Companies

Skyrocketing Moutai price 'normal' says chairman

By Wang Huazhong (China Daily)
Updated: 2011-03-11 15:28

A woman selects Moutai products at a shop in Zaozhuang city, East China's Shandong province, on Jan 1. Ji Zhe / for China Daily

BEIJING - A senior executive from the China Kweichow Moutai Distillery Co Ltd - the maker of one of nation's most famous alcoholic drinks - has responded to criticism that the iconic beverage costs twice as much in China as it does overseas.

Ji Keliang, the company's chairman, told China Daily in an exclusive interview that it was "normal" for Moutai to be cheaper overseas because it was less popular among foreign drinkers.

He was speaking after Chinese consumers snapped up bottles of the "national liquor" recently following rumors of another impending price rise.

The rumors followed an earlier price hike that saw the company raise the cost of a bottle of Flying Moutai to 959 yuan ($146) from 869 yuan.

At the time of the rise, many drinkers complained that the beverage could be bought overseas for around 550 yuan.

Ji said the fact that the drink costs more in China is easy to explain. In addition to being less popular overseas, he said there were several factors.

"It is completely normal for products to be sold much more cheaply overseas for reasons including tax refunds and differences in tax systems," he said, while noting that the cost of gasoline is higher in China than in Western countries and that the extra cost adds to delivery expenses in China.

"Overseas demand for Moutai has been rising even amid the financial downturn," he added. "Our product will stand the test of time."

The company sells about 6 percent of its output overseas, said Ji, who is also a deputy of the ongoing session of National People's Congress.

"Our overseas sales will rise continuously," he predicted. "Moutai is the best distillery wine in the world."

Ji dismissed claims that strong demand from official and military channels and corruption had driven up the price of the drink in China.

"Demand from the government is almost constant, and the army uses other wines to entertain guests as well," Ji said.

"Consumption by officials has only a minor effect on the price tag. The major booster is the growth of the country's GDP, the booming economy of the private sector and surging demand from the public."

In response to an allegation that 90 percent of drinks claiming to be Moutai were counterfeit, Ji said he believes the actual figure is "lower than 3 percent".

However, during a meeting of the Guizhou delegation, Li Zhanshu, Party chief of Guizhou province, and Vice-Premier Wang Qishan both said they suspected the amount of counterfeit Moutai was higher than Ji's estimate.

Related readings:  Rising cost of raw materials causes Moutai's price jump  More than the alcohol in Moutai to make you giddy  Moutai Riddle: Pricier in China, cheaper abroad  Moutai liquor sales boom before Spring Festival

Ji added that his company had spent more than 100 million yuan on keeping counterfeit versions off the market.

Ji told China Daily the company ramped up production by 10 percent in 2010 and is now producing 20,000 tons of the brew each year.

He refused to release sales data for either the domestic or overseas markets, saying the information was "sensitive for the company's share price".

On Jan 1, the company called on retailers to limit the price of a bottle of Flying Moutai to 959 yuan. However, because of strong demand, many retailers sold bottles for several hundred yuan more than that.

"Although only about half of our agents price the liquor according to our cap, the company's intentions were good," Ji said.

"The actual retail price passed 1,000 yuan before Spring Festival but our attempts to contain the price were successful in curbing it from soaring up further."

Guizhou Governor Zhao Kezhi said on Wednesday that the latest rise in the price of Moutai was reasonable because of rising production costs.

Zhao also called on the public to battle against those who produce and sell fake Moutai.