Vinum targets wineries in China

The California-based private equity buyout firm sees rising demand in the Asian country saying its recently formed $250m fund could eventually acquire Chinese wine producers.

Vinum Capital Management will look to Chinese wineries as it seeks to invest its recently formed $250 million (€162 million) buyout fund, Vinum Capital Partners I.

The San Anselmo, California-based firm told PERE it would consider investments in China as well as more traditional wine-producing regions such as California, New Zealand and Australia.

Robert Dellenbach, a partner with Pittsburgh-based law firm Reed Smith, which oversaw VCM’s formation, said Vinum would look to tap the growing Chinese wine market and in the long run “potentially acquire Chinese operations.”

Vinum would initially focus on meeting “pent-up” demand for equity from premium wineries, particularly in California, Washington and Oregon, where family-run or smaller operations are seeking to sell.

Dellenbach said the firm would take advantage of economies of scale in relation to sourcing grapes and dealing with suppliers and distributors. Thornhill said at the time of the formation the fund would “acquire wine properties efficiently, grow them effectively with expertise and necessary growth capital, and ultimately sell them to strategic and financial acquirers.”
The US wine market was one VCM was keen to capitalize on, according to Dellenbach, however China had particularly attractive prospects, he added.

Wine sales have jumped 42 percent in the five years to 2006, according to industry reports, with consumption increasing 55 percent. The reports also state China’s wine imports have tripled from $25 million in 2004 to $77 million in 2006, with consumption expected to increase more than 65 percent in the 10 years to 2010, taking the country into the top 10 largest wine consumers in the world. Beijing, Yantai and Tonghua Jilin are some of China's notable wine-producing regions.

The team behind VCM, which includes Tom Thornhill, chairman of the Mendocino Wine Company; Stephen Kuhn, founder of the communications company Reverbix; and Justin Faggioli, a rancher and former executive vice president of Ravenswood winery, has launched or managed more than 150 brands for companies and wineries including Penfolds, Beringer and Gallo, according to a statement.