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China Foods Ltd - the Hong Kong-listed consumer food arm of Cofco, the country's largest State-owned food conglomerate - will buy two or three wineries in Australia and the United States, in a bid to expand its wine sales while fending off competition from surging wine imports.
The acquisitions, aimed at locally renowned brands, will be worth at least $20 million and are expected to be completed within the next two years, China Foods' Managing Director Luan Xiuju said at a news conference in Beijing on Monday.
"I've visited the wineries. Now everything depends on the progress of our talks with them," she said.
Luan also said the company is in talks with two global leading wine dealers to become their exclusive brand representative and distributor in China.
The company owns two overseas wineries: Chateau Viaud in Bordeaux, France, and the Bisquert winery in Chile. Sales from its wine import business were less than $15 million last year.
The company said the recent moves are intended to compete with foreign wine suppliers, which have eroded the market shares of domestic wine producers in the Chinese market in the last few years.
China's wine imports have seen a significant increase over the last seven years. The amount surged from fewer than 400 million liters in 2004 to 1,400 million liters in 2011, according to a report by Rabobank, making the country an attractive market for wine dealers across the world.
Among foreign suppliers, France continued to dominate China's wine market in 2012. From June 2011 to July 2012, China's imports of Bordeaux wine reached 63 million liters, industry data showed.
The vast amount of imported wine has seriously affected the sales of domestic producers.
Yantai Changyu Pioneer Wine Co Ltd saw a dramatic decline in its sales of premium wines and reported an 11.1 percent fall in net profit to 1.7 billion yuan ($273 million) for 2012.
China Foods' wine sales, which account for a major part of its revenue, were also affected. The company's net profit slumped 41 percent from 646 million Hong Kong dollars ($83 million) to 382 million HK dollars.
Apart from further overseas expansion, China Foods said it also plans to boost sales by launching new entry-level products.
"The new products will be priced between 50 and 100 yuan, to make them affordable to common consumers. This is also in line with the relatively slower economic growth this year," said Luan.
Meanwhile, analysts cheered the planned acquisitions.
"Overseas investments will help the company gain more expertise as well as experience in wine production and winery management," said Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultant.
"China's market is growing very fast but is still less familiar with the wine culture than Western countries. The most important thing right now is to bring wine into the households as well as to people's daily life," Ma added.
(China Daily 04/02/2013 page16)