March 24, 2014 / 3:05 PM / in 4 years

UPDATE 1-China liquor king dodges weakest ever growth, eyes bounce

* 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 (Reuters) - 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, 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 and

The firm is looking to deepen ties with e-commerce firms Alibaba, Tencent Holdings Ltd and IPO-bound, 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)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below