Australia’s largest wine producer plans to significantly expand its business in China using shipments from other markets to bypass crushing tariffs Beijing imposed on the Pacific nation’s exports.
Accolade Wines, owner of the popular brands Hardys and Echo Falls, said it would ship wine from Chile and elsewhere to China, which would allow it to bypass prices up to 218% which was imposed in November after rising diplomatic tensions.
As a result, Australian wine exports to China fell 96% year on year to just A $ 12 million between December and March, according to The data of Wine Australia, a government agency.
The plan is part of the efforts of Accolade which has been purchased by private equity group Carlyle for A $ 1 billion (US $ 778 million) in 2018, to expand beyond its core Australian and UK markets and sell more premium wines.
The company is also considering an initial public offering, with Hong Kong being a potential location.
“We believe we can gain a significant share in China,” said Robert Foye, CEO of Accolade, who admitted that the company has been slow to exploit China for a decade. wine boom. “I just think [Accolade] didn’t have this global management team that really knew how to run the business. “
Foye estimates that the Chinese wine market could grow for another 15 years due to low levels of per capita consumption and a growing middle class.
Accolade, which generated $ 1.2 billion in revenue last year, also aims to boost sales in Asia, the United States and other markets, Foye told the Financial Times.
Matthew Reeves, an analyst at research group IbisWorld, said small Australian producers have been hit hard by tariffs, but the country’s largest wineries have been able to source produce for the Chinese market. besides.
“Accolade has private equity backing, so it’s a viable strategy for them to import into China from other countries,” he said.
Foye, who built a successful Chinese business as COO at rival Treasury Wine Estates before being sacked for an unspecified violation of internal policies, said Accolade compiled a list of targets for acquisition. The company has brands in Chile, USA and South Africa and wants to add more premium wines suitable for chinese palates, like reds with a fruity, sweeter taste, he said.
Accolade has purchased two premium Australian wineries, Rolf Binder Wines and Katnook Estate, over the past year.
However, Foye admitted that Chinese tariffs would slow its expansion, as most of its production was based in Australia.
Accolade aims to increase sales in markets outside the EU and UK to 60 percent of the group’s total within three years, from around 40 percent in 2021.
The winemaker lost A $ 11.6 million in the year through June 2020, according to the accounts.
The company’s indebtedness peaked at nine times 2020 earnings before interest, taxes, depreciation and amortization, according to Moody’s Investors Service. The rating agency downgraded Accolade’s debt parent to B3 from B2, deeper in the speculative category, just over a year ago, citing higher-than-expected restructuring costs, problems production and the coronavirus pandemic.
Foye said the group is forecasting 25% profit growth for the year through June and is considering a stock market listing.
“I want to do an IPO. And that’s what we’re going to do at Accolade Wines. So we’re going to do it in the next two to three years, either on the Australian stock exchange or I would like to do it on the Hong Kong stock exchange. “
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