news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

On the evening of August 5, Yiyuan Winery issued a profit warning, saying that the company recorded a net loss of no more than RMB 4 million in the first half of the year, while in the same period last year, Yiyuan Winery's net profit was RMB 5.4 million. Yiyuan Winery attributed the loss to sluggish consumption.

Grace Vineyard Winery. Photo: Grace Vineyard Winery official website

Sales volume in the first half of the year dropped by about 40% year-on-year

In the profit warning, Grace Vineyards stated that the turnaround from profit in the first half of 2023 to net loss in the first half of this year was mainly due to sluggish consumer desire and consumption, which caused the company's sales volume in the first half of the year to drop by about 40% year-on-year, resulting in a decline in sales.

According to the official website of Grace Vineyard, in 1997, Chen Jinqiang and Sylvain Janvier from France founded Grace Vineyard in Taigu, Jinzhong, Shanxi. In 2002, Chen Jinqiang passed the winery to his daughter Chen Fang. In 2018, Grace Vineyard Holdings Limited was listed in Hong Kong. Today, Grace Vineyard owns the Shanxi Grace Vineyard and Ningxia Grace Vineyard, which grow and brew wine, and the Fujian Dexi Winery, which brews spirits.

Last year, Yiyan Winery achieved relatively good results: due to the increase in sales of high-end wines, its revenue increased by 4.6% year-on-year to 65 million yuan; the overall gross profit margin increased from 58.7% in 2022 to 73.3%; the net profit was 10.22 million yuan, turning losses into profits.

After reviewing Yiyuan Wine's performance over the past six years, it can be found that although there are not many years of losses, with only 600,000 losses in 2020 and 2022, the net profit data in profitable years is not very high, and there has never been an "explosion". Among them, in 2018, the company's net profit was 6.165 million yuan, and in 2019 the net profit dropped sharply to 30,000 yuan. In 2021, the company's net profit was 7.7 million.

Chen Fang, Chairman of the Board and CEO of Grace Vineyard Wines. Photo/Grace Vineyard Wines official website

Expanding the spirits business and looking for the second curve

In recent years, Yiyan Winery has also been seeking breakthroughs in performance by implementing high-end strategies and developing spirits.

The annual report shows that last year, Yiyan Winery sold a total of 738,000 bottles of wine. Although it was a decrease from 2022, the average selling price increased from 75.1 yuan per bottle in 2022 to 88.1 yuan.

In terms of revenue, the proportion of high-end wines also increased significantly last year: from 58.3% in 2022 to 72.2% in 2023. In contrast, the proportion of entry-level wine revenue decreased from 41.7% in 2022 to 27.8% in 2023.

In terms of walking on "two legs", Yiyan Winery started planning as early as five years ago.

In August 2019, Grace Vineyard completed the acquisition of 100% equity interest in Wanhao Asia Limited. The acquisition was aimed at Fujian Dexi Wine Co., Ltd., a direct non-wholly owned subsidiary of Wanhao Asia. The company mainly produces whiskey and gin in Fujian Province.

The project was originally planned to be completed and put into production in mid-2022, but was delayed due to factors such as the epidemic. According to the 2023 annual report of Grace Vineyard, as of the end of 2023, the construction of the gin and whiskey distillery has been successfully completed, with some interior decoration work remaining, and whiskey production has officially started in the second half of 2023. Grace Vineyard is trying to use this project to create synergy with its wine business and lay the foundation for entering the spirits industry, making its wine business more diversified.

However, even so, Yiyuan Winery still faces risks such as over-reliance on the Shanxi market and squeezed by imported wines. Currently, most of Yiyuan Winery's sales come from Shanxi. "We continue to develop new products, markets and distribution channels, including but not limited to developing wines from new production areas, developing new sales points, promoting online sales channels, and cooperating with new distributors outside Shanxi Province," Yiyuan Winery said in its 2023 annual report.

The exterior view of the Dexi Distillery. Photo: Yiyuan Winery official website

Many wine companies expect losses in the first half of the year

It's not just Yiyuan Wine. Recently, many listed wine companies released their first-half performance forecasts, with losses being the majority.

Among them, ST Tongpu expects to lose 27.5 million to 24.5 million yuan, Mogao shares expects to lose 8 million to 12 million yuan, and CITIC Niya expects to lose 4.5 million to 5.5 million yuan. Only Weilong shares expects to make a profit in the first half of the year, with a net profit of 6.78 million to 10.65 million yuan and a non-net profit of 6.49 million to 10.2 million yuan.

However, if you look closely, there are also concerns behind Weilong's profit data. According to its previously released first quarter report, the company's net profit in the first quarter of this year was 18.467 million yuan. Calculation shows that Weilong still suffered losses in the second quarter, with losses ranging from 11.687 million yuan to 7.817 million yuan.

Without exception, these companies that forecast losses mentioned the sluggishness of the entire wine market.

ST Tongpu stated that it was mainly affected by the complex internal and external environment. Although the company's business improved thanks to the efforts of the company's board of directors, the improvement was not significant, resulting in the company's losses.

Mogao Co., Ltd. said that in the first half of the year, the domestic wine market remained sluggish and consumer demand was insufficient.

CITIC Niya stated that in the first half of the year, the domestic wine market was still in a period of adjustment. Affected by changes in the structure of consumer categories in the domestic market and policy factors, the market competition situation became more severe, sales of the company's wine products slowed down, overall revenue declined, the company's sales revenue decreased compared with the same period last year, and the operating performance in the reporting period showed a loss.

Earlier, industry insiders said in an interview with Nanduwan Finance that the domestic wine market has not changed due to the pressure from imported wine and liquor, as well as the sluggish consumer market. Under such circumstances, most wine companies are not large enough and lack the ability to resist risks, making it difficult for them to fight against the general trend.

Written by: Nanduwan Financial News reporter Liu Lanlan