Changyu profits drop in the first half of 2014

China’s largest wine producer, Yantai Changyu Pioneer Wine Co, reported more falls in sales and profits in the first half of 2014, despite a slight recovery in the second quarter.

In the six months to the end of June, Changyu’s net sales dropped by 9.3% versus the same period in 2013, to CNY2.3bn. Its net profit also fell by 13.8% to CNY638m, the company said.

The lack of interest in the high-end wine due to the government austerity measures has hit Chinese winemakers alongside imported wines over the past couple of years.

‘Multiple factors, such as a slowdown of domestic economic growth [and] an overwhelming flow of foreign wine into [the] Chinese market, the competition in the domestic wine industry was fierce,’ said Changyu.

The company managed reacted to the situation by maintaining ‘steady development in the middle and high-end wines’ but by launching a ‘vigorous expansion for the low-level wines, brandy and imported wines with own brands’.

In the second quarter of 2014, group sales rose by 14.9% on the same period of 2013, to CNY793m, while profits increased by 6.23% to CNY180m.

However, the effort was not enough to reverse the overall decrease for the half-year. Changyu’s three wineries, Chateau Changyu AFIP Global, Golden Icewine Valley and Xinjiang Tianzhu Winery, again reported net losses in the first half of 2014, of CNY9.15m, CNY4.61m and CNY2.7m respectively.