Coq Au Vin Fondue

I've been looking for new fondue recipes for New Year's Eve and I found this one on grouprecipes.com.

1 medium onion, diced
1 Tbsp olive oil
2 Tbsp sugar
1/4 cup water
1 1/2 cups red wine
4 cups chicken stock
3 garlic cloves, finely minced
1 cup dried shitake mushrooms, coarsely broken with your hands
2 bay leaves
salt and pepper

Saute onions in olive oil over medium-high heat until softened and lightly browned.
Season with salt and pepper.
Add water and sugar.
Cook, stirring, until water is almost gone and sugar has caramelized.
Add wine all a once and bring to a boil.
Pour in broth, add mushrooms, garlic and bay leaves.
Stir and allow to boil until reduced by about half.

Pour into a fondue pot and use it to cook shrimp, chicken, beef, and veggies.