China Organic Agriculture Buys Vineyard: Business or Pleasure?

In another case of a company outgrowing its name, China Organic Agriculture (CNOA.OB) has decided to buy a vineyard in California called Bellisimo Vineyard and will start selling wine in China. Bellisimo produces grapes for other wineries (including E&J Gallo) and also bottles its own Bellisimo-branded chardonnay, merlot and cabernet. CNOA calls this wine "premium", but those familiar with E&J Gallo will know that this is hardly the case. Perhaps they can fool the Chinese consumers by calling it premium California wine, but soon enough the truth will out. If there's one thing that defines the nouveau riche in China, it is that they are not stupid. At least not for long.

And of course, these grapes are not organically produced. How that fits into a company called China Organic Agriculture is far from certain.

But look at the beautiful pictures of the vineyard located just north of Calistoga in Napa Valley. Can't you imagine CNOA's management team relaxing in the beautiful Tuscan-styled villa, playing tennis next to the lush lawn, and lazing by the Olympic-size swimming pool? With an annual revenue (latest figures from 2005) of less than $0.5 million, and with only $25,000 (yes, twenty-five thousand dollars) of that from actual wine sales, I suspect this move is really less about expanding into "premium wine" and more about buying a vacation home for CNOA's own nouveau riche insiders.

When there's no one to stop you, I suspect many people out there would do the same. Wouldn't you?

My Position: None.

Comments

[td:]

Do a little DD, CNOA is going to start producing their own wines from the grapes specifically for the Chinese palate. If they bottle in china, they avoid excessive taxation, they will be well leveraged...

2008 Jun 19 11:56 AM

[td:]

From the CNOA yahoo message board...
"The Bellisimo Vineyard property is one of the more prestigious properties in Napa, located near Calistoga and produces grapes currently sold to Gallo and Ledson wineries. Wine sold from Bellisimo grapes are sold at prices over $60 per bottle by both wine companies. The 2004 Knights Valley Bellisimo ‘Meritage’ blend recently received the Gold Award at the 2007 San Francisco Chronicle Wine Competition. The ‘Meritage’ blend is a blend of 50% Cabernet and 50% Merlot. Bellisimo Vineyard can produce up to 300 tons of grapes per year which translates to approximately 17,000 cases of wine. "

2008 Jun 19 12:01 PM

[td:]

"When there's no one to stop you, I suspect many people out there would do the same. Wouldn't you?"

Yeah and when there is no one to stop you from posting swill on seeking alpha...I suspect you will keep doing so...

2008 Jun 19 12:04 PM

[cnoa_shareh...:]

just a word of advice. you are posting speculative information rather than factual. if you have noted, the new subsidiary of CNOA will take care of the distribution of wine in china. one thing to note is that this subsidiary will not only be distributing wines from Belissimo but also wines from other wineries. Distributorship business is very key in China. So to those reading this post, this article is unfounded and is biased

2008 Jun 19 12:20 PM

[PDTC:]

from all the Chinese companies I follow,one constant seem to emerge....'they never ever tell you the truth'
do your own research and it will convince you.
Being gullable is very dangerous inthe Chinese rush for fame and fortune, many of us will loose in the process

2008 Jun 23 08:35 AM

[mojotronic:]

CEDC is one of the most successful stocks available. Their business is distributing liquor in Eastern Europe. Take a look at their charts for the past few years. I'm not saying CNOA will have the same sort of dynamic success because I haven't researched their competition, but if they do, this move could be the best they ever made. If you're already in CNOA, no sense bailing now. If not and you're a gambler, the stock is at a low for the year.

2008 Jun 23 12:44 PM

[mojotronic:]

Demand in China for foreign wines, including those produced in California, is growing rapidly. In 2007, the import of wine into China totaled approximately 54 million bottles, representing a 125% growth from 2006, according to the latest report of the International Wine and Spirit Competition. The market share of imported wines in China increased from 6.6% in 2006 to 10% in 2007, while industry analysts project that share will reach 18% in 2008. Total wine consumption in China is expected to increase 65% from 2001 to 2010, a growth rate 6.5 times faster than the global average.

CNOA has grown their rice profits exponentially for the last three years and should have no problem increasing their profits in the fast growing wine business. I like that they're aggressively expanding their business portfolio, and seriously suspect the author of this article is short on CNOA and unable to buy back in at the moment.

2008 Jun 23 04:34 PM

[jamesNY:]

Just felt so hurt that my CNOS shares lost 40% ( almost -$10K) after the news. Donot know why? What is true there???? The price is down and down day by day?!

2008 Jun 26 05:59 PM

[KenyaInvestor:]

Man, you really think that CNOA is going to spend all their time boozing it up on a vineyard instead of running their company? This has got to be the stupidest article I have ever seen on CNOA.

With everything going on with this company, such as their decision to become a distributor and not just a grower, you have decided to make a ridiculous suggestion that they are just going to throw their company away and hang out on a vineyard?

There is only one was to categorize this article for potential investors, and that is TICKER SYMBOL: SPAM.

And BTW, I seriously doubt that you have no position in this stock, and incredibly doubt that you ever went to Oxford or Stanford or wherever else. If you did, it certainly doesn't speak well for those schools.

2008 Jul 03 11:18 PM

[Felipe:]

Project to the future is what you are doing CNO: OB is the best deal in AGRO, the world is growing in population, consumption is growing what is needed is to produce more and that is what this company is doing CNO, looking at future the share price is cheap for what it was $ 4.20, $ 0.57 today is a gift.

2008 Jul 18 04:05 PM

[Felipe:]

Rome (EFE) .- Ban Ki Moon, UN secretary general, called on Tuesday to increase food production by 50% by 2030 and overcome the food crisis worldwide, during his speech before the summit began that food security in Rome. "The world needs to produce more food. The production needs to grow by 50% by 2030 with the aim of the current Copa demand," he said.

Leaders from around the world began today in Rome summit, convened by FAO to discuss the hike of food prices and their impact on the most vulnerable populations.

During the summit, Spain pledged to implement a package of measures to combat global food crisis with a budget of 500 million euros (about 750 million dollars) until 2012. "We do not want to stay at a summit of mere words," said José Luis Rodríguez Zapatero, president of the Spanish Government.

Nicolas Sarkozy announced that his country allocated bilaterally, billion euros (about 1,550 million dollars) over the next five years to countries in sub-Saharan Africa for agricultural development.

2008 Jul 24 11:10 AM