19th January, 2017 by Natalie Wang
Chinese winery Wei Long Grape Wine Co is axing its organic wine project, less than a year after the company first announced the scheme last May.
Wei Long’s organic winery in Gansu province in northwest China
A listed company in China, Wei Long has been making organic wines in Gansu Province in western China for more than 10 years. The new project, announced last year, was expected to increase its production to 40,000 tonnes a year.
Aborting the organic wine operation, according to the company’s statement, was a result of heightened competition from imported wines and a succession of natural calamities that drove it to “make sales strategy adjustments based on overall market and environment conditions”.
The decision might also be linked to the company’s financial stress. In September last year, the winery announced its ambitious plan to invest AU$80 million in building an Australian winery in Victoria when it was already having trouble raising outside investment for its organic wine project, a Chinese news website Yun Jiu Tou Tiao wrote.
Setting up the organic project alone would cost the company about 120 million RMB (US$17.5 million), according to a story by Sina news when Wei Long was preparing for IPO in 2015.
The company’s overall wine sales have been plummeting since 2011 as well, dropping from 836 million RMB (US$120.8 million) in 2011 to 35.4 million RMB (US$5.1 million) in 2013.
In another sign of the company’s strained finances, it is also pulling out of building a nationwide distribution network citing high costs of managing stores, warehouse etc as main reasons.
Speaking of its future wine production, Wei Long said in the statement that its Australian winery, “can guarantee the grape supplies for all wine production” although the production timeline for its Australian winery is not yet known, as it may face delays in construction as reported earlier by dbHK.
Considered one of the biggest wineries in China by market share, Wei Long says on its website that its market share accounts for more than 10% in China. It has another two wineries in Shandong in eastern China and Xinjiang in northwestern China.