Chinese Market Opportunity for Imported Wine Grows
By 2009-2-15 9:53:41
RGLC Secures Foothold in China through Investment in GuaongZhou Awa Wine Co.: Regal Life Concepts, Inc. is a publicly traded company with headquarters in Phoenix, Arizona. RGLC is in the process of exiting the legacy bamboo flooring business and strategically positioning itself in the health, wellness and lifestyle arena. The Company has identified two major growth industries that will become its target markets – Health and Wellness Tourism, and the Wine Distribution Market in China. As a key component of the Company’s wine distribution strategy, RGLC has acquired an initial stake of 26% in GuaongZhou Awa Wine Co., Ltd. (Awa Wine) – a growing China based wine import and distribution business described in more detail later in this report. Upon the successful achievement of various business milestones, RGLC also has the option to increase its equity interest to 51% in Awa Wine.
Wealth Creation Drives Demand for Higher End Goods: The China growth story is not news to any investor, but a look at a sampling of various economic data from the World Bank1 and U.S. Central Intelligence Agency2 helps to provide a framework from which to consider the historical and likely future trends in the markets for all goods, including higher end products that become increasingly more affordable as disposable incomes rise:
- The average income in China was $293 in 1985 and $2,025 in 2006, a compound annual growth rate of approximately 10% over 21 years.
- Population stands at approximately 1.33 billion, with a labor force of over 800 million.
- China contributed 1/3 of global economic growth in 2004.
- Real GDP grew 9.8% in 2008 to $7.8 trillion. U.S. GDP for 2008 was $14.6 trillion, after growing at 1.4%.
- GDP has increased more than 10x since 1978, and measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2008 stood as the second-largest economy in the world after the US, although in per capita terms the country is still lower middle-income.
The Opportunity for RGLC: Imported wine is a status symbol that increasingly is both desirable and affordable for the growing Chinese middle and upper classes. This trend is evidenced clearly by data from the Chinese Customs Service, which reports that wine imports have grown 57 times since 1995, a compound annual growth rate of 130%. With the acquisition of Awa Wine, RGLC is strategically positioning the Company to capitalize on this highly attractive market opportunity.
Wealth Creation Drives Demand for Higher End Goods: The China growth story is not news to any investor, but a look at a sampling of various economic data from the World Bank1 and U.S. Central Intelligence Agency2 helps to provide a framework from which to consider the historical and likely future trends in the markets for all goods, including higher end products that become increasingly more affordable as disposable incomes rise:
- The average income in China was $293 in 1985 and $2,025 in 2006, a compound annual growth rate of approximately 10% over 21 years.
- Population stands at approximately 1.33 billion, with a labor force of over 800 million.
- China contributed 1/3 of global economic growth in 2004.
- Real GDP grew 9.8% in 2008 to $7.8 trillion. U.S. GDP for 2008 was $14.6 trillion, after growing at 1.4%.
- GDP has increased more than 10x since 1978, and measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2008 stood as the second-largest economy in the world after the US, although in per capita terms the country is still lower middle-income.
The Opportunity for RGLC: Imported wine is a status symbol that increasingly is both desirable and affordable for the growing Chinese middle and upper classes. This trend is evidenced clearly by data from the Chinese Customs Service, which reports that wine imports have grown 57 times since 1995, a compound annual growth rate of 130%. With the acquisition of Awa Wine, RGLC is strategically positioning the Company to capitalize on this highly attractive market opportunity.
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