A venerable Napa winery, owned by Qinghai Huzhu Barley Wine Co., Ltd., a Chinese publicly traded entity, has encountered a protracted financial downturn, marked by seven consecutive years of losses surpassing RMB 100 million (US$13.8 million), according to the latest financial disclosures from the parent company.
Operating under the moniker Tian You De Wine, Qinghai Huzhu Barley Wine Co., Ltd. is headquartered in Qinghai Province, situated in Northwestern China. Specializing in the research, development, production, and sales of barley wine, the company’s venture into the grape wine sector, particularly its Napa operations, has been marred by sustained financial setbacks.
Despite this, the parent company has displayed robust financial performance over the past three years, as indicated by its 2023 financial report. Total operating revenue soared to 1.21 RMB billion (approximately US$170 million), marking a noteworthy 23.50% year-on-year increase. Meanwhile, net profit attributable to the parent company surged to RMB 89.58 million (approximately US$12.6 million), representing an 18.36% upswing from the preceding year—a milestone achievement not seen in nearly five years.
However, the foray into the grape wine business, initiated a decade ago, has yet to yield favorable outcomes. The company’s American operations, responsible for wine production, sales, and barley wine exports, have incurred cumulative losses exceeding RMB 100 million (US$13.8 million) over seven years, significantly impacting the listed company’s financial standing.
In 2023, Tian You De Wine’s wine revenue plummeted by 33.53% compared to the previous year, accounting for a mere 1.15% of the company’s total revenue, down from 2.21% in 2022. Notably, the wine production and sales segment reported a net loss of RMB -16,521,719.42, while the American subsidiary recorded a net loss of RMB -14.64 million for the same period.
Since 2017, when the financials of the American subsidiary were first disclosed, persistent annual losses have accumulated, tallying a staggering RMB 101 million to date.
In 2013, Tian You De Wine acquired Maxville Winery in California’s esteemed Napa Valley, encompassing approximately 400 hectares. Despite the trend among Chinese companies to invest in overseas wineries to tap into China’s burgeoning wine market, Tian You De Wine’s venture has faced considerable challenges.
The mismatch between the winery’s distribution channels and its core market exacerbates its financial woes. While Tian You De Wine primarily operates in Qinghai Province, where it generated provincial sales of RMB 806 million in 2023, Napa Valley caters to a different demographic, with sales largely reliant on upscale markets.
Moreover, operational costs inherent to Napa Valley wineries, coupled with limited market reach and brand strength, have compounded the financial strain. Despite efforts to establish a presence on Chinese social e-commerce platforms, including Youzan, the winery’s high-priced offerings have struggled to resonate with consumers, further impeding its path to profitability.
In light of these challenges, the road ahead for Maxville Winery and Tian You De Wine’s wine operations remains fraught with uncertainty, as they navigate a competitive landscape and endeavor to reverse their financial fortunes.
