Bright Food’s Quest for Growth May Focus on Wine

Bright Food Group Co. Chairman Wang Zongnan aims to raise the share of overseas sales at Shanghai’s biggest food and dairy producer sixfold. After failing to buy yogurt and sugar companies, Wang may now turn to wine.

Bright Food is considering a bid for Treasury Wine Estates Ltd., two people familiar with the matter said on July 1. Treasury Wine, the world’s second-biggest wine business, rose by a record in Sydney trading yesterday.

Wang aims to add overseas companies in businesses including sugar, dairy, wine, food distribution and manufacturing to help boost revenue from outside China to as much as 30 percent of sales in five years. A successful bid for Treasury will help the government-owned group follow larger rival Cofco Ltd. in acquiring vintners to tap demand in China, where rising incomes are boosting wine consumption.

“As living standards improve rapidly, Chinese people are seeking a more delicate lifestyle in which wine plays an important role,” said Jason Yuan, an analyst at UOB Kay Hian Holdings Ltd. in Shanghai. Adding wine assets “may help the company to diversify its revenue sources,” he said.

Wine consumption in China surged 75 percent to 3.5 billion liters in 2010 from 2005, data from Euromonitor International show. The market is estimated to expand to 6.1 billion liters in 2015, according to the London-based researcher.

‘Young’ Dealmakers

“Our mission is to become a first-class comprehensive food group in China and to have influence on the international stage,” Bright Food’s Wang said in an interview in April. “We are very young when it comes to acquisitions.”

Wang, who oversaw 22 percent growth in sales and a 45 percent jump in net income last year at Bright Food, will need to replicate the domestic success overseas after unsuccessful attempts at acquiring businesses abroad.

The group lost out to General Mills Inc., the maker of Cheerios cereal, which agreed in May to buy a controlling stake in Yoplait for about 810 million euros ($1.18 billion). Wilmar International Ltd. last year outbid Bright Food for CSR Ltd.’s sugar unit.

Bright Food had also inquired last year about acquiring GNC Holdings Inc., the retailer of vitamins and supplements, before the Pittsburgh-based chain raised $360 million in an initial public offering.

‘Right Thing’

“An overseas takeover is the right thing to do for a company that aspires to have a global footprint,” said Wu Zhengwu, an analyst at AJ Securities Co. in Shanghai. Wu is the top-ranked analyst on Bright Dairy & Food Co., Bright Food’s flagship listed unit in Shanghai.

Photographer: Nelson Ching/Bloomberg

Wang Zongnan, chairman of Bright Food Group Co. Close

Wang Zongnan, chairman of Bright Food Group Co.

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Photographer: Nelson Ching/Bloomberg

Wang Zongnan, chairman of Bright Food Group Co.

The group may raise as much as 6 billion yuan ($928 million) this year selling bonds and listing a unit to fund acquisitions and boost production capacity, Wang said April 1.

A Hong Kong initial public offering of unit Yunnan Yinmore Sugar Co. may raise 2.5 billion yuan to 3 billion yuan, Wang said at the time. A bond sale in China may raise another 3 billion yuan and Bright Food may also list its food assets as a group in Hong Kong in three years, he said.

“To become a global company has always been our firm goal,” Pan Jianjun, Bright Food’s spokesman in Shanghai said yesterday by phone. “We have not contacted Treasury Wine or made a visit to the company.”

The Melbourne-based vintner fell 2.5 percent to A$3.58 as of 11:27 a.m. in Sydney trading, after climbing 8.9 percent yesterday, the largest gain since the shares began trading May 11.

Wine Purchases

Cofco, China’s largest grain trader with food production and processing businesses, signed a formal agreement in February to buy the Chateau de Viand, a wine producer in France’s Bordeaux region, Xinhua News Agency reported in February, citing Chairman Chi Jingtao.

In September, Cofco agreed to acquire a wine factory and vineyeard in Chile for $18 million from Bisquertt, according to China’s State-owned Assets Supervision and Administration Commission.

China is on track to become the world’s seventh-largest wine market by 2013, according to a study by the Vinexpo Asia Pacific industry exhibition and market researcher International Wine and Spirit Record.

Bright Food’s countrywide distribution network would be an advantage in the wine business, according to UOB Kay Hian’s Yuan. “Bright Food, as a long time market player and a state-owned company, has a vast distribution network. Distribution is the most important factor for alcohol sales.”

Bright Food, which makes “Big White Rabbit” brand candy, was established by combining four state-owned companies in August 2006, according to its website.

“Bright” is a brand created by Shanghai Yimin Foods Co., one of the four companies that merged to form Bright Food, soon after the Communist Party took power in 1949.

--Michael Wei. Editors: Suresh Seshadri, Dave McCombs

To contact Bloomberg News staff for this story: Michael Wei in Shanghai at +86-21-6104-3044 or mwei13@bloomberg.net

To contact the editor responsible for this story: Dave McCombs at dmccombs@bloomberg.net

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