* Kweichow Moutai set for weakest H1, FY growth
* Analysts expect growth to bounce back in 2015
* Investors help drive shares up 36 pct YTD
* Moutai reports H1 results later on Thursday
By Adam Jourdan
SHANGHAI, Aug 28 Chinese premium liquor maker
Kweichow Moutai Co Ltd is winning over investors
with a sales strategy that shows other top-end brands how to
survive Beijing's anti-luxury drive.
The company's fiery baijiu liquor, which outsells vodka
worldwide, was the tipple of choice for China's elite, but
Beijing banned it from official banquets in 2012. At over $300 a
bottle, it was deemed too opulent for state functions
Moutai has been cutting prices and its online sales and
distribution deals have attracted a wider range of consumers and
reduced its reliance on dwindling government spending.
Those moves have helped drive the company's shares in
Shanghai up 35 percent this year compared to the benchmark
CSI300 Index which has remained flat.
The fate of Moutai is a potential lesson for premium product
makers in China from global No.1 luxury group LVMH Moet Hennessy
Louis Vuitton SA to cognac maker Remy Cointreau SA
, who have also seen their China sales drop.
"Like Moutai, I wouldn't be surprised if other mass luxury
brands look at new ways to move their products in China," said
Ben Cavender, principal at China Market Research Group.
"We're at a stage now where brands are trying to hook in the
next generation of consumers, who are very tech-savvy and are
used to buying things online."
Kweichow Moutai did not respond to requests for comment. The
company releases its first-half results on Thursday and is
expected to see a small net profit gain.
Moutai narrowly avoided its weakest-ever profit growth last
year and profit for 2014 is expected to rise 5.4 percent, its
slowest rate ever, according to 18 analyst polled by Reuters.
In order to survive and thrive below the radar of
officialdom, the former icon of opulence for China's generals
and the envy of rivals for its eye-watering profits has pushed
more sales online, halved its prices and boosted tie-ups with
This has made the brand more affordable to the average
buyer. The cost of Moutai's core product, Feitian 53°, dropped
from around 2,200 yuan (US$358) in 2012 to around 950 yuan now.
These moves were a major departure for a company once fined
for illegally protecting its high prices. But the shift has
convinced 17 of 19 analysts polled by Reuters to recommend the
stock a "buy" or "strong buy". None recommended it a "sell".
Baijiu makers and sellers are trying to tempt more private
drinkers to move away from official spending that previously
made up half of all sales, analysts said.
"The government crackdown on public spending targeted
officials using public funds to treat guests. It doesn't mean as
an individual consumer I can't still buy Moutai," said a
Zhejiang-based government official, who asked not to be named as
he is not permitted to speak to the press.
Premium baijiu makers like Moutai face not only the
challenge of surviving the anti-luxury drive, but still contend
with consumers not totally won over by the drink's pungent taste
and high alcohol level.
"Before Moutai was just too expensive. Now the price is
okay, but I still won't buy much," said Zhang Hong, 47, a
partner at a travel agency in the city of Wenzhou. "The truth is
I just don't like the taste."
Bar owners like Simon Dang, co-founder of Capital Spirits in
Beijing, are playing host to baijiu producers and distributors
eager to learn how to target younger drinkers.
"It's going to take some time to change the perception of
baijiu, but we're seeing that a relaxed bar setting is becoming
a popular way to enjoy it," he said.
($1 = 6.15 Chinese yuan)
(Editing by Matt Driskill)