Listing to boost China Ouhua for expansion

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KUCHING: With its official listing on the Main Market of Bursa Malaysia today (November 3), foreign winemaker China Ouhua Winery Holdings Ltd (China Ouhua) remains positive on its debut despite witnessing the mellow performance of other China-based companies on Malaysia’s bourse to date.

SPECIALTY STORES: Photo showing one of China Ouhua’s specialty stores in China under its flagship ‘Fazenda Ouhua’ label.

In an exclusive interview with The Borneo Post, the group’s executive director and founder Wang Chao revealed that China’s fast growth provided a window of opportunity for China Ouhua to expand along with its wine industry.

“Knowing this, we have an urgent need for fresh funds for our expansion,” Wang said.

“To line up for listing in China would take us years and that would mean heavy opportunity costs for us. So, Malaysia, having a more streamlined process, was a natural choice for us.”

Wang further under-scored Malaysia as being one of the few countries in the region to be the least affected by the financial crisis and was a good platform to expand into a growing market.

Through its subsidiary, Yantai Fazenda Ouhua Winery Co Ltd, the company was principally involved in the production and distribution of red and white wines under the flagship ‘Fazenda Ouhua’ labels for the past ten years, banking on its exclusiveness in the winery market to become one of the top few branded leaders in the segment.

“We were the first player in the wine industry in China to establish specialty wine stores as a mode of distribution on a large scale. China Ouhua captured a market share of 0.67 per cent in 2006 and subsequently improved to 1.49 per cent in 2008.”

Wang’s perception of the market was positive as he understood that the market had yet to know about Chinese wines.

“We (Chinese winemakers) do not publicise like the Europeans do. Europeans are the majority producers of wine worldwide. China’s grape-planting areas increased from 32,600 hectares in 1980 to 453,000 hectares to date – a growth of 12.9 times.

“Where we are at (Yantai-Penglai in the province of Shangdong) is also known as the Bordeaux of China. We are the best wine-producing region in the country, generating a revenue of about 12.8 billion yuan which represents 63.8 per cent of total revenue of China’s wine producing industry in 2008.

“The country is, today, the largest producer in Asia and ranks number 10 worldwide,” he revealed.

The executive director affirmed China as leading the definite economic recovery in Asia.

“Despite China experiencing an economic slowdown in 2008, IMF expects the country’s GDP (gross domestic product) to continue to be robust at a nine per cent growth which is very healthy compared with more advanced countries like the US at 1.6 per cent, UK at one per cent and Japan and 0.5 per cent.

“We have also been enjoying consistent sales during these turbulent times. With the developed world struggling to put forth a respectable GDP growth number, signs of economic recovery are obvious in China.”

Speaking on China Ouhua’s initial public offering (IPO), he revealed his hopes to invest in world class equipment to deliver higher quality wines at a higher quantity in return to its clients.

“Our clients are very supportive of this venture. The IPO proceeds will allow us to enhance our capability to design and develop new and improved products. This will help us to extend our product range with improved product quality,” Wang said.

“It is evident that globally, markets are slowly improving. The tremendous amount of money pumped into the system by governments worldwide is starting to take effect,” he observed. “As such, consumer confidence is slowly returning.”

From this, Wang estimated much potential for greater consumption of wine based on an average global per capita wine consumption of 3.7 litres and an approximation of 293.5 million urban employees in China.

“We currently have 53 specialty stores in China. Moving forward, we aim to open 200 specialty stores by the end of this year to enhance our distribution network and market reach,” he concluded.