April 2, 2013

Chinese Companies Dead Set On Buying Australian, American Wineries

COFCO Expected To Buy Barossa Winery & Sell Under Great Wall Brand

COFCO wants to acquire land in Australia’s famed Barossa Valley

Having already snapped up distressed wineries in France and Chile, Chinese state-owned giant COFCO is now setting its eyes even further afield, on wineries in the US as well as Australia’s Barossa Valley. According to China Daily, China Foods Ltd – COFCO’s Hong Kong-listed consumer food arm – hopes to buy “two or three wineries” in the US and Australia, “in a bid to expand its wine sales while fending off competition from surging wine imports.” As China Foods Managing Director Luan Xiuju said at a conference this week in Beijing, the planned acquisitions (“aimed at locally renowned brands”) could be worth at least US$20 million and are slated to roll out over the next two years.

Said Luan, “I’ve visited the wineries. Now everything depends on the progress of our talks with them.” Far from confirmation of any deals in the pipeline, but something to go on.

Hoping to raise its quality and compete with imported wines — which command better prices and consumer respect than home-grown names — COFCO has been on a global spending spree, most recently with the aim of producing international imprints of its Great Wall wine brand for domestic consumption. The growing overseas presence of COFCO has been particularly felt in Australia. Though China has become a key market for Australian winemakers, with exports to the country increasing 20 percent last year to US$169 million, a glut of grapes, stiff competition from other New World wine-growing countries, and  a stubbornly strong Australian dollar has hit the bottom lines of several wineries, making them attractive acquisition targets for cash-rich Chinese companies like COFCO.

Silenus Vintners was purchased in 2011 by a Chinese-American company

But all the interest in the world doesn’t mean COFCO will necessarily be able simply slap down the cash and walk away with the keys to its new American and Australian purchases. As the Australian noted in February, since COFCO is a state-owned entity, any purchase by the company would need to be approved by the Federal Government’s Foreign Investment Review Board. This brings to mind the controversy stirred up last fall when a Chinese-led consortium acquired Australia’s largest cotton farm, Cubbie Station, and the purchase of the Burgundy wine estate Château de Gevrey-Chambertin last year by Hong Kong’s Louis Ng, which set off a firestorm of criticism in the famed wine-growing region.

Likewise, COFCO will undoubtedly encounter a great deal of scrutiny in the US, where acquisitions by Chinese investors, let alone state-owned companies, have been few and far between. In 2011, Napa Valley winery Silenus Vintner was purchased by a Chinese-American company, while Bialla Vineyards was sold to a Hong Kong buyer for $3 million in cash the same year. However, Silenius and Bialla are far from the “locally renowned brands” COFCO said it plans to buy, so expect to see some fireworks if and when the Beijing juggernaut’s China Foods Ltd imprint makes its presence felt in Napa Valley over the next couple of years.

Business & Finance / Food, Wine, & Spirits / Investment / Lifestyle / Market Trends / Policy / Real Estate
Tag: acquisition, australia, barossa valley, bordeaux... , More
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