COFCO swallows Bordeaux

0 CommentsPrint E-mail Global Times, February 17, 2011
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COFCO Wines & Spirits, a subsidiary of COFCO, the country's largest food processor, manufacturer and trader, has acquired a Bordeaux chateau at the price of 100 million yuan ($15.19 million), according to a press release from the company Wednesday.

The agreement was signed on Wednesday in France.

The property, Chateau de Viaud, is located in Lalande-de-Pomerol, a prestigious wine production area in France. After the purchase, all wine produced by the French chateau will be sold under the name Great Wall, COFCO's own wine brand.

COFCO aims to further strengthen the international presence of its Great Wall wine and its image as a premium wine brand, according to the press release.

This is not the first overseas purchase the food conglomerate has made. In September 2010, COFCO paid $18 million for a vineyard in Chile, which added annual production capacity of 1,400 liters for the company.

Analysts believe that the two international purchases could enhance Great Wall's brand image.

"Wine culture is originally from the Western world, and people generally believe Western wine, especially French wine, is the best. Therefore, the purchase of a French chateau is absolutely a plus for the company's image," Chen Gang, an industry analyst with Shanghai-based Sinolink Securities, told the Global Times Wednesday.

According to Chen, the wine production model in a chateau represents premium production skills and higher quality, which is different from mass-produced wines. So this deal is important for Great Wall, which is aiming high as a premium wine maker.

But Li Fei, a wine judge working with Beijing-based wine culture training center Ease Scent, told the Global Times that it will still take a long time for Great Wall to join the club of world-renowned wine makers.

"Western consumers prefer wine with a long established history and reputation, so it is hard for a new brand like Great Wall to compete," commented Li.

Even so, China's domestic market alone could be a source of huge profits for wine makers.

In 2011, wine consumption in China is expected to top 828 million liters. In other words, people will consume more than 1.1 million bottles of wine annually, said the COFCO press release.

Sinolink's Chen estimated that the industry could grow by 20 percent each year in terms of sales income.

Ease Scent's Li also noted that wine consumption has huge potential in China.

"Not only wine companies are eyeing foreign chateaus. It is quite common for wine lovers to purchase a foreign chateau nowadays. After all, a small chateau might cost only 10 million yuan ($1.52 million) sometimes," said Li.

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