Hillhouse, Sequoia-backed Chinese baijiu brand Jiangxiaobai closes $137m for its distillery unit

Hillhouse, Sequoia-backed Chinese baijiu brand Jiangxiaobai closes $137m for its distillery unit

Jiangji Distillery, a unit of Chongqing Jiangxiaobai Liquor Co, has secured a strategic investment of 1 billion yuan ($137.4 million) from a state-owned investment platform to build the largest light-aroma baijiu production base in southwestern China.

Jiangxiaobai raised the fresh capital from a platform owned by the local government in Jiangjin District in southwestern China’s Chongqing City.

Beijing-based Zhong Lun Law Firm, the legal advisor to Jiangxiaobai that announced the deal in a recent statement, said the latest investment came after Jiangji Distillery raised “hundreds of millions of Chinese yuan” earlier this year.

As part of the deal, Jiangxiaobai and the Jiangjin government have formed a partnership to build a 10-billion-yuan ($1.4 billion) modern industrial cluster in Jiangjin District, which lies along the upper reaches of Yangtze River, to aggregate distilleries with sorghum farms.

As a latecomer to the country’s baijiu industry, Jiangxiaobai differentiates itself from longer-established, more staid liquor makers such as China’s state-controlled Kweichow Moutai Co and Wuliangye Yibin Co by appealing to two previously neglected consumer groups, millennials and the generation after that, Gen Z.

The decade-old company has roped in well-known investors, including Hillhouse Capital Group and Sequoia Capital China, to back its quest for exploring new opportunities in China’s baijiu market. Domestically, the baijiu market reached 643.4 billion yuan ($88.4 billion) in 2021 and was poised to become a near-1-trillion-yuan ($137.7 billion) industry by 2025, according to market researcher iiMedia Research.

Founded in 2012, Jiangxiaobai claims to have become profitable since 2014. The firm’s annual revenue came close to 3 billion yuan ($412.2 million) in 2019, according to the company, before the COVID-19 pandemic started to weigh on its growth performance.

Jiangxiaobai was reportedly valued at about $1.6 billion before its completion of a $300-million funding round led by China Renaissance, according to a Bloomberg report in September 2020, citing people familiar with the matter. The people said that Baillie Gifford & Co and China Merchants Bank International Capital Corp were among the investors who participated in the round.

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