China’s tea companies hard-pressed to successfully list
May 21, 2013 Leave a comment
China’s tea companies hard-pressed to successfully list
Staff Reporter
2013-05-20
A Bama Tea store. (Photo/CFP)
Despite having capital support, tea enterprises find it very challenging to get listed on the A-share market in China, owing to their small revenue scale, limited profit-earning capabilities, poor internal management and limited scope for business expansion.
The Fujian-based Bama Tea recently hit headlines on the mainland with news of it preparing to launch an initial public offering (IPO) after acquiring funds totaling 150 million yuan (US$24.4 million) from four venture capital companies.
However, Bama’s ambition to become China’s first listed tea company is “very unlikely,” China Business News reported. “The possibility is very small,” the newspaper said, citing Ouyang Daokun, secretary-general of the China Tea Leaders Club.He was personally not optimistic about the stock market launch of a tea company, Ouyang said.
Since the 1990s, no Chinese tea enterprise has succeeded in getting listed on the stock market, according to the report.
Last year, the Fujian Anxi Tiekuanyin Group was expected to enter the A-share market as it had reached the last leg of the journey involved in its stock market launch. Its sprint at the time encouraged many other tea businesses to do the same.
Anxi Tiekuanyin later withdrew its IPO on Jan. 7. Another tea company, Hua Xiang Yuan, gave up its IPO application in April. So far, none of tea companies on the mainland have realized the dream of becoming China’s first tea A-share, the China Business News reported.
In Ouyang’s eyes, no tea company could overcome the three challenges to get itself listed, which are namely a small revenue scale, limited profit-generating capability and poor internal management of the company, the newspaper said.
In addition, a vertical business model is also a blockade, according to Ouyang, who explained that most active tea companies in China started their business from tea gardens, before building their own brands.
Bound by tea gardens, tea enterprises are unable to expand and establish a regional monopoly, the business leader said.
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