Italian drinks group joins the list of Chinese investors

- Last updated on GMT

Related tags: Alcoholic beverage, Wine, China

International drinks groups have been lining up to invest in China
in recent years, but almost all of their acquisitions have been in
the beer sector where there are literally hundreds of potential
takeover targets. But China's wine sector has been largely
overlooked, despite its potential - until now.

Italy's Illva Saronno group, best known for its Amaretto Disaronno liqueur brand, has taken a 33 per cent stake in China's biggest wine producer, Changyu, paying RMB481.4 million for the shares in the company, whose majority owner is the state-controlled Yantai State Asset Management Bureau.

The state agency holds a 55 per cent stake in Changyu, and said it would sell a further 10 per cent stake in the winery to another foreign group (although it declined to say who). France's Castel group already has a number of agreements with Changyu and could be a potential investor in the company.

Illva is one of the first non-brewers to invest in China's alcoholic beverage market, although most of the world's biggest beer makers (InBev, Anheuser-Busch, SABMiller, Heineken and others) have been targeting China, with its fast-growing economy and increasing market liberalisation, for many years.

China is the world's biggest producer of beer, with output of some 24 million tonnes a year.

Because of the Chinese predilection for strong liquor, spirits have dominated consumption there, despite the country's long history of vinification - China has been making grape wine for over 2,000 years.

The situation began to improve in the late 1990s following the decree that all state banquets should be accompanied by wine rather than spirits, according to market analysts Access Asia​, while recent moves to curb excessive alcohol intake, coupled with the growing body of evidence to support the health benefits of moderate wine consumption, have also driven growth.

This, accompanied by the gradual shift towards western-style patterns of eating and drinking and the drink's increasing popularity among younger drinkers, lifted the Chinese wine market to more than RMB3.4 billion in 2003, according to the market analysts.

Although this is still extremely small compared to more developed markets, growth in the last few years suggests that China could be set to become a significant player in the long-term. Since 1997, white wine sales have grown by a healthy 68.16 per cent, while red wine sales have grown by 84.63 per cent. This represents total market growth of 73.82 per cent according to Access Asia.

Much of the growth has come from foreign wines, but domestic production is improving rapidly, so much so that some producers are considering exporting their wines.

There are around 10 domestic wine producers, led by Changyu, Dynasty (a Sino-French joint venture with Rémy Cointreau) and Huaxia Winery.

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