A bottle of "Ling Jiang Guo" liquor is displayed on a table at a press conference that Wahaha held in Beijing Tuesday. Photo: Courtesy of Wahaha

Zong Qinghou, Wahaha's chairman Photo: Courtesy of Wahaha

 

Hangzhou Wahaha Group Co Ltd, China's leading beverage producer, launched its own baijiu (white liquor) brand Tuesday, a move that experts said is a good sign for China's liquor industry which has been faced with falling sales recently.

In a press conference in Beijing Tuesday, Wahaha launched its first liquor, named "Ling Jiang Guo," a result of tie-up between Wahaha and Jinjiang, a baijiu producer located in Maotai town, Southwest China's Guizhou Province, Wahaha told the Global Times Tuesday via e-mail.

Maotai town is the production place of Moutai, a famous high-end baijiu in China. Ling Jiang Guo, like Moutai, is also baijiu and produced by Jinjiang, which has significant experience in producing this type of liquor, according to the e-mail statement.

Wahaha looked at several liquor enterprises in Guizhou Province before making its decision after careful consideration, Yang Qingshan, executive president at the China Brand Strategy Association, told the Global Times Tuesday.

Wahaha chose the right time to enter the industry, Yang said, noting it is more cost-effective to invest when the industry is in recession.

China's liquor market, especially the high-end sector, has been cooling down since the central government launched an anti-extravagance campaign early this year.

The total revenue of 13 listed Chinese baijiu enterprises in the first three quarters dropped 3.17 percent year-on-year, and the total net profit decreased 6.33 percent year-on-year, news portal chinanews.com reported Monday, noting it is the first time the industry has witnessed falling profit in nine years.

Zong Qinghou, chairman of Wahaha, said the cooperation was facilitated by local governments in Guizhou Province and the investment is to support the development of Chinese liquor industry, China National Radio (CNR) reported Tuesday.

Zong was the wealthiest Chinese in 2012 and the second wealthiest in 2013, according to the Forbes China Rich List 2012 and 2013.

The price of Ling Jiang Guo will be between 100 yuan ($16.39) to 400 yuan, so it is a mid-end product, and will not be affected by the government's anti-extravagance campaign against high-end products, a PR staff member of Wahaha who wanted to be anonymous told the Global Times Tuesday.

The New Year and Chinese Spring Festival holidays are coming up, Yang said, noting it is wise to launch a new liquor product in the peak sales season.

Building a new liquor factory takes a long time and requires complicated technology, so Wahaha chose to cooperate with a proven liquor maker, Yang said, noting Wahaha was cautious about its entry in the liquor industry.

Wahaha provides the capital, marketing and sales network while Jinjiang is responsible for production, the staff member said.

The investment from Wahaha, a very well-known enterprise in China, encourages the liquor industry, Yang said, adding that Wahaha is very likely to make a bigger move such as buying shares of liquor makers in the future if the cooperation goes well.

The staff refused to reveal the amount of its investment. According to the CNR report, the amount is 15 billion yuan.

Although liquor is also a part of the drinks industry, its distribution network is different from soft drinks which is Wahaha's main business, Yan Qiang, a partner of Beijing-based Hejun Consulting, told the Global Times Tuesday.

Investing in a different industry is risky and Wahaha should hire professional personnel to handle the new business instead of relying on its own experience like what the company did in entering the retail sector by opening a shopping mall in Hangzhou, East China's Zhejiang Province, which has been performing poorly, Yan said.