--- title: "China Resources Strategic Investment in Golden Seed Group, Plans 49% Stake, Officially Enters Baijiu Market" description: "On February 16, 2022, Golden Seed Wine announced that its controlling shareholder, Anhui Golden Seed Group, would transfer 49% of its equity to China Resources Strategic Investment, a wholly-owned subsidiary of China Resources (Group), via a non-public agreement. This move marks China Resources' official entry into the baijiu market, aiming to leverage its resources to revitalize Golden Seed Wine amid its ongoing losses." author: "天景" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2022-02-26" language: "en" canonical: "https://xinjignxiao.com/en/articles/china-resources-strategic-investment-in-golden-seed-group-plans-49-stake-cb490ed6/" markdown: "https://xinjignxiao.com/en/articles/china-resources-strategic-investment-in-golden-seed-group-plans-49-stake-cb490ed6.md" original_source: "https://mp.weixin.qq.com/s/n6_XJ75cBpESemR79U-GGw" translation: "https://xinjignxiao.com/zh/articles/%E5%8D%8E%E6%B6%A6%E6%88%98%E7%95%A5%E6%8A%95%E8%B5%84%E9%87%91%E7%A7%8D%E5%AD%90%E9%9B%86%E5%9B%A2-%E6%8B%9F%E6%8C%81%E8%82%A149-%E6%AD%A3%E5%BC%8F%E5%88%87%E5%85%A5%E7%99%BD%E9%85%92%E5%B8%82%E5%9C%BA-cb490ed6.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/china-resources-strategic-investment-in-golden-seed-group-plans-49-stake-cb490ed6/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # China Resources Strategic Investment in Golden Seed Group, Plans 49% Stake, Officially Enters Baijiu Market > On February 16, 2022, Golden Seed Wine announced that its controlling shareholder, Anhui Golden Seed Group, would transfer 49% of its equity to China Resources Strategic Investment, a wholly-owned subsidiary of China Resources (Group), via a non-public agreement. This move marks China Resources' official entry into the baijiu market, aiming to leverage its resources to revitalize Golden Seed Wine amid its ongoing losses. **On February 16, 2022, Golden Seed Wine announced that it had received notice from its controlling shareholder, Anhui Golden Seed Group Co., Ltd., that to promote the deepening reform and high-quality development of state-owned enterprises**, the sole shareholder of Golden Seed Group, Fuyang Investment Development Group Co., Ltd. (hereinafter referred to as "Fuyang Investment"), plans to transfer 49% of its equity in Golden Seed Group to China Resources Strategic Investment Co., Ltd. (hereinafter referred to as "China Resources Strategic Investment"), a wholly-owned subsidiary of China Resources (Group) Co., Ltd., through a non-public agreement transfer in accordance with relevant laws and regulations. Fuyang Investment and China Resources Strategic Investment signed the "Equity Transfer Agreement on Anhui Golden Seed Group Co., Ltd." on February 16, 2022. Golden Seed Wine stated that after this transaction, the controlling shareholder will introduce an important strategic shareholder, and the two parties will engage in long-term joint venture cooperation. **After the completion of this equity transfer, Fuyang Investment's stake in Golden Seed Group will decrease from 100% to 51%, while China Resources Strategic Investment will hold 49%. The actual controller of Golden Seed Group will remain the State-owned Assets Supervision and Administration Commission of Fuyang Municipal People's Government.** The equity transfer is proposed to be conducted through a non-public agreement transfer and will take effect after approval from relevant authorities. **China Resources' investment may reshape Golden Seed Wine** Public information shows that Golden Seed Wine is a subsidiary of Golden Seed Group, formerly known as Fuyang County Distillery, founded in 1949, and listed on the Shanghai Stock Exchange in 1998. Golden Seed Wine currently owns two China Well-known Trademarks, "Golden Seed" and "Zui San Qiu," and one "China Time-honored Brand" - Yingzhou. This equity transfer is a strategic restructuring between central state-owned enterprises and local state-owned enterprises, which may be a win-win for both parties. Why? For Golden Seed Wine, this cooperation can leverage China Resources Group to solve issues such as capital expansion, brand enhancement, and channel expansion, achieving complementary advantages and promoting product market coverage. On the other hand, China Resources Group's management experience in the FMCG sector can help Golden