Legend Holdings [Chinese investment holdings company], parent company of Lenovo [Chinese multinational electronics company], continues its expansion in the Chinese liquor industry, with the reported purchase of Anhui WenWangGong Jiu, which has been confirmed by Anhui Wen Wang Gong Group, though the detailed transaction volume has not been disclosed yet.
WenWangGong is among the top 50 liquor companies in the Chinese baijiu industry with fixed assets of over 100 million yuan [US$16.1 million]. But fierce competition in the liquor industry still imposes great pressure on the company. “The annual sales of WenWangGong Jiu are no more than 1 billion yuan [US$160 million] with the major products all priced at lower than 100 yuan [US$16.10] per bottle,” said one insider.
Legend Holdings plans to rapidly become an influential liquor group in part through cooperation with strong liquor companies across China. Legend started its liquor industry in June 2011 by spending 130 million yuan [US$20.9 million] for a 39% share of Hunan WuLing Liquor and eventually acquired full control.
In November 2011, Legend Holdings bought 100% of the shares of Heibei QianLongZui Liquor, followed by investment in Anhui YingJia Liquor in March 2012. Then in September 2012, Legend announced it would acquire KongFuJiang with 400 million yuan [US$64.35 million].
WenWangGong is the fifth liquor company bought by Legend Holdings. Legend Holdings is not the only company interested in the liquor industry with its high profitability. Soymilk giant Weiwei Group, COFCO and Shanghai Tangjiu have all invested in the industry. Moreover, several local liquor brands began to expand throughout China with capital operations as well, which is believed by experts to mean more fierce competition in the liquor industry just around the corner.
“There would be a capital integration wave in Chinese liquor industry in ten years,” said one insider.
Source: The Morning Whistle Jan 2013