The beleaguered Chinese winery Dynasty Fine Wines is pinning its hope on a nearly HKD 20 million new Ningxia winery to revive its operation, its first major investment fuelled by expanding domestic wine industry after its trading being resumed in Hong Kong. But critics and industry watchers question if the move is already too late.
On July 31, the Hong Kong-listed company announced that approximately HKD 18.9 million will be allocated to build the new Ningxia winery. The facility will focus on producing medium and high-end wines and will be situated in the eastern foothills of Helan Mountain, with an annual production capacity of 5,000 tonnes, according to the company.
The strategic move is aimed at securing a stable supply of quality grapes and grape juice in China’s premier wine region through the integration of pressing, fermentation, processing, testing, and research and development as a whole.
For years, Dynasty sourced wines from growers in Tianjin, Hebei, Ningxia, and Xinjiang, and operates one winery in its homebase Tianjin, which is a mash-up of the Palace of Versailles, the Louvre, and a German castle, about an hour by train outside of Beijing.
The company’s entry into Ningxia represents a crucial investment and is being closely watched by the industry, as Dynasty grapples to reclaim its former glory. Founded in 1980 as a joint venture between the Tianjin government and French cognac producer Remy Coindreau, Dynasty was once considered one of China’s top three wine producers, alongside Changyu Pioneer Wines and COFCO-owned Great Wall.
At its peak from late 1990s to early 2000s, its wine sales account for about half of the country’s market. In 2005, it became publicly listed in Hong Kong. However, in 2013 Dynasty was rocked by fraud allegations, resulting in 6 years of trading suspensions and sluggish sales. As a result, its reputation tarred and sales plunged.
Even after trading resumed on the Hong Kong Stock Exchange in 2019, the company’s outlook remains bleak. According to its annual report, in 2022, Dynasty Wines’ group revenue declined by 21% to HKD 241 million, while net profits plummeted 24% to HKD 92.4 million.
The decline in Dynasty’ performance is evident in off-trade channels as well. Once a major player alongside Changyu and Great Wall as part of the “Big Three” domestic wine producers, Dynasty’ products are now scarcely found in supermarkets, wine stores, or even restaurants.
Meanwhile, its main competitor such as Changyu has successfully expanded its productions into regions like Ningxia since 2013 with Chateau Changyu Moser XV, capitalizing on the growing consumer demand for domestic wines. According to a 2021 IWSR/Vinexpo report, consumption of domestic wines in China is projected to reach US$19.5 billion in 2022, compared to US$16.5 billion in 2021.
The venture into Ningxia is seen as a last-ditch effort by Dynasty to revive its group revenue. While the company had previously attempted internal restructuring, asset sales, and engagement with major liquor companies, its prolonged trading suspension and continuous losses have hindered its ability to seize opportunities in the competitive domestic wine market, as highlighted by Chinese media New Beijing Daily.
As domestic competitors and imported wines continue to squeeze on Dynasty, its brand value and consumer influence have significantly declined, presenting an uphill battle for the company to regain its former stature. With its legacy on the line, Dynasty will have to break some ground with the new Ningxia winery. Otherwise it will end up under it.