6 days ago
Moutai Posts Worst Growth in Years as Chinese Cut Back on Liquor
(Bloomberg) -- Kweichow Moutai Co. delivered its worst six-month growth in sales or profit in years as China's top distiller struggles with weak consumer demand for premium beverages.
First-half revenue increased 9.2% from a year earlier to 91.09 billion yuan ($12.7 billion), while net income climbed 8.9% to 45.4 billion yuan, the company reported Tuesday. Those are the slowest semiannual increases since at least 2016, according to data compiled by Bloomberg.
The distiller, which has targeted sales growth of about 9% for the year, has seen flagship liquor Feitian's wholesale price — the fee Moutai distributors charge alcohol retailers — continue to slide and even reach a record low this year, as consumers pulled back on spending amid economic uncertainty in China. Wholesale prices for Feitian 2024 and Feitian 2025 in original packaging have declined by 16% to 17% year-to-date, according to Bloomberg Intelligence analyst Ada Li.
In a further blow to liquor prices, China's government in May issued a notice reminding officials to cut wasteful spending on travel, food and office space. The austerity drive could further risk tanking demand for liquor at government banquets and corporate events. The company even replaced its signature liquor with blueberry juice at a buffet during its annual shareholders meeting that month, local media reported.
To address falling prices, Moutai distributors in some provinces have adopted supply restrictions to channels including e-commerce platforms, according to a local media report.
Still, Moutai's earnings have been largely shielded from the volatility in wholesale prices as it sells its sorghum-based liquor, known as baijiu, to distributors at a fixed price of 1,169 yuan per 500 milliliter bottle. Smaller baijiu makers have been more exposed.
Sichuan Swellfun Co.'s profit slumped 57% and sales fell 13% in the first half, according to a preliminary earnings report. Jiugui Liquor Co. has warned first-half net income dropped by at least 90% and revenue to shrank by 43%.
'A strong rebound in baijiu is unlikely through year-end, as new anti-extravagance rules dampen demand and wholesale prices amid destocking and tight inventory controls,' said Bloomberg Intelligence's Li. Still, the fallout from the latest austerity push may be less severe than a crackdown in 2012, thanks to more adaptable producers and already-reduced government demand, she added.
Moutai shares have been under pressure due to the wholesale price weakness. The stock dropped 5.7% so far this year, compared with a 5.3% gain in the Shanghai Shenzhen CSI 300 Index. An index of China-listed liquor makers has fallen 8.8% this year.
--With assistance from Foster Wong.
More stories like this are available on