Seed open new ideas in production, operation, and management, accelerating its high-end and national expansion process. It is important to note that Golden Seed Wine is facing continuous losses. In terms of performance, Golden Seed Wine expects a net loss attributable to shareholders of listed companies of RMB 155 million to RMB 185 million for 2021; after deducting non-recurring gains and losses, the net loss is expected to be RMB 180 million to RMB 210 million. It is worth noting that this is not the first time Golden Seed Wine has incurred significant losses after deducting non-recurring gains and losses. In 2019 and 2020, the company's losses after such deductions exceeded RMB 100 million. **Golden Seed Wine stated that the expected loss is due to the low proportion of sales of sub-high-end products and the low overall gross profit margin.** In the first three quarters of 2021, its ordinary baijiu revenue was approximately twice that of mid-to-high-end wine. 2022 is the last year of Golden Seed Wine's three-year strategic adjustment period. According to the plan, the company will further accelerate the market cultivation of its core product, Golden Seed Fuhexiang, and fully enter the mainstream price range of the Anhui market. In this critical final year of the adjustment period, China Resources' investment may be of great significance. Because based on past investment performance, after China Resources invested in Shanxi Fenjiu, its net profit increased from RMB 1.507 billion in 2018 to RMB 4.879 billion in the first three quarters of 2021. It is worth noting that after this transaction, China Resources Strategic Investment will only hold a stake in Golden Seed Group, and the actual controller of Golden Seed Wine remains the Fuyang SASAC. The semi-annual report shows that Golden Seed Group holds 27.1% of Golden Seed Wine's equity, making it the largest shareholder. **Before China Resources Group's investment, Fuyang Investment wholly owned Golden Seed Group. After the transfer, Fuyang Investment will hold 51% of Golden Seed Group.** In any case, drawing on the development of Fenjiu in recent years, whether China Resources can reshape Golden Seed Wine is highly anticipated by both Golden Seed Group and industry observers. **Favorable policies, China Resources' "baijiu industry blueprint" gradually clear** Investing in Golden Seed Wine can be said to be China Resources' first major move this year. As early as February 2018, China Resources' subsidiary, Huachuang Xinrui (Hong Kong) Co., Ltd., acquired 99.15 million unrestricted tradable shares of Shanxi Fenjiu for a total of RMB 5.16 billion, becoming the second largest shareholder of Shanxi Fenjiu (holding 11.45%). In 2021, before the transaction with Jingzhi, Jingzhi Wine Industry held 100% of Jingzhi Baijiu. After the transaction was completed, China Resources Wine Industry held 40% of Jingzhi Baijiu, CDH Investments held 20%, and Jingzhi Wine Industry held the remaining 40%. Under the Anti-Monopoly Law, China Resources Wine Industry, Jingzhi Wine Industry, and CDH Investments jointly control Jingzhi Baijiu. At the beginning of this year, China Resources officially invested in Golden Seed Wine. Cai Xuefei, a baijiu industry analyst, said that this transaction is a case of each taking what they need. China Resources needs business growth, and baijiu undoubtedly has development potential and is hot in the capital market. Moreover, China Resources itself has huge consumer demand for baijiu. Golden Seed Wine's scale has shrunk severely in recent years, and it can leverage China Resources to solve capital, brand, and channel issues for expansion, accelerating its high-end and national expansion process. For China Resources, this is the third investment after Fenjiu in 2018 and Jingzhi in 2021, bringing Golden Seed Wine under its wing. With these three investments, the "China Resources baijiu system" is gradually taking shape. Clearly, China Resources has been laying out a grand blueprint for the "baijiu industry" in recent years. Why? **On the one hand, favorable national policies are becoming increasingly dense.