December 27, 2019 / 11:44 AM / a month ago

China's Kweichow Moutai to reopen e-commerce firm next year amid overhaul

BEIJING/SHANGHAI (Reuters) - Chinese luxury liquor maker Kweichow Moutai (600519.SS) will open a new e-commerce company next year after abruptly shutting its old one, as it pursues a revamp following the arrest of its former chairman, local media reported on Friday.

FILE PHOTO: A bottle of Moutai Liquor is seen on display in a showroom at Moutai Liquor Culture center in Renhuai, Guizhou province, China June 3, 2017. REUTERS/Stringer

The company’s Moutai liquor is often served at official banquets and business dinners and has seen demand surge as China’s burgeoning middle-class gets a taste for pricier drinks. Its fiery Feitian 53 baijiu sells for close to $250 per bottle.

In May, the company’s former chairman Yuan Renguo was dismissed from his posts and expelled from the ruling Communist Party after being accused by the party’s graft buster of offences including taking bribes. Reuters has not been able to contact Yuan to comment on the allegations.

Yuan’s ousting came amid a broader campaign against corruption led by Chinese President Xi Jinping.

Moutai’s current chairman, Li Baofang, has launched a package of reforms with a focus on standardizing its extensive network of distributors at a time when demand for the company’s liquor exceeds supply.

Local media outlets such as financial magazine Caixin have reported this year that Moutai’s lucrative distribution business had been plagued with graft due to the high returns distributors could get from obtaining a license from the firm.

The company, which could not be reached for comment on Friday, shut its e-commerce platform ten days ago, without giving a reason.

In a meeting with distributors on Friday, Li said the company would relaunch a revamped version next year, according to local media such as the state-owned China Securities Journal.

Recent results reports show the liquor maker stopped cooperating with 607 dealers in 2018, and 597 more in the first half of this year, cutting the total number of dealers to 2,415.

It also established a wholly-owned subsidiary sales office earlier this year to sell directly to customers.

The Shanghai-listed firm has seen its share price almost double this year, making it one of the most expensive companies in China and the world’s most valuable spirits company.

Last week, Li said at another event with distributors that sales revenue had reached 100 billion yuan this year.

The company expects to sell 34,500 tons of Moutai in 2020, up 11% on this year, according to a stock market filing on Friday.

Reporting by Sophie Yu and Brenda Goh; Editing by Mark Potter

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