China’s leading supermarket operator, Yonghui Superstores, has announced that it plans to invest RMB 200 million (US$31 million) to create two subsidiaries, one for wine and alcohol beverage business and another for supply chain operation, the company has announced.
The supermarket operator, partly owned by China’s tech giant Tencent and e-commerce platform JD.com, made the announcement at its board of director meeting last week, buoyed by the country’s long-term prospects for wine consumption.
China currently ranks as the world’s fifth largest wine consumer and is expected to climb to No. 2 spot in the coming years, second to the US, according to IWSR, despite being stalled by pandemic.
The subsidiary focusing on wine and alcoholic beverage business is registered in Fujian province, Yonghui’s home base, and is named Fujian Yongyue Business Management LTD, with initial capital of RMB 100 million (US$15.5 million).
According to the company’s spokesperson, the subsidiary for wine and beverage business aims to create a supply chain to source wines directly to serve end consumers.
The news also came on the back of a good financial year for Yonghui, despite the pandemic. Its year-on-year net profit surged by 35.36% in the first half of 2020, as pandemic forced people to stock up and stay at home to limit social contacts.
The Chinese supermarket giant’s plan to expand its wine business was years in the making. It first floated the idea in late 2019, and during the same year, it stepped up its wine investment. In 2019, it signed an agreement with Australia’s leading retail group, Woolsworth, owner of Summergate Fine Wines & Spirits, to source nine categories of goods for Chinese consumers including wine.
In 2015, it partnered with Treasury Wine Estates, parent company of popular brand Penfolds and Wolf Blass. According to local Chinese reports, Yonghui’s first order with TWE was over RMB 60 million (US$9.3 million).
However, with worsening trade woes between China and Australia, Yonghui is expected to dial back its Australian wine portfolio given the combined punitive tariffs of up to 218.5%.
Founded in 2000, Yonghui now has over 1440 stores across China, including Mini Yonghui and Bravo YH. It surpassed Walmart to become the country’s 6th biggest supermarket chain operator based on sales revenue, and ranks ahead of Alibaba group’s freshmart Hema.