* Liquor maker Moutai's 2013 profit up 13.7 pct
* Second slowest ever growth on China anti-luxury drive
* Moutai boosting online sales, cutting prices
* Sees 2014 as "even tougher" year for baijiu sector
(Adds Moutai earnings, recasts throughout)
By Adam Jourdan
SHANGHAI, March 24 Kweichow Moutai Co Ltd
, whose premium, fiery liquor "baijiu" has been hit
by a fierce luxury crackdown in China, beat market estimates to
dodge its weakest ever profit growth on Monday.
China's top baijiu maker saw 2013 net profit rise 13.7
percent to 15.1 billion yuan ($2.43 billion), above market
estimates of 14.6 billion yuan, though a sharp drop from 52
percent growth last year and the second slowest since listing as
it grappled with a slower economy and government-led crackdown.
But Moutai has seen its stock rebound by a third this year,
far outpacing the wider Shanghai index, as it shows its
ability to maintain sales and profit growth despite facing its
"most difficult year".
But despite cut-price deals and online tie-ups that have
begun to win back investors, the shares are still down by close
to 40 percent since China launched the crackdown in 2012.
The fate of high-end baijiu, a potent white liquor that
outsells vodka worldwide, reflects the wider challenge for
luxury brands in China as they seek to adapt to slower growth
and price-sensitive shoppers increasingly looking downmarket.
"There's not going to be the same growth as before, but
people feel that it's reached a bottom," said Torsten Stocker,
Hong Kong-based partner at consultancy firm A.T. Kearney, adding
Moutai's iconic name in China would help it muscle out rivals.
The anti-luxury drive saw Moutai's profit margin squeezed to
48.95 percent from 50.30 percent in 2012, reflecting increasing
costs as high-end baijiu makers are forced to take a more
proactive approach to marketing and sales, analysts said.
Close rival Wuliangye Yibin Co Ltd posted a 20
percent loss earlier this month, its biggest drop since 2002,
though its earnings could see a bounce from the third quarter of
this year, according to Chinese broker Hong Yuan Securities.
President Xi Jinping has cracked down on official banquets
and gifting - which analysts said accounted for around half the
sales of high-end baijiu - as the new leadership tries to calm
public anger over corruption and restore faith in the party.
"The industry is entering a 'slow growth' period. Even if
there is some recovery, it will be tough to return to the
high-speed growth of before. We predict that 2014 will be an
even more difficult year for the development of the baijiu
sector," Kweichow Moutai said in their annual report on Monday.
Once the tipple of China's generals and political elite,
Moutai was famed for its high prices, often pumped up by the
company itself to stoke the brand's exclusive image among the
officials, military and executives who would serve the drink at
banquets and give it as gifts as a sign of prestige.
But prices have halved, with Moutai's famous "53° Feitian"
brand dropping from over 2,000 yuan ($320) in 2012 to around
1,000 yuan now. The firm has also launched more affordable,
mid-range products to attract mainstream shoppers.
Lower prices and a more diverse consumer base will raise
costs and squeeze margins for Moutai, meaning the sky-high
growth rates of the last decade are unlikely to be repeated.
"Feitian's price is very favourable now. I used to drink
Moutai only at banquets, but now I can buy my own. It makes me
look so good," posted one shopper on online liquor retailer
Jiuxian.com, adding that online channels made it easier to buy.
The luxury crackdown has also hit international alcohol
makers, with Diageo Plc, Pernod Ricard SA and
Remy Cointreau SA all warning of slowing China demand.
Moutai has looked to widen its appeal, pushing increasingly
online, where it opened an official store on Alibaba's Tmall at
the end of last year. It has also offered cut price deals on
domestic online liquor retailers Jiuxian.com and GJW.com.
The firm is looking to deepen ties with e-commerce firms
Alibaba, Tencent Holdings Ltd and IPO-bound JD.com,
according to recent local media reports citing leaks from
Moutai's parent group, as it seeks to broaden its online sales
channels to target a wider range of private drinkers.
"In past they were reluctant to move to e-commerce because
they thought it would disrupt the other channels, make
wholesalers unhappy and risk disrupting the price, now they see
there is frankly no choice," said Waldemar Jap, Hong Kong-based
managing director at Boston Consulting Group.
($1 = 6.2250 Chinese Yuan)
(Reporting by Adam Jourdan; Editing by Tom Heneghan)