Woolworths Liquor Group, Brad Banducc
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Woolworths Liquor Group, Brad Banducc

Posted by | December 3, 2014 |

The managing director of Woolworths Liquor Group, Brad Banducci, says Summergate, the large alcoholic drinks distributor in China which has just been acquired by the company, was able to increase sales in the past three months despite a tough market.

The acquisition is one of the first by Woolworths overseas as it lifts its focus from its domestic operations, where it is battling slowing sales in its core supermarkets business and heavy losses in its Masters hardware operations. Mr Banducci declined to comment on the price.

Woolworths runs the 189-store Dan Murphy’s liquor chain and the BWS chain, with 1230 outlets, in Australia as part of a liquor division which generates sales of $7.4 billion annually.
Mr Banducci said austerity measures imposed by Chinese authorities had crimped sales across the market in China but Summergate had been able to “hold the line”, and in the past three months had been able to increase sales.

He said Summergate generates annual sales of around US$40 million.”Its managed to actually hold the line, and in the last three months has managed to grow.”

Summergate is one of China’s top drinks distributors and represents a portfolio of around 80 global brands, including Concha y Toro and Chateau Masur. It also includes a small fine wine retail business, Pudao, with two stores in Shanghai and Beijing, along with a small online and direct retail operation. Founders to stay Summergate has 13 offices and 11 distribution centres and employs more than 400 people. It was established in Shanghai in 1999 by two businessmen, Ian Ford and Brendan O’Toole. They will remain with the business for at least three years.

He said negotiations had been going on for up to a year, and the signing of the Free Trade Agreement between China and Australia was an added bonus over the past few weeks as negotiations were finalised.”The FTA has made it all the more interesting,” he said. It would “absolutely” enhance the deal.

Mr Banducci said it was a low-risk way for Woolworths to start building a bigger business in China, but it was a strategically important acquisition. “It is strategically important. It is an opportunity for us to build a long-term business in a market which has huge opportunity and is close to us,” he said.

Mr Banducci said Woolworths intended to launch the Langton’s fine wine business which it owns in Australia, into the Chinese market as part of the strategic plans for expansion.

Woolworths’s liquor division has been one of the grocery chain’s top performers as it’s being outpointed by rival Coles in supermarket sales. Woolworths’s Masters home-building centre chain is also incurring heavy losses, with a break-even point having been pushed out further and investors are troubled by the amount of capital it is soaking up, and the impact on overall returns at Woolworths. ‘Conservative’ approach Woolworths chief executive Grant O’Brien said on Wednesday the company would always be very conservative on international acquisitions.

“We have a conservative investment lens, particularly in relation to international acquisition opportunities,” Mr O’Brien said.Mr Banducci said the wider Woolworths Liquor Group was trading solidly in the lead-up to the crucial Christmas period. “We’re optimistic for Christmas,” he said.

Woolworths runs the Dan Murphy’s superstore chain, BWS chain and owns 75 per cent of the ALH pubs joint venture.Mr Banducci said he had known the two principals of Summergate for almost two decades.”I’ve actually known the founders of the business for a long time,” he said. He said Summergate’s main business was in the wholesaling of liquor.

Summergate general manager and founder Ian Ford said that he and his co-founder Brendan “are both very proud that a company of the calibre of Woolworths Liquor Group has chosen to acquire our great business.

“I personally look forward to the years aheadcontinuing to lead and guide our fantastic group of people, striving to be the preferred partner to all stakeholders in the industry,” Mr Ford said in a statement.

Michael Boddington from Asian Agribusiness Recruitment Training Development (AARTD) has been involved in agribusiness in Asia since 2000. AARTD has office both in Vietnam Ho Chi Minh City and China Beijing. So AARTD has a thorough understanding of the Vietnam and China agribusiness industry and produces up-to-date research reports on the market. We can offer insights on supply and demand trends and comments on the future structure of Asian agribusiness. If you would like to know more please email: michael@aartd.com

Source: http://www.smh.com.au/business/retail/woolworths-buys-china-liquor-business-summergate-20141203-11ywsk.html#ixzz3KoLQ9gU3