AMERICAN Don St Pierre Jr, co-founder of leading wine importer ASC Fine Wines, knows from difficult personal experiences how to turn a problem into an opportunity and turn his company into a major force in the fine wine market.

The 46-year-old executive chairman of the board of ASC compares himself to a glass of Chateau Latour. “It is long lasting and always perseveres to make a great wine even in the most difficult years,” he tells Shanghai Daily.

ASC is headquartered in Shanghai and represents more than 1,200 wines from 14 countries. It was founded 18 years ago in Beijing by Don St Pierre Sr, now retired, and the junior St Pierre.

The most difficult year was 2008 when St Pierre Jr was detained in Shanghai for 28 days, charged with attempted tax evasion by undervaluing the wine he declared to customs, due to his misunderstanding of taxation regulations on China’s mainland. However, St Pierre Jr admitted the charges and paid duties amounting to 1.8 million yuan (US$290,000).

Speaking of that experience, he says, “It’s hard. You have to have self-belief to go through it. But we turned a problem into an opportunity finally.”

Two years later, ASC established guanxi (connections) with the Chinese government, becoming its primary option for consulting, especially on the global price of wines as a reference for customs officials looking for tax evasion.

In turn, ASC, the exclusive distributor of DBR Lafite, owner of Chateau Lafite, has benefited by the government crackdown on counterfeit Lafite bottles.

Tax evasion and smuggling are the biggest challenges faced by China’s fine wine industry and they will continue as long as high taxes on value, not volume, remain unchanged, St Pierre Jr says.

Speaking of smuggling, he says most takes place between Hong Kong, which charges zero duty on wine imports, and Shenzhen in Guangdong Province, where tax is applied to value, not volume.

“Smuggling, though recently going down due to the anti-corruption drive, is still serious and will continue for a very long time unless the current tax structure on China’s mainland is changed,” he says.

In countries like the United States and Singapore, wine import duties are applied to volume, but when it is applied to value, importers have a big incentive to falsify value.

The taxation on China’s mainland forced the company to open offices in Hong Kong.

“If I’m going to control the distribution of the brand on the mainland, I have to control how the brand is imported to Hong Kong or other companies may ship the wine to the mainland through smuggling,” the importer explains.

Another challenge is China’s anti-extravagance drive that has reduced lavish banquets and gifts of expensive wine. The austerity campaign has reduced sales of ASC’s top expensive wines by at least 30 percent since the drive started, St Pierre Jr says.

He wants to seize this opportunity to expanding e-commerce since customers’ consuming logic is changing: There is less buying of costly, prestigious label wines to impress officials and win favors and more buying of wines that people enjoy personally.

Americans St Pierre Jr and Don St Pierre Sr are probably the most successful fine wine importers in China. Wine critic Robert Parker has called ASC “China’s greatest fine wine importer.”

ASC is widely regarded as the wine industry’s Whampoa Military Academy for nurturing talent. The academy produced distinguished commanders in World War II. For example, Simon Wang, now CEO of Kerry Wines, was vice president of sales of ASC; Martin Hao, now a Master of Wine candidate and leading wine educator, worked for ASC.

St Pierre Sr founded the company with his son in 1996. At that time, most of their rivals were in Hong Kong, but ASC’s message to brands was that they were on the ground in China, hence, in the best position to do business.

Before retirement, St Pierre Sr was based in Beijing, handling operation in northern China. St Pierre Jr was (and still is) based in Shanghai and oversaw the south.

The senior St Pierre, who had once dreamed of being a baseball player, arrived in China in 1985. He was president of Beijing Jeep, the American-Sino Motors joint venture. At one time he was probably the single best-known businessman working in China.

“He taught me to be competitive and to persevere,” says his son.

His father also taught him the importance of understanding China’s distinctive business ethic and logic.

“One of the reasons why we’re successful is that we know about China more than the wine business,” says St Pierre Jr.

CEO John Watkins, who worked for GE and Northwest Airlines, has more than 30 years’ experience building business in China. Vice President Stephane Moreau, who worked for Carrefour and B&Q, has almost 20 years China experience.

“In China, I don’t think you will be successful if you’re only looking at the competition. You have to look at where the market’s going and try to stay in front of that,” St Pierre Jr explains.

In 2006, ASC became the first provider of WSET (Wine and Spirit Education Trust) courses in China to cultivate customers by educating them. Four years later, it opened China’s first licensed fine wine auction company. It is one of the first importers to invite leading winery owners from abroad to talk with Chinese consumers.

“In this country, you have to control (the source),” St Pierre Jr says.

St Pierre Jr observes that in China local businessmen usually pursue the profit regardless of following rule.

“Anybody can import the product, though illegally, and operate a brand less professionally. That means ASC’s investment in brands is meaningless if there’s no exclusivity,” he says.

Many wine importers in China are owned by big companies specializing in medical equipment, construction and real estate, he says, emphasizing that ASC is devoted exclusively to wine.

It is the exclusive distributor for DBR Lafite, Louis Jadot, Penfolds and Laurent Perrier, among others.

St Pierre Jr grew up in Ontario, Canada, attended school in Indonesia and lived in Hong Kong and Taipei for years. He can speak fairly good Mandarin.

Before going into wine, the father and son looked into infant care products, publishing, photocopying, even munitions.

In May 1995, their warehouse in California was investigated by the FBI for allegedly importing banned munitions from China. But the authorities dropped the case 5 weeks later.

They decided on wine because of their personal interest, social network and China’s market potential.

Foreign entrepreneurs have an advantage in the wine business in China because wine drinking is perceived as a Western lifestyle, St Pierre Jr says.

They made many mistakes, underestimating the difficulty of running a business in China and how much money they would have to invest.

Father and son were frequently at odds while at the same time being good friends.

“My father was more focused on the short-term survival of the business while I was more focused on the long-term investments to build relationships,” says St Pierre Jr.

He says with a laugh that it’s a good thing that father and son worked in different cities, Beijing and Shanghai, or there would be more friction.

ASC undertakes many activities to promote interest in wine. It sponsors the China Sommelier Competition, publishes its own wine magazine about the latest trends and has financed the Chinese translation of critic Jancis Robinson’s latest wine book “Jancis Robinson’s Wine Course” and previously “World Atlas of Wines.”

The company’s turning point came in 2012, when Watkins replaced St Pierre Jr as CEO, signifying a move from family management to professional management. The company has 20-plus offices and about 1,100 staff.

“I am a good entrepreneur stimulated by interaction with other people but not a good professional manager handling structure and systems,” St Pierre Jr explains.

He now lives in Shanghai with his wife Monica Xu and daughters Caitlyn, Ciana and Callie.

He spends most of his time helping Japanese partner Suntory, which acquired a 70-percent share of ASC in 2009, to take advantage of global wine opportunities.

His aim is to build ASC into one of the world’s top 10 wine companies.