On the afternoon of October 16, China Foods Limited, a subsidiary of COFCO Group, announced the sale and divestiture of all its wine and other non-beverage businesses centered on the 'Great Wall' brand. These assets will be sold to China Foods (Holdings) Limited, a wholly-owned subsidiary of the controlling shareholder COFCO Group, for a total transaction value of approximately HK$5.069 billion (RMB 4.277 billion).

Regarding the positioning of the listed company China Foods, COFCO Group stated, 'China Foods will become the sole specialized beverage platform under COFCO Group, focusing solely on the beverage business in the future, continuously optimizing its operations and enhancing profitability.'

Zhao Shuanglian, Secretary of the Party Leadership Group and Chairman of COFCO Group, stated that this is another major step in the implementation of COFCO Group's specialized platform strategy. Specialized companies, which vertically integrate around core products, align with COFCO Group's overall strategic approach of building specialized companies and effectively addressing capital system optimization.

As for the sale of the wine business centered on the 'Great Wall' brand, it is due to poor performance. From 2011 to 2016, the compound annual growth rate of China Foods' domestic wine business revenue was -11%. The wine business segment recorded consecutive losses from 2015 to the first half of 2017.

Furthermore, the company expects intensified competition in the domestic wine industry, with the industry expected to maintain slow growth over the next three to five years, similar to the period from 2011 to 2016. Additionally, traditional Chinese baijiu continues to achieve double-digit annual growth, putting pressure on the growth and profitability of domestic wine products.

China Foods also stated that it has taken measures including, but not limited to, adjusting product mix and building brand awareness to improve the operating performance of the wine business, but the results are uncertain.

In contrast, the beverage business has performed best in terms of results. From 2011 to 2016, the compound annual growth rate of beverage EBITDA was 5.6%. For the six months ended June 30, 2017, beverage revenue and segment results were approximately HK$7,568 million and HK$422 million, respectively.

China Foods announced that the board has decided to focus solely on the beverage business to eliminate uncertainties related to the wine business. Upon completion of the transaction, China Foods will become the sole specialized beverage platform under COFCO Group, strengthening its beverage business cooperation with The Coca-Cola Company.

China Foods currently holds the exclusive rights to produce, market, and distribute Coca-Cola products in 19 provinces, municipalities, and regions in China. Following the completion of the major restructuring of bottling operations in mainland China in April 2017, the market landscape shifted from 'three-way division' to 'two-way division,' with China Foods' bottling plants increasing from 12 to 19, covering 51% of the domestic population and 81% of the market area, further expanding its business scale. In the future, China Foods will strengthen its beverage business cooperation with The Coca-Cola Company, continuously optimize its product mix based on mutual agreement, promote the sustainable development of bottled water, carbonated drinks, and juices, and continuously launch high-margin new products, resulting in a more diversified product portfolio.

2017 (3rd) FMCG + Internet Conference will be held in Chongqing in November 2017. The conference will closely focus on the theme 'New Forces, New Ecosystem' and invite 1,000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions to jointly explore a new chapter of cross-border integration!

Click the link below to review the highlights of the 1st and 2nd FMCG + Internet Conferences:

2016 'FMCG + Internet' Summit Forum

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