The Asian economy, including China’s wine sector, has faced various challenges in recent years, especially under the shadow of the pandemic. However, 2023 is seen as a potential turning point for China’s wine industry, with the acquisition of Summergate Fine Wines & Spirits and Torres China by WAJIU Group being a focal point.

April 2023 saw WAJIU China acquiring Summergate Fine Wines & Spirits, followed by a strategic partnership with Familia Torres in July. Now, six months into this merger, questions arise about changes in regional distribution, sales breakthroughs, and more. We sought insights from Mr. Jin Song, Board Director of WAJIU Group and General Manager of WAJIU China, and Dan Siebers, Brand Marketing Director at Summergate Fine Wines & Spirits and Torres China.

Q1: Post-acquisition, how have distribution rights for renowned international wineries been affected?

A1: Following the acquisition, we’ve successfully integrated two unique portfolios from competing companies. Interestingly, there have been very few direct conflicts in this process where we faced a decision between two major wineries. These few instances were pivotal in streamlining our offerings and improving efficiency.

Notably, many wineries are enthusiastic about the expansion opportunities within Summergate and Torres China. Additionally, some are exploring the potential of expanding into WAJIU Wholesale. We approach this expansion with caution and a collaborative spirit, ensuring that we work closely with our wineries to support their growth and safeguard their interests.

Despite these strategic developments, it’s important to clarify that Summergate and Torres China have retained their distinct distribution strategies, continuing to be market leaders in premium on trade distribution and reinforcing our partnerships with renowned international wineries. Our commitment is to preserve the unique strengths and market presence of each partner.

Q2: In light of the recent acquisition, have there been any significant changes to the distribution rights for Summergate & Torres China’s regional distributors?

A2: Since the acquisition, there have been minimal changes concerning the distribution rights for Summergate & Torres China’s regional distributors. We have strived to maintain a stable and consistent approach in this area to ensure a seamless transition and continued efficiency in our distribution network.

Q3: How have the competitive relations and coordination between Summergate  Fine Wines&Spirits & Torres China been managed post-acquisition?

A3: After the acquisition, our main objective has been to nurture the existing brand relationships and ensure our partners’ comfort and satisfaction. Although some brands have been reassigned to enhance coordination, our approach has been to amalgamate the strengths of Summergate , Torres China, and wajiu.com , creating a more unified and efficient strategy. Notably, while the Summergate and Torres China sales teams continue to operate independently, we have appointed a single director for each channel. This director is responsible for coordinating both teams, maximizing opportunities for expansion, and minimizing any unhealthy competition. This structure allows us to maintain the unique qualities of each team while optimizing our overall market presence and effectiveness.

Q4: How has team stability been managed post-merger and acquisition within the organization?

A4: Following the merger, our strategy focused on integrating essential functional departments to optimize operational efficiency. This integration saw the merging of IT and office systems in 2023, culminating in a full system unification by 2024. Alongside this, we streamlined our warehousing and distribution processes.

In the realm of human resources, both the branding and sales departments have retained a degree of independence within this new, unified structure. The sales team has largely remained consistent, with a few strategic changes in leadership roles from either Summergate or Torres China. This reorganization has resulted in a sales leadership team comprised of 6 members, collectively boasting over 100 years of experience in the China wine market. Notably, this leadership includes the return of Dan Siebers, one of the original three executives who played a pivotal role in building Summergate in the 2000s. His comeback is a significant addition to the team, reinforcing our commitment to maintaining stability and leveraging deep industry expertise during this transformative phase.

Q5: Within WAJIU Group’s strategic framework for the Chinese market, what are the defined roles and product positioning for Summergate and Torres China?

A5: In the landscape of China’s imported wine market, Summergate and Torres China have consistently focused on the uppermost tier, excelling in premium distribution channels. This high-level positioning is key to attracting and retaining prestigious brands, though it comes with higher service costs and typically lower volume.

In contrast, wajiu.com has carved out a successful niche in direct B2B wholesale, catering to a wider market with a diverse range of over 3000 quality wines at accessible price points. While this segment boasts high volume and growth, advancing up the value chain remains a challenge due to its focus on more budget-friendly offerings.

Importantly, the combined scale of operations under WAJIU Group has brought about significant logistical efficiencies, leading to substantial cost savings while simultaneously elevating service levels. This synergy allows us to offer a broad spectrum of wine products, from high-end, exclusive labels to more widely accessible quality wines, effectively catering to varied consumer segments across China’s dynamic market.

Q6: In the wake of the merger between Summergate Fine Wines&Spirits, Torres China, and wajiu.com , what key sales accomplishments have been achieved?

