Wine has been gaining popularity among mainland consumers. COFCO International set up a new joint venture to produce luxury wine to capitalize on this trend.

COFCO International, the Hong Kong-listed arm of China's largest grain trader China National Cereals, Oils and Foodstuff Corp (COFCO), said it will set up a 100-million-yuan joint venture (JV) winery in Shandong, to tap into the booming luxury wine market.

The move came as branded wine is gaining popularity among wealthier consumers on the mainland.

Based in Yantai, East China's Shandong Province, where COFCO brews wine under the brand of Great Wall, the new JV will be established with food processor Shandong Longhua Company, which will hold a 45 per cent stake.

The venture, called COFCO Navavally Jundung Vineyard Co Ltd, will produce high quality wine. That signals a shift in COFCO's strategy, whose Great Wall wine has been selling well in the low-end market.

"Now we plan to launch something new and different," said a COFCO spokeswoman. "Our new winery will focus on luxury wine production to meet the increasing need from consumers."

The mainland's top four local wine brands are Changyu, Great Wall, Tonghua and Dynasty. They have a market share of 60 per cent, with Changyu accounting for 19.3 per cent, Great Wall 17.34 per cent, Tonghua 14.17 per cent, and Dynasty 10.51 per cent.

Pre-Spring Festival market

COFCO said it has not planned to raise wine prices to capitalize on a boom in the pre-Spring Festival market, though Changyu has increased its prices by 10 per cent.

Changyu said it was because prices of grape in East China surged in autumn.

"I understand that the grape price has risen, but currently we do not have the plan of changing prices," said the COFCO spokeswoman.

Wine has been gaining popularity in liquor-consuming China.

"It is now favoured by wealthy young urban Chinese," said Andes Cheng, associate director from South China Research Ltd.

"Economic opening-up has made many mainlanders accept Western culture," he said.

A survey conducted by the Psychic Health Research Institute of Beijing University last year, showed that the number of Chinese wine drinkers, including quite a few minors, had been increasing in recent years, and a majority of them are male.

(HK Edition 01/14/2006 page4)