China-based wine distributor Summergate has said it is in negotiations with potential outside investors in order to raise capital for growth.
Summergate’s general manager, Ian Ford, confirmed to Decanterchina.com that the Shanghai-based group is in talks with potential investors, but could not say more about the situation at this stage due to confidentiality agreements.
It is envisaged that an outside investor will take a minority stake in Summergate, which counts Concha y Toro as a major client, and its sister business Pudao.
There has been speculation among industry insiders within China about Summergate’s financial health amid a difficult time for the country’s fine wine sector over the past year.
But, Ford said outside capital is intended for ‘major growth investments’ in the business and that its finances are sound.
‘With respect to our financial position, 2013 in China was a challenging year for the whole industry, wine, spirits, imported and domestic,’ Ford told Decanterchina.com.
‘Our revenues in 2013, though up year-on-year, were not at the level we expected or planned for, due to the government’s austerity policy, and our cash flow was tight but manageable as a result.’
More positively, Summergate had its best festive season sales on record in the build-up to the recent Chinese New Year, Ford added.
In a recent note to suppliers on the search for investors, Ford said, ‘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.’
The note added that Summergate sees upcoming consolidation in the Greater China wine market, a theory also espoused by other industry observers.
‘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.’
This article was first published on Decanter.com sister site, Decanterchina.com.
Written by Chris Mercer