Photo: CFP

 

Graphics: GT

Chinese high-end baijiu (white liquor) maker Kweichow Moutai Co is expected to further raise its factory prices in the second half of the current year amid the gradual recovery in the country's liquor industry, the liquor brand's distributors said.

"At the end of June, the average retail price of Moutai liquor products jumped by 50 yuan ($7.47) to 80 yuan per bottle," a distributor named Wu, based in Zhengzhou, capital of Central China's Henan Province, told the Global Times Sunday.

A similar rise is prices have been seen in other cities around the country.

In Beijing, for instance, Moutai's star product - the 500ml bottle of 53-degree Feitian - was said to have climbed to about 880 yuan, up from 820 yuan in early June.

The company, based in Southwest China's Guizhou Province, could not be reached for comment during the weekend by press time.

Both Wu and a Beijing-based Moutai distributor, who asked to be called Ren, attributed the price hike to a shortage in supply.

Moutai has reportedly already hit about 70 percent of its liquor sales targets for the year in the first half of 2016, a reflection of high demand on their products.

Moutai's supplies are unable to meet consumers' rising demands, said Wu.

Since 2015, China's liquor industry has seen a gradual recovery taking place, due in part to companies cutting outputs and diversifying product ranges in an effort to cope with hits caused by the economic downturn and the central government's crackdown on extravagance in 2013, said analysts.

Moutai's listed arm in the Shanghai bourse reported a net profit of 4.89 billion yuan during the first quarter of 2016, up 12 percent year-on-year, in comparison with the yearly growth rate of 17.99 percent and 2.96 percent over the same period in 2015 and 2014, respectively.

The net profit of China's major liquor companies was 72.7 billion yuan in 2015, up 3.29 percent from a year earlier, according to a report issued by Guangdong-based CIConsulting in June.

Given the modest recovery, many large-scale liquor brands issued plans for a 10 percent to 15 percent price rise in March, Yang Qingshan, a Beijing-based independent liquor expert, told the Global Times on Sunday. 

Moutai's arch rival Wuliangye Yibin Co, whose net profit grew 31.9 percent year-on-year in the first quarter of 2016, increased the retail price of its 52-dregree liquor product by 20 yuan on March 26, according to the Guangzhou Daily.

Price hikes among big liquor brands are expected to last through the second half of the year.

Wu noted that the price of Moutai's 53-degree Feitian may reach 1,000 yuan per bottle by the end of this year, thanks to the "traditional sales season amid a wave of festivals and national holidays."

Still Yang expressed his concern for whether prices could stay at such a relatively high level in the next year.

"China's liquor industry has reached the bottom and started to rebound," he said.

"The recovery is still bumpy and the sector needs at least two years to get back to its golden age of 2012," noted Yang.

The price tag of 53-degree Feitian once reached a high to 2,000 yuan in 2012.

Yang noted that the overall liquor industry is confronted with overcapacity and fierce competition, making it a struggle for medium- and low-end brands to survive and difficult for big brands to expand.

Against this backdrop, liquor makers including Moutai, Wuliangye and Luzhou Laojiao are eyeing the overseas markets.

In a 2015 annual report issued by Moutai, the company showed great interest in international markets, stating that Chinese liquor companies currently have just a 1 percent stake in the global market, indicating a large potential growth.

Wuliangye is promoting its brand in countries around the world, including Italy and Australia, according to the company's website.

A report issued by Shenzhen-based research firm Askci Corp in May said that China's liquor sector had $109.2 million of exports in the first quarter of 2016, an increase of 76.7 percent from a year earlier.

"China's liquors especially Fenjiu [a spirit distilled in Fenyang, North China's Shanxi Province] and Erguotou [a liquor made from sorghum] which are clear liquor flavors similar with vodka are appealing to foreign consumers," said Yang.

Brands like Moutai and Wuliang can earn a position in the overseas market through their high brand value, he noted.