The deal will see China’s second-largest winemaker offload its Great Wall brand, which has five production plants in the country.
It will also involve the sale of five of its production plants, along with five wineries in and outside of the country, and the distribution of imported wines.
China Foods’ wine business recorded a negative compound annual growth rate of 11% from 2011 to 2016, with Great Wall posting declining sales.
“China’s wine industry has faced increasing competition and is expected to remain in a slow growth rate in the next three to five years, similar to the 2011 to 2016 period,” the company said, explaining the board decision.
It also revealed that Great Wall suffered 8% drop in sales in the last half-quarter.
“The board believes that there would be relatively great uncertainties in the domestic wine market in the next few years,” Cofco added.
These include the rise of the baijiu spirits market, which has been maintaining double-digit annual growth, creating “pressure on the growth and profit margin of domestic wine products” in the country.
On completion of the deal, China Foods will become the only focused beverage platform within Cofco. Currently, the offshoot also has exclusive rights to produce, market and distribute Coca-Cola products in 19 provinces, municipalities and regions in China.
China Foods aims to strengthen its cooperation with The Coco-Cola Company to optimise its portfolio and maintain growth of packaged water, soft drinks and juice products. It will also focus on launching new higher-margin products.
Cofco chairman Zhao Shuanglian said the transaction will be seen as an “important move to implement a specialisation strategy and execute vertical integration by establishing specialised companies targeting core products”.
State-owned Cofco is China’s largest food processing company. It owns 11 businesses and earns more than 50% of its operating income from overseas sales.
More from China...
HK’s new voluntary labelling scheme comes with tough penalties
Healthy food labels were launched in Hong Kong last week, as the government warned food manufacturers that misrepresenting the content of salt and sugar in their products would be punished as a crime.
The voluntary labelling scheme, which indicates if a food contains low levels of sugar or salt, relies on a manufacturer providing correct information.
But if false details are given, those responsible could face fines or prison, according to Bernard Chan, chairman of the Committee on Reduction of Salt and Sugar in Food, one of the government groups behind the labelling scheme.
“If the information is displayed dishonestly, it is illegal. I believe importers and manufacturers have to be careful in using the labels,” Chan said.
This is the case even though companies do not require approval to use the labels.
Rather, they need only notify the Centre for Food Safety and ensure the levels of nutrients their product contains meets legal requirements before making a claim.
The labels will indicate whether pre-packaged food is considered “low salt”, “no salt”, “low sugar” or “no sugar”.
A “low salt” label can be used only if a product contains not more than 0.12 grams of sodium per 100g or millilitres, or “no salt” if there is less than 0.005g of sodium, according to city regulations.
“Low sugar” labels require the food to contain not more than 5g of sugar per 100g or millilitre, or 0.5g of sugar for “no sugar” claims.
Shanghai begins regulation of small-scale food shops
More than 1,300 unlicensed tea stores and dim sum shops have been brought into the regulatory fold in the last 100 days as Shanghai ramps up its oversight of the segment.
The small-scale enterprises, which had not previously required licences, now come under the city’s regulatory banner after authorities launched a registration scheme in July to unify the food trade there.
By doing so, all food shops are being incorporated into the government’s framework as the first step to becoming authorised businesses.
To be registered, the stores must have mass demand from the public, not affect the daily life of surrounding residents, have fixed business sites and meet food safety and hygiene requirements.
Owners must also address improved store environments and enhanced washing facilities.
The scheme will soon cover the entire city, officials have said.