China wine distribution: Summergate seeks investor

By Jim Boyce

Rumors are swirling that major China-based wine importer and distributor Summergate is on its last legs. To be honest, if Summergate were a wine, it would have the longest-lasting legs in history because I have been hearing such rumors for three or four years. Anyway, the latest issues concern 1) pictures that appeared on the web and apparently show protests at the Summergate office by customers over non-delivery of en primeur and 2) claims the company is up for sale.

I asked co-owner Ian Ford about these issues (see below) and about his view on a China wine industry going through drastic changes due to factors like the government’s austerity program (“a seismic event”), the rapid growth of importers (“The majority of new entrants have been opportunistic profiteers shipping cheap buyer’s own brands or ‘private labels’”) and growing consumer knowledge and power (“[We are moving to] a market driven by genuine consumer consumption through channels like e-commerce”). In regard to e-commerce, he called it the “great equaliser” when he spoke at the recent Wine Vision conference in London. I’ll have more on his views for the Chinese wine market in 2013 soon.

As for the photos from the Summergate office, he says: “A client from the past showed up outside of our office lobby, held up a hand-painted bed sheet, and took a picture. It’s been resolved, but welcome to the wacky world of the China wine market! I genuinely feel for those companies that invested heavily in Chateau Lafite futures during the heyday and now find themselves with a lot of wine that they can’t sell for love nor money in China.”

As for the sale of Summergate, the company is looking an investor to take a minority share. A recent email said Summergate and Pudao Wines (the retail outlets backed by Summergate) “are actively now seeking to raise significant capital for both businesses, to support major growth investments for the years ahead, and to secure and strengthen the existing platform and successes that we’ve achieved up to now.”

“This is a significant event for us, and will be the first time in our 15 year history that we will be raising capital – until now we have grown the businesses “organically” with no bank debt or equity finance,” continues the email. “The time has come for this important step however, and we are very excited about the prospect of reinvigorating the businesses with a significant capital injection, and being able to propel the company and our business and market forward over the coming years.”

“Our goal is to find a strategic investor to take a minority stake in the businesses, both for the purposes of raising capital for growth, and also for the strategic benefit of their experience, skills, systems, and relationships. Our vision for both companies, the direction we are driving in for the business and our partners, our strategic goals, and the values that knit together everything that we do, are as rock solid and as unchanged as ever.”

“The landscape of the China drinks market is changing significantly, as the market moves from an era of government-led procurement and opportunistic profiteers, to a market driven by genuine consumer consumption. After years of overheated expansion and fragmentation within the trade, we see a significant period of consolidation on the horizon. The opportunities inherent in this period of evolution and consolidation are significant, and we are excited that both Summergate and Pudao will be “muscling up” to pursue these important opportunities with full resources.”

More soon on Ford’s views for 2014.

1 Comment on China wine distribution: Summergate seeks investor

  1. Ken Waldron // February 2, 2014 at 10:03 am //

    The suggestion by Summergate CEO that
    “rapid growth of importers (“The majority of new entrants have been opportunistic profiteers shipping cheap buyer’s own brands or ‘private labels’”)
    is somehow a problem and a threat to the China wine industry is just silly & insular. It somehow implies that Summergate is not “profiteering” or hasn’t been opportunistic during it journey in the China wine sector.

    The Summergate business model and that of the other similar (ASC, Jointek, Aussino etc) has been entirely opportunistic and profiteering and based on exploiting the ignorance of some privileged corporates.

    The advent of importers of “so called cheap BOB wine” has democratized the wine market in china and made it possible for a much broader market to evolve and made wine accessible to the whole population.

    The implication that there is inherently something wrong with BOB labels further highlights someone who is simply out of touch with the global wine market. Check out Park n Shop, Carrefours, Tesco’s Dan Murphy’ or Trader Joe’s or Majestic.

    BOB is the modern wine market and to suggest otherwise is akin to saying that art can only be found in a museum.

    Summergate and their ilk still have a role to play in China wine sector but the model that they adopted and the channels they have sought to dominate will never again be as important in wine distribution as it was when they started.

    All markets evolve and do so dynamically.

    Adopt and adapt

    Ken Waldron
    Global marketing strategist.
    Wine producer, Wine exporter,
    Exporter of branded and BOB to china since 2003

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