KKR Buys Stake in China Liquor Retailer as Wine, Spirit Consumption Rises

KKR & Co. agreed to invest in China’s VATS Liquor Store as rising incomes drive consumption of wines and spirits in the world’s most populous country.

VATS operates more than 270 liquor stores across China, the New York-based buyout firm said yesterday in a statement, which didn’t contain financial details. The Beijing-based company distributes French wines including Petrus and Laphroaig Scotch whisky and sells Chinese liquor brands made by Wuliangye Yibin Co., according to the statement.

"China’s alcohol market is slated to expand further as people’s incomes keep rising," Jason Yuan, a Shanghai-based analyst at UOB-Kay Hian Holdings Ltd., said by telephone today. "Getting hold of a vast distribution channel is the key to success."

China’s government is seeking to promote domestic spending as it reduces a reliance on exports to drive growth. Consumption of bottled white spirits in China has increased at a compound annual growth rate of 20 percent in the past five years, data from the country’s statistics bureau show.

Consumer spending in Brazil, Russia, India and China may surpass U.S. purchases in 15 years and companies that sell to emerging-market shoppers are some of the best investments “of our lifetime,” Goldman Sachs Asset Management Chairman Jim O’Neill, who coined the BRIC acronym, said Dec. 7.

VATS, which opened its first store in central Hunan province in May 2005, aims to increase the number of its outlets to more than 1,000 over the next three to five years, according to its website.

KKR is the largest shareholder of China Modern Dairy Holdings Ltd., the Hong Kong-based producer of raw milk that listed in the city last month, according to data compiled by Bloomberg.

--Michael Wei. With assistance from Eva Woo in Beijing. Editors: Chua Kong Ho, Lena Lee.

To contact the Bloomberg News staff on this story: Michael Wei in Beijing at mwei13@bloomberg.net

To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net

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