China’s Changyu turns to Brandy for profits as wine sales lag

China’s oldest winery Yantai Changyu Pioneers in eastern Shandong province is launching what Chinese media are calling an “aggressive” plan to promote its brandy, as domestic wine sales remain tepid.

The news was announced last week and confirmed by the company to dbHK.

This means that within the next three to five years, Changyu will embark on a major shift to spirit production and increasing its brandy sales, which currently only make up around 20% of its annual revenue last year, while its wine sales contributed more than 77% of its company revenue.

According to Chinese media reports, the Yantai-based Chinese winery is aiming to increase sales of its brandy to account for roughly 60% of its total sales within the next three to five years.

And its brandy production would focus on medium and premium ranges, it added, without revealing further details.

The move seems to have been in the making for a while, as the company pledged to “place equal importance” on developing wine and brandy in its 2017 annual report.

But it comes at a time when its wine sales in China are lacklustre having peaked in 2011, through heightened competition from imported wines and China’s very own boutique wineries in Ningxia and Xinjiang for instance, a fact that the company admitted in its 2017 annual report.

However, seeing China’s growing thirst for imported wines, the domestic wine giant embarked on a buying spree, purchasing wineries in France, Spain, Chile and most recently in Australia, where the wines are produced in those countries and shipped back for mainland consumers.

With this major shift to spirits, Changyu’s aggressive overseas winery purchase has to be shelved, at least for now. “If there’s suitable purchase, we will continue to invest, but it won’t be as it was in the past with consecutive buys,” a spokesman told dbHK.

For Changyu’s existing brandy ranges, its main market in China is in Guangdong, where up to 90% of the sales are generated from the province, the company’s general manager Sun Jian previously revealed.

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