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Australia’s leading wine producer plans to significantly expand its business in China by using shipments from other markets to avoid the crushing tariffs Beijing has imposed on the Pacific nation’s exports.
Accolade Wines, owner of the popular Hardys and Echo Falls brands, said it would send wine from Chile and elsewhere to China, allowing it to be overlooked. rates of up to 218 percent that were imposed in November after rising diplomatic tensions.
As a result, Australian wine exports to China plummeted 96% year-on-year to just US $ 12 million between December and March, according to data of Wine Australia, a government agency.
The plan is part of Accolade’s efforts bought of private equity group Carlyle for $ 1 billion (US $ 778 million) in 2018, to expand beyond its major Australian and British markets and sell more premium wines.
The company is also considering an initial public offering, with Hong Kong as its potential headquarters.
“We believe we can get a significant stake in China,” said Robert Foye, CEO of Accolade, who admitted the company has taken a long time to take advantage of China’s decade. boom of wine. “I just think so [Accolade] I didn’t have that global management team that really knew how to run the business. “
Foye believes China’s wine market could grow for another 15 years due to low per capita consumption levels and the expansion of the middle class.
Accolade, which generated $ 1.2 trillion in revenue last year, also aims to increase sales in Asia, the United States and other markets, Foye told the Financial Times.
Matthew Reeves, an analyst at IbisWorld research group, said small Australian producers had been hit hard by tariffs, but the country’s top winemakers had been able to get products for the Chinese market. from other places.
“Accolade has private capital support, so it’s a viable strategy for them to import into China from elsewhere,” he said.
Foye, who built a successful business in China as chief operating officer of rival Treasury Wine Estates before being fired for an unspecified violation of domestic policies, said Accolade has compiled a list of targets for acquisition. The company has brands in Chile, the United States and South Africa and wants to add more premium wines suitable for Chinese palates, like blacks with a fruity, sweeter flavor, he said.
Accolade has bought two premium Australian wineries, Rolf Binder Wines and Katnook Estate, over the past year.
However, Foye admitted that Chinese tariffs would slow its expansion, as most of its production was based in Australia.
Accolade aims to increase sales in markets outside the EU and the UK to 60% of the group’s total within three years, compared to 40% in 2021.
The winemaker recorded a loss of A $ 11.6 million in June 2020, according to accounts.
Business leverage peaked at nine times 2020 earnings before interest, taxes, depreciation and amortization, according to Moody’s Investors Service. The rating agency downgraded Accolade’s debt relative to B2’s B3 to a speculative level just over a year ago, citing higher-than-expected restructuring costs, production problems and a coronavirus pandemic.
Foye said the group was forecasting 25% year-over-year profit growth in June and was considering a stock market crash.
“I want to go public. And that’s what we’re going to do at Accolade Wines. So we will do it in the next two or three years on the Australian Stock Exchange or, in fact, I would like to do it on the Hong Kong Stock Exchange. “
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