Constellation Brands Sets Sights On Chinese Wine Market

Constellation Brands Inc. (STZ) is ramping up its Chinese operation as the winemaker looks to capitalize on a growing thirst for its offerings there.

The company, whose brands include Robert Mondavi and Kim Crawford wines and Svedka vodka, has installed a senior executive in Hong Kong to build its infrastructure there and in coming weeks will formally announce a leader for its Asian business, Chief Executive Rob Sands said in an interview.

Sands said imported table wines are a particularly attractive opportunity. The Chinese market for table wine was estimated to have expanded in excess of 20% annually over the five years to 2010, with the market for imported bottled table wines growing at over triple that rate, according to an April report from Rabobank. The bank values the Chinese market for imported bottled wine around $655.7 million, the bulk from red wines.

Sands said Constellation is formulating its strategy for how to break into the country, which can be hostile to outsider businesses. It may grow via its own organization or consider a partnership or acquisition.

Constellation already has a connection in the Chinese alcohol market, importing Tsingtao beer to the U.S. via Crown Imports, a partnership with Grupo Modelo SAB de CV (GPMCY, GMODELO.MX).

Constellation may face increasing competition from local winemakers such as Dynasty Wine Ltd., China Great Wall Wine Co. and Changyu Pioneer Wine, whose products have been growing in popularity.

Meanwhile, other liquor players have stepped into the Chinese market as well. Earlier this month, LVMH Moet Hennessy Louis Vuitton SA's (LVMUY, MC.FR) Moet Hennessy announced a partnership with a state-owned agricultural company to develop a Chandon-branded sparkling wine in the Ningxia Hui Autonomous Region in northwest China. Pernod Ricard SA (PDRDY, RI.FR) also grows in Ningxia.

-By Melissa Korn, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com

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