine country.

So when the top wine experts in the congested city of Hong Kong heard about a new winery in town, they were perplexed.

"I thought it was a joke," said independent wine consultant Simon Tam.

"My first reaction was, 'Where are the grapes located? Where do people have so much space in Hong Kong to grow grapes?'" said Frank Schuetzendorf, the food and beverage director for the Kowloon Shangri-La Hotel.

The answer lies on the third floor of an industrial building in southern Hong Kong island, home of the 8th Estate Winery. Off the crowded streets of one of the world's most densely populated cities is a dark room of 340 oak wine barrels.

This is the creation of Lysanne Tusar, a 29-year old entrepreneur from Vancouver, Canada. In 2007, Tusar merged her love of wine with a simple goal: to start a winery in an untapped market. After doing some research, Tusar decided that Hong Kong was the spot.

"Hong Kong seemed to make a lot of sense because it is an isolated community as far as production goes. There's no wine production anywhere close by. The closest one is in northern China so you'd have to travel quite a ways," Tusar said.

She also believes Hong Kong is a microcosm of what will eventually play well in the rest of Asia. According to the Hong Kong Trade Development Council, Hong Kong and mainland China now drink 60 percent of all wine consumed in Asia.

My first reaction was, 'Where do people have so much space in Hong Kong to grow grapes?'
--Frank Schuetzendorf, Kowloon Shangri-La Hotel

The winery's business model is unconventional. Since there is no space for vineyards in this city of 7 million, the winery buys its grapes once a year from another country. Tusar has contracted an Italian winemaker to find premium grapes from a region, negotiate a price and flash freeze the fruit before shipping to Hong Kong.

Tusar describes this process as "a bit of a logistical circus." The 2007 vintage was made with grapes from Washington State in the U.S. The 2008 vintage was from the Piedmont and Tuscany regions of Italy.

The trick is to freeze the grapes soon after they're picked from the vines. That means finding a flash-freezing facility within a half-day's drive from the selected vineyards.

The annual purchase of grapes is the winery's biggest expense: The grapes can cost between $300,000-$500,000 a year depending on the grapes and region.

"The business model is so unorthodox yet so sound," said wine consultant Simon Tam. "They are not hindered or restricted by grapes from one particular patch of area or country even. They have the flexibility to choose. If say, northern Italy produces a less than desirable vintage and hence, a low-quality grape, then they can look around the world."

The boutique winery is a small operation with a staff of four and bankrolled with just over $2 million from family and a silent investor. It produces about 100,000 bottles every year and intends to stay small. This year, the winery is selling 4 reds, 4 whites and 3 different types of dessert wines.

So how does the wine taste? Schuetzendorf of the Kowloon Shangri-La hotel tasted some of the wine a few months ago. "The first impression was, 'Wow, this is actually very good wine'," said Schuetzendorf, who signed a three-month exclusive hotel contract with the winery to carry four 8th Estate wines.

At CNN's request, the hotel bar agreed to give 8th Estate wine to unsuspecting customers for a taste test. We didn't reveal the label. I asked customers what they thought. A Swiss man named Walter who lives in Hong Kong tried the Chardonnay and said, "It's good, drinkable ... it could be from some part of France."

After Richard Kronrad of Miami, Florida tasted the merlot, he said, "Very dry, very nice. No after taste. Is it from California?"

A local customer, Ruby Lee of Hong Kong, tasted the merlot and shook her head, "I don't really like it. It's not normally what I have." When I told her it's made in Hong Kong, her eyes lit up, "Really? Yes, I'm surprised!" Even though she didn't like the red wine, she would buy it to support a local business.

Tam, who has visited the operations, says he's a fan of the winery's 2007 Shiraz, but the operation still could improve. "It's a great success but there are a lot of intricacies of wine and winemaking that could improve the wine," he said. He suggests the winery invest in a lab to precisely test the alchemy of the wine.

Tusar wants to upgrade the facility but the winery first needs to bring in revenue. She says the 8th Estate is on track to turn a profit in about a year and a half.