Cofco says distribution muscle will beat rivals as wine goes mainstream

Monthly Interview

LI Shiyi, General Manager of COFCO's new imported wines & spirits division speaks to DecanterChina.com about COFCO's new moves towards the imported wine market.

The head of Cofco’s newly-established imported wines and spirits division believes the firm’s extensive distribution network will give it an advantage over rivals as wine consumption in China moves to ‘mass-market channels’.

Speaking exclusively to DecanterChina.com, Li Shiyi, said that he agrees with other market commentators that future wine consumption growth in China will be driven by the general public, rather than government officials.

China’s thirst for imported wines has fallen from its peak in 2009 and 2010. According to customs figures, during the first three month of 2014, China’s wine imports dropped by 20.7% in volume and 26.2% in value versus the same period of 2013. Government austerity measures have been blamed for hitting the high-end of the market, in particular.

Within these tough market conditions, Cofco established a separate imported wines & spirits division in January 2014, as an independent operation from its Great Wall brand. Its general manager, Li Shiyi, first joined Cofco in 2007 and has over a decade’s experience managing international companies and state-owned companies.

‘What was really tackled by the austerity measures were the few high-end producers with hyped prices,’ he said. ‘China’s imports market will eventually pass the chaotic period. We believe that in the future, mass consumption will become the main drive for imported wine.’

He argued that Cofco is in a better position than some more established rivals in the imported wine market. ‘Over the last decade, many “western-origin” wine import companies [have] occupied a fair share of the market. They have played their part in introducing imported wines to the Chinese market, and have established a series of comparatively influential brands. However, their products are rarely found through mass-market channels.’

Cofco’s long-standing reputation, as well as other intangible assets such as heritage and management experience, provide ‘unique advantages’ to its new imports operation, he said.

The firm is not new to the imported wine business, even if it has not had a standalone division before. It imported its first wines in 2008.

Together with the new imports division, Cofco also launched its own imported wine range ‘Ming Zhuang Hui (名庄荟, Grand Cru Collection)’. The range includes wines from Bordeaux’s Moueix Family and Chile’s Concha y Toro. Most recently, the group also signed an import deal with Greece-based producer Boutari.

‘Currently there isn’t a dominant, star brand in the imported wine market in China,’ Li said. The Ming Zhuang Hui range is sold through online channels such as Cofco’s jiu.womai.com, and offline through ‘a national-scale distribution network’, he added.

Commenting on the decision to separate the business divisions for Great Wall and imported wines, Li said ‘each operation fulfils different market needs’. But, he said the two operations will ‘share their resources and support each other’.

For example, Bordeaux-based wine consultant Michel Rolland, who is now the chief winemaker of Cofco’s Great Wall Global Chateaux Cluster, is also leading a team of industry experts to help select wine imports partner.

Compared to before the reform, the current arrangements ‘concentrate more on production lines, and give clear delegations to each division’, Li said, ‘we can react fast enough to the market, and maximise the initiative of the team. ’

‘We have a market filled with opportunities, and Cofco’s rich internal resources,’ Li said. ‘All we need to do is embrace the market.’

Last week, a Chinese government commission picked Cofco and five other state-owned companies to trial reforms around the role of state officials in company management, with state officials potentially taking a more hands-off role.