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Public company info - Dynasty Fine Wines Group Ltd. , 00828.HK
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Dynasty Fine Wines Group Ltd., 00828.HK - Company Profile
Chairman Wan Shoupeng
Share Issued (share) 1,248,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Alcoholic Drinks & Tobacco
Corporate Profile Business Summary: The principal activities of the Group are manufacturing and sales of wine products. Performance for the year: The revenue of the Group for the year ended 31 December 2020 decreased by 21% to HK$238.7 million (2019 – HK$302.3 million) and the Group’s profit attributable to owners of the Company increased to HK$116.4 million (2019 – loss of HK$72.9 million). Business review Sales analysis A)Distributorship The decrease in revenue was primarily attributable to the outbreak of COVID-19. Since the outbreak of COVID-19 in January 2020, the Group has adopted various prevention and control measures in accordance with the relevant national and local regulations on epidemic prevention and control, with an aim to minimising the impact of the outbreak on the Group’s operations. However, during the pandemic period, in particular from January to April 2020, business/government banquets and family gatherings were greatly reduced due to the restrictions imposed regarding the epidemic prevention and control policies. Places of consumption, such as supermarkets, tobacco and liquor stores and other retail terminals, were under strict policy control with regard to their operations, which seriously affected the consumption sentiments of wine products. Following the effective containment of COVID-19 and resumption of normal operation of places of consumption in the PRC, the Group’s business improved in the second half of the year. During the year, the Group further pushed forward implementing a sales and marketing reform, which encompassed (a) promoting two upgrades, namely product upgrade and brand upgrade, (b) forming the third-tier markets, i.e. the core market, key market and potential market and (c) taking four management measures. Such measures included (i) enhancing expansion and control of online channels, such as developing new channels and launching new products; (ii) the launch of mass-scale marketing campaign including showcasing in retail shops, hosting wine tasting events and organising plant visits to strengthen closer bonds with customers; (iii) accelerating the standardisation of markets; and (iv) exploring new distributors and updating existing distributors to strengthen cooperation with them. The Group co-operated with distributors to strengthen the control on retail price and over the sales channels to improve the operational efficiency of the Group. The total number of bottles of wine sold decreased to approximately 9.4 million in 2020 (2019 – approximately 13.6 million). Sale of red wines continued to be the Group’s primary revenue contributor accounted for approximately 65% of the Group’s revenue for the year (2019 – 73%). The Group produced a wide range of more than 100 wine products under the “Dynasty” brand to meet the demands and preferences of different consumer groups mainly in the mass-market segments in the PRC wine market. During the year, the Group launched a new high end product, i.e. Dynasty Chinese Zodiac Commemorative Dry Red Wine for the Geng Zi Year of the Rat, integrating the high quality with the Chinese zodiac culture and leading the rise of Chinese-style fashion products. The Group also launched Dynasty Jiuxiang Rose Liqueur series earlier this year. Moreover, the blockbuster products, i.e. the second generation of Dynasty Merlot Dry Red Wine series, made their debut on the market in May, targeting business banquets as a model for business use. Meanwhile, the Group released Dynasty Seven-Year Reserve Dry Red Wine series, positioning high-end market with national banquet quality. In September 2020, the Group unveiled its strategic plan for its brandy business and launched 3 new brandy products, namely Dynasty V.S.O.P. Brandy Aged 8 Years, Dynasty V.S.O.P. Brandy Aged 10 Years and Dynasty X.O. 18 Years Old Brandy. The introduction of these new products not only enriches the product matrix and culture elements of Dynasty’s brandy, but also enhances its overall brand positioning. The new products are expected to become new growth drivers for Dynasty’s brandy business. The current new brandy product strategic plan also plays a key role in the implementation of its “5+4+N product strategy”, among which “5” represents the five key series of products namely, air dry series, seven-year reserve series, merlot series, classic series and best selling series, to achieve the goal of full coverage for all mainstream price segments; “4” refers to the four advantageous categories i.e. dry red wines, dry white wines, brandy and sparkling wines, to increase the vertical market share; and “N” stands for development of various customised products to meet the diversified needs of Chinese consumers. Moreover, the Group also sold foreign branded wines mainly imported from France, Italy, Germany, Austria, Australia, New Zealand, Chile, Spain and the United States in the PRC wine market through the Group’s existing distribution network to introduce some classic “old world” and “new world” varietals to cater for a market niche preferring the taste of foreign premium wines. The