While we all wait eagerly to see who might buy up the soon-to-be-untangled Foster’s beer business (see this piece for a recent update of the contenders), it is possible that the more fascinating and globally significant acquisition might actually occur on the wine side of the company’s separation.
An Australian article last month got me looking into the prospect of a Chinese takeover of some or all of the forthcoming wine business (renamed as Treasury Wine Estates). The article mentions that China’s Bright Foods, failed bidder for CSR’s sugar business, has sounded out Foster’s about the firm’s “Hunter Valley operations focused on the blue-chip Rosemount brand”.
I was a little unclear on the size and scale of China’s wine market. I have certainly heard the usual extravagant claims that it could be an enormous untapped opportunity for Australian exporters, but what I was unaware of was the actual scale of existing domestic production.
According to this academic study China is already the 6th largest producer of wine in the world (at 13,005m hectalitres in 2008). That’s more than Australia (11,700m), South Africa (9,890m), Chile (7,860m) and NZ (1,700m). Chinese production grew 17% between 2004-8, while pretty much all ahead and around them on the list experienced pretty hefty declines in volumes (e.g. Australia fell 20%, France 25%).
Certainly China is not currently a significant exporter of wine (unlike most of the other major producer nations), and the initial focus of any foreign acquisitions will likely be on servicing the Chinese market with higher quality imports.
The longer-term picture is where it gets interesting, however. Picking up a firm with strong international brands (which Bright Foods would certainly be doing if they secured some/all of Treasury) would allow the Chinese firm to build up much-needed expertise in marketing and distributing beyond Chinese shores.
This could well be the birth of a new wine giant.
(As an aside, there is an unfortunate irony to the possibility of a big chunk of Foster’s shifting into Chinese hands, as the firm had a very torrid time from 1993-2006 trying to build a beer presence in the country).
Tags: Australia, beer, brewing, Bright Foods, business, China, CSR, finance, Fosters, International business, Internationalisation, mergers and acquisitions, multinationals, Rosemount, Strategic management, strategy, Treasury Wine Estates, wine, wines