A6: Our strategy post-merger focuses on sustainable and healthy growth, with the aim of revitalizing and stabilizing the operations of these combined entities by 2023-2024. This approach has led to several noteworthy developments:

By merging our operations, we have achieved considerable logistical efficiencies, enhancing our service levels and operational effectiveness. This has positively influenced our sales strategy, making us more competitive and agile in the marketplace.

The merger has notably strengthened our ability to attract and retain prestigious brands. A prime example is acquiring the exclusive label of Moutai, the world’s most popular spirit. Despite being a single brand from one country, Moutai’s market size and popularity are extraordinary, surpassing giants like Diageo. This acquisition not only bolsters our portfolio but also serves as a powerful door opener for our other key brands, enhancing their distribution and visibility in the market.

Our focus on building a stable and confident presence in the industry is being realized through these strategic steps. Aligning the strengths of all three entities, we are well-positioned for continued growth and success in China’s dynamic wine and spirits market.

Q7: In light of the digital evolution in the market, is there a plan to transition Summergate and Torres China into an online B2B platform akin to wajiu.com?

A7: Firstly, it’s important to address a common misconception about wajiu.com. Wajiu.com is not an e-commerce entity; it’s a national wholesaler that operates via an online ordering platform. This platform requires each user to submit a business license and adhere to minimum order requirements, which are 10 cases per item and 30 cases per order.

Regarding Summergate and Torres China, they will retain their unique identities, focusing on traditional brand and channel operations to cater to their high-end clientele. Their market positioning and operational approach are not immediately aligned with a transition to an online B2B model like wajiu.com.

Up to now, we have added no items from Summergate and Torres China to the wajiu.com platform. Any future integration of their products into wajiu.com will be undertaken slowly, cautiously, and in close coordination with our partners. This deliberate approach ensures we maintain the premium brand management and relationship-driven sales strategy that are the hallmarks of Summergate and Torres China, while cautiously exploring the benefits of an online wholesale model. Our strategy is consistent with our commitment to preserving the distinct value and service excellence that define Summergate and Torres China in the market.

Q8: Can you elaborate on the progress of integrating the corporate cultures post-merger?

A8: The integration of corporate cultures following the merger has been a carefully managed process. We have focused on streamlining our functional departments to create a more cohesive and efficient organizational structure. This effort has been crucial in aligning different teams and processes that were previously distinct within each company.

A key aspect of this integration has been the emphasis on recognizing and nurturing outstanding talent. By identifying and valuing individuals who align with the group’s overarching development strategy and vision, we have been able to foster a culture of excellence and innovation. This approach has helped in blending the unique strengths and values of each company into a unified corporate culture that reflects the combined ethos and objectives of the merged entities.

Our strategy has been to balance respect for the individual cultures of Summergate, Torres China, and wajiu.com, while also creating a new, unified culture that embodies the best aspects of each. This balanced approach has been instrumental in ensuring a smooth cultural integration, helping us to move forward as a stronger, unified group.

Q9: What prompted the selection of WAJIU Group, and what distinctive advantages does it bring to the table?

A9: WAJIU Group was chosen for its comprehensive array of strengths, crucial to navigating the evolving landscape of China’s wine market. The group excels in operational efficiency, sophisticated warehousing, adept supply chain management, and superior internet marketing and online platform management, essential in today’s digital-focused market.

A pivotal advantage of WAJIU Group is its Chinese roots, which align well with the current market trend favoring local operators over foreign ones. In a market that has transitioned from being predominantly foreign to local, this local understanding and expertise are invaluable. This is a global phenomenon; top importers and distributors in markets such as Japan, Australia, and the USA are locally operated, demonstrating the effectiveness of local teams in understanding consumer behavior, market trends, and cultural intricacies.

Furthermore, WAJIU Services offers a significant advantage with its efficient and professional approach, enabling about 21.43% savings in logistics costs and more than doubling service levels. This contributes immensely to our operational effectiveness and market positioning.

The acquisition of Summergate Fine Wines&Spirits and Torres China by WAJIU Group marks the next stage of development in China. It represents the first time the strengths of foreign companies have been synergistically combined with Chinese market know-how and access. This unique blend of international experience with local expertise sets a new precedent in the industry.

Industry experts agree that consolidation is a key trend in China’s competitive wine market. WAJIU Group’s strategic acquisitions not only solidify its market presence but also propel the industry forward. By integrating the capabilities of Summergate and Torres China with WAJIU’s local market acumen and logistical strengths, the group is well-positioned to significantly influence the wine sector, driving innovation and growth. WAJIU’s strategic foresight and positioning underscore its potential as a major player in shaping the future of China’s wine industry.

Contacts:  Bijie MA丨mabijie@summergate.com