Group currently sells about 130 imported products under approximately 20 brands. The Group believes that with the trend of increasing wealth and the disposable income of consumers for a medium-term, the demand for Dynasty and imported wines should increase. B)Online sales Online sales have become increasingly important in the PRC. The Group kept and strengthened cooperation with distributors to operate online stores on the e-commerce platforms. In addition to online stores on Tmall (天貓商城) and JD.com (京東商城), online flagship store on Pinduoduo (拼多多) platform and distribution line on Tmall Mart (天貓超市), the Group also developed new online sales channels during the year, such as the second-line sales distribution platform, social media and social group e-commerce platforms or in the form of online celebrity live delivery to further expand its sales channels and build up a new customer base. The Group strategically plans and continues putting resources for future improvement of the online sales channels and optimization of online stores interface so as to capture the change of customer consumption behavior in the PRC. During the year, the Group also offered series of new products through launching exclusive online products on an e-commerce platform and strengthened the price management of online sales of old products. The Group believes that the online platform not only serves as a business-to-customer trading platform between the Group and consumers, but also an additional marketing and promotion channel for the brand. Thus, the platform should enhance the overall business potential of the Group. Supplies of grapes or grape juice Production of quality wines greatly depends on a sufficient supply of quality grapes or grape juice. Currently, the Group has more than 10 major grape juice suppliers with whom the Group has enjoyed long-term relationships, mainly located in Tianjin, Hebei, Ningxia and Xinjiang. Ensuring reliable supplies of quality grapes and grape juices to meet the production needs of the Group’s growing business is a high priority of the Group. Thus, the Group continues to actively work with vignerons to enlarge their existing vineyards in order to enjoy better economies of scale and equip their vineyards with state-of-the-art techniques for assuring quality. For super and ultra premium wines, vignerons have adopted a disciplined approach to limiting harvest yields in order to deliver higher quality grapes. To optimise the supply network, the Group kept identifying new suppliers that comply with the quality requirements and conducted thorough tests on their grape juices before orders were placed. These procedures ensure the Group to procure quality grapes and grape juice supplies and also minimise the effect of bad harvests interrupting production. Following the entering into the master purchase agreement with Tianjin Food in November 2020, the procurement of grapes and grape juice (including unprocessed wines) from Tianjin Food not only maintained and stabilise the quality of grapes and grape juice (including unprocessed wines), but also reduced the Group’s lead time and cost of transportation and storage. Furthermore, Tianjin Food will continue to follow the guidance and advices provided by the Group in the process of grape harvesting and pressing which can ensure that the quality of grape juice (including unprocessed wines) meets the Group’s standard. Production capacity After completion of the Disposal in January 2020 and as at the end of the year, the Group’s annual production capacity decreased to 50,000 tonnes (2019 – 70,000 tonnes). Such capacity is sufficient for the Group to promptly response to the market demand and provides a platform for sustainable earnings growth. Prospects: Looking ahead to 2021, the Group expects to continue to face various challenges from fast-changing economic conditions, and the post-stage of containment of COVID-19 in the PRC and opportunities from an increasing trend of domestic consumption backed by the government support. Going forward, following the containment of pandemic, apart from intensifying the sales and marketing reform, the Group will strive to gradually improve its performance by deepening the implementation of the “5+4+N product strategy” under a demand-driven market approach. It will increase its vertical market share through four advantageous categories and will utilise customised products, which are driven by market demand, to meet the diverse and fragmented consumer demand and achieve full coverage of all price segments. With effective product strategies and a high quality and diversified product portfolio, the Group firmly believes that the “Dynasty” brand is able to attract more consumers. The Group will be persistent in meeting consumer demand by pursuing innovations for its wine series. Meanwhile, the Group will increase its investment in brand development to fully vitalise its brand and drive the development of its major products by steadily enhancing quality and controlling prices to boost sales volumes, with the aim of bringing Dynasty’s superior wines to more consumers in the PRC. Subject to the factors including the impact of the global COVID-19 situation and the market conditions in the PRC, the Group currently expects that the revenue of the Group will steadily improve in 2021 following the rebound of economy in the PRC.

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