Australian Vintage Limited (AVL), the ASX-listed parent company behind the McGuigan, Tempus Two, and Nepenthe wine brands, has received a major financial boost in a joint venture with China’s largest online wine retailer, YesMyWine.
The deal raises $16.5 million for AVL, which is putting 15% of its existing capital via nearly 46 million shares at 46.01 cents each into Vintage China Fund.
AVL CEO Neil McGuigan said 75% of the funds from the share placement will be used for capital projects, mainly at AVL’s Buronga Winery and Merbein Packaging Facility, and the balance used to reduce debt.
The Australian business will have an exclusive distribution agreement with Vintage China Fund, but it will exclude the McGuigan brand, which has an existing deal.
YesMyWine founder and Vintage China Fund Dixon Jiang Yuan will join the AVL board as part of the placement deal.
Neil McGuigan said dramatic online wine sales in China was one of the reasons AVL partnered with Vintage China Fund.
“YesMyWine’s incredible growth in sales value, which is up 50 per cent since its inception in 2008, is testament to Dixon’s ongoing hard work and commitment to growing the wine eCommerce category in China. I look forward to working with him and growing our brands further in market,” he said.
“The opportunity for Australian wine in China is unparalleled and unquestionable, and if you want to be a key player in the market you have to invest in growing your brands and partner with like-minded businesses in order to make a meaningful impact.”
China is now Australia’s top wine market, with Treasury Wine Estates leading the charge, especially through the Penfolds brand.
The massive growth in China’s middle class has been a godsend for the Australian wine industry, with exports jumping 51% in the last year to $474 million, making it the top export market by value for the first time.
Sales there were worth just $27 million 10 years ago.
McGuigan says the challenge for Australian wine exporters is that much of the Chinese market is currently out of their reach. Australian Vintage Limited can now push its wines further into the Chinese market, which is growing at a rate of over 50 per cent every year despite it contributing just 11 per cent of total retail sales in China currently.
“This long-term, strategic partnership will deliver positive distribution and help build sales outside our traditional markets, thus creating natural financial hedges for the business,” he said.
Vintage China Fund director Dixon Jiang Yuan said they had been watching McGuigan’s company over many years.
“AVL’s performance in Asia is pleasing, but we believe we will be able to provide platforms and channels that will help step change the business in what will arguably be the largest market for wine in the world,” he said.
AVL shares are up nearly 7% today to 0.46 cents.