How often does a hangover give rise to a great business idea? For Don St Pierre Sr, it was one of the factors behind the success of ASC Fine Wines, a wine import and distribution business he founded with his son in Beijing in 1996.

The fortified rice wine traditionally poured at Chinese business banquets is associated with lethal after-effects that hamper productivity. When Mr St Pierre Sr was formulating his plan for the business in the 1990s, he gambled that a profitable slice of the Chinese population would soon be wealthy enough to choose an alternative - by buying high-quality wines from abroad.

His instincts were right. Today ASC earns $95m in annual revenues, employs 500 and is thriving amid a buoyant Chinese market for fine wine. Its story illustrates some valuable lessons for foreign entrepreneurs operating in Asia's most vibrant economy.

Mr St Pierre Sr was no newcomer to China when he and his son, Don St Pierre Jr, entered the wine business. During the 1980s "Big Don" had learned much about brand building, logistics and people management in the country while running Beijing Jeep, a politically fraught joint venture between American Motors Corporation and Beijing Automotive Industry Holding Corporation. Later, he worked at China Automotive Components Corporation, a subsidiary of Asimco.

Armed with minimal market research and legal advice, the St Pierres struck out on their own in the mid-1990s. With few qualified Chinese wine professionals available to recruit, Mr St Pierre Sr turned to Pierre de Montgolfier, a close Beijing friend, to help him kick-start the business through his family connections to the Bollinger champagne empire.

ASC acquired the exclusive import agency for Australia's Petaluma Vineyard as well as the French champagne label. Mr St Pierre Sr also asked his French client to hand-pick a dozen other Bordeaux wines to complement Bollinger. Meanwhile, Mr St Pierre Jr secured a deal with leading Californian producers such as Berringers. Together, they assembled an A-list portfolio of wines that gave ASC market credibility.

But they also discovered the downside of being a first mover in an immature market: local consumers' aspirations outstripped their spending power. Some 80 per cent of sales during the first few years came from expatriates and the diplomatic community. It was not enough to sustain the business, which was rapidly going broke, recalls Mr St Pierre Sr.

"One of the reasons I still smoke was that I followed a guy out of a meeting onto a balcony overlooking Beijing and asked him for a cigarette. It was Gernot Langes-Swarovski [former head of the Swiss crystal glass maker]. He owned a wine business in Chile and saved my business by investing in ASC six months later," Mr St Pierre Sr says. Mr Swarovski remains a silent partner in ASC, with 63 per cent of the equity.

With operating funds in the bank, "Little Don" moved to Shanghai to set up an office there, and began cultivating the personal relationships and locally relevant deals that are vital to success in the fractured Chinese market.

The St Pierres also realised that they were going to have to do more to educate their potential buyers. In Beijing, few professional waiters have ever tasted the wine they are expected to pour, which can lead to expensive mistakes. So they organised seminars for staff on how to store, select and serve fine wine and pair it with food; and set up tastings for Chinese consumers, collectors and wine writers.

Mr St Pierre Sr's car industry experience, with a strong focus on customer service, has given the business a distinctive cast. ASC sells to hotels, restaurants and clubs; wholesalers and supermarkets; and online buyers. While he spun out staff functions such as sales and marketing to regional offices, he insisted that logistics was run from Beijing - allowing him to check the back order book daily and chase up slow workers. "I give endless staff talks about customer service. Many of my Chinese team lacked role models in this area of the business," he says.

Debt collection is another area the duo has had to concentrate on. "Many Chinese believe they own you if they owe you. I needed to convince my staff to fight that tendency," Mr St Pierre Sr says. "In my book, a sale is not complete until you get the money."

In the early days, ASC would take business from any restaurant or retailer placing an order. Now it screens potential buyers and requires cash up-front until it can assess the creditworthiness of new customers.

Today, many of the wine world's leading brands are flocking to China and ASC is often their first port of call for advice. It has attracted offers of partnership, joint ventures and investment - creating a dilemma for the founders, who remain 37 per cent owners and wish to retain control.

"We're constantly pulled in different directions. We need to be disciplined so that we can continue to execute well," says Mr St Pierre Jr. Nonetheless, he adds: "learning to say no to new ventures has been hard."

ASC's after-tax profits range between 6 per cent and 10 per cent of revenues. Escalating salaries are squeezing profits but Mr St Pierre Jr believes demand for wine in China will continue to rise in 2009 in spite of the global downturn. ASC forecasts a 30 per cent growth in sales, fuelled by expansion into new regions across China and new wines in its portfolio.

Electronic commerce will be key to ASC's future profitability. Mr St Pierre Jr is planning a secure business-to-business site to facilitate trade across the 100 cities the company now serves and is establishing a presence on a secure Chinese wine retailing website to reach new consumers across the country.

Father and son also have aspirations to produce their own wine, a plan that could appeal to Chinese drinkers' patriotism and wallets, since locally produced fine wine carries no import duty. The four biggest Chinese winemakers are already venturing into the market for top-quality wines, with plans to make a small range of fine wines that could compete with ASC's foreign portfolio.

For now, the St Pierres are still looking for a vineyard. After protracted negotiations with the state auction bureau to buy a small, high-quality vineyard in Hebei, the company could not agree on a price for the acquisition. But they remain interested in investing in a new venture should they find the right property at the right price - and as long as the idea does not unsettle relations with their suppliers back in the west.

"We need to make sure the brands in our portfolio are comfortable with the concept," says Mr St Pierre Jr.

Twenty-eight day detention shows value of local knowledge

Foreign entrepreneurs in China operate in an unpredictable legal environment. In April, the Chinese customs authorities detained Don St Pierre Jr and another ASC staff member for 28 days while they investigated the company's records. ASC was fined for under-declaring the value of fine wine imports for the previous two years - a settlement ASC says was worth about a day's turnover.

"We need better structure and systems to interpret the many grey areas in Chinese customs codes and business regulations," says Mr St Pierre Jr. The company is beefing up its government relations function to keep track of policy. "Regional differences exist and lots of rules are unwritten," he says. "Top law firms will give you a two to three page legal briefing that effectively advises you to take no action. You cannot be completely risk averse and succeed in this market."

Many foreigners take on local joint-venture partners to help them navigate the grey areas, but the St Pierres are committed to a wholly foreign-owned structure. "Chinese partners can help you with guanxi [connections], but they have their eyes on your money," says Mr St Pierre Sr. "Twenty-three years in China has taught me the do-it-yourself approach is the best way to run a business here."

His son concurs: "You have to get down and dirty, act with your eyes wide open."

Mr St Pierre Jr regards his detention as part of the emotional roller coaster of business life in China. "We went from being a small company in an insignificant industry to a market leader in a growing business. Our profile increased and our business practices have to follow suit."