** In August 2021, the Price Supervision and Competition Bureau of the State Administration for Market Regulation held a symposium on baijiu market order supervision, mainly focusing on "maintaining normal order in the liquor industry"; in December, the State Administration for Market Regulation issued an announcement soliciting opinions on the "Baijiu Production Licensing Review Rules (Draft for Comments)". The two national standards, "Baijiu Industry Terminology" and "Terminology and Classification of Alcoholic Beverages," which will be implemented in June this year, are also conducive to promoting the baijiu industry to adapt to the trend of consumption upgrading. On January 10 this year, the Ministry of Industry and Information Technology issued the "Guiding Opinions on Accelerating the Construction of a Modern Light Industry System (Draft for Comments)", which mentioned baijiu in three places; on January 26, the State Council issued the "Opinions on Supporting Guizhou in Pioneering New Paths in the Western Development in the New Era", which clearly proposed supporting the construction of an important national baijiu production base in the Chishui River area. It can be seen that the macro policy attitude towards the development of the baijiu industry is very positive, with more detailed market supervision standards and more complete policies, which are long-term beneficial to the liquor industry. **Filling the consumer sector gap, China Resources baijiu begins to rise** **On the other hand, it comes from filling the gaps in China Resources' own system.** Looking at China Resources as a whole, in the consumer sector, China Resources ranks among the top in the country in terms of business scale in beer, supermarkets, bottled water, etc. Its brands such as Snow, C'estbon, and Vanguard are industry leaders, but baijiu is a blank area in its consumer sector. Hou Xiaohai, chairman and general manager of China Resources Snow Breweries (China) Co., Ltd., once said that China Resources Beer's strategy during the "14th Five-Year Plan" period will explore, focus on, and selectively enter limited diversified industries and categories, "such as baijiu, premixed drinks, fruit-flavored beverages, etc., while gradually building new category operation capabilities within the system." From the investment in Fenjiu in 2018, it can be seen that China Resources had foresight in the baijiu sector as early as four years ago. **At this point, China Resources already holds three major baijiu brands, one famous liquor, and two listed liquor companies.** From the criteria for selecting these three major baijiu brands, they share a commonality: **a good brand foundation and user base.** Fenjiu is a leading famous liquor, while Jingzhi and Golden Seed Wine are representatives of provincial liquors. They all have unique category potential, a solid regional market foundation, and a good brand foundation and room for improvement. In terms of category potential, Fenjiu is the leader in light-flavor baijiu, Jingzhi is the standard setter for sesame-flavor baijiu, and Golden Seed Fuhexiang baijiu is the breakthrough found by Golden Seed after years of high investment in quality research. In terms of market foundation, Fenjiu's national market construction is in full swing; Jingzhi is the leader of Shandong liquor, established nearly 30 years ago, with a solid foundation in the Shandong market, and "Drink Zhixiang in Shandong" is deeply rooted in people's hearts; Golden Seed Wine was listed on the capital market in 1998, making it the eighth listed baijiu company in China and the second in Anhui. As a former mainstay of the second-tier baijiu echelon, it has a deep consumption base in the Anhui market. From the above, it can be seen that the "preferred selection" criteria mentioned by Hou Xiaohai are quite similar to the market system of Snow Beer. Similarly, drawing on Fenjiu and Jingzhi, the opportunity for Golden Seed may be China Resources; and the rise of China Resources' baijiu sector may also come from the additional empowerment of Golden Seed. **From the current perspective, the industry believes that after China Resources' strategic investment in Golden Seed Wine, helping the company reverse its losses this year is the primary task. Given that Golden Seed mainly focuses on ordinary (low-end) liquor and is transitioning to mid-to-high-end products, expanding revenue scale is key to reversing Golden Seed Wine's losses.** This means that in addition to consolidating the market position of the company's low-end liquor, China Resources also needs to expand Golden Seed Wine's sales channels in other provinces through its own channels and resources. 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