CITIC Group to sell its stake in Lafite’s Chinese winery

Ahead of Lafite’s pending release of its first Chinese wine made in China’s eastern Shandodng province, CITIC Group, Domaines Barons de Rothschild’s partner in the Chinese project, is selling all of its 30% stake in the winery for RMB 32.56 million (US$4.93 million).

Lafite’s vineyards in Shandong Penglai

The sale announced on Shanghai United Assets and Equity Exchange raised questions as to why CITIC Group decided to pull out ahead of the first vintage release of Domaine de Penglai, a joint venture between DBR and CITIC Group started in 2008, as reported by Chinese Business Network.

People who are close to the Domaine de Penglai project told the Chinese newspaper that DBR has asked CITIC for further investment, but the latter expressed no interest, leading to the ensuing sale.

“It’s not clear why CITIC decided to put its stock up for sale, but low return could be one of the reasons,” Wang Dehui, head of a wine consulting firm based in Shenzhen, told the newspaper. CITIC Group invested RMB 27 million initially, and the selling price of RMB 32.56 million means in the past eight years, CITIC only made about RMB 5.56 million.

In fact, according to filings cited by the newspaper that Domaine de Penglai is already financially stressed. In 2016, its assets were reportedly worth about RMB 220 million, but the winery is RMB 160 million in debt. And by the end of August this year, the winery was RMB 250 million in debt when its total asset value is estimated at RMB 300 million.

“Obviously, quality-focused DBR group is not concerned about profit,” the article said. It’s unknown who has lined up for the purchase, but DBR could buy back the stocks to make it a solely owned project.

This is however not the first time that CITIC Group has shown a more tepid interest toward wine. Its CITIC Guo’an Wine company, which owns the Niya wine brand in China’s Xinjiang province, recently acquired Guoan Lithium, a battery maker, to diversity its business for profits, citing fierce competition from imported wines and dwindling profits for domestic wines as the main reasons behind the move.

Founded in 2008, Domaine de Penglai has already had four harvests, and the 2016 harvest is considered the best so far, as reported by dbHK earlier.

The project has 25 hectares under vine, planted with 55% Cabernet Sauvignon, 15% Cabernet Franc, 10% Syrah, 10% Marselan and 10% Merlot. Another 25ha will be planted in 2018.