A mere half-hour bus ride from the charming city of Renhuai in Guizhou province, where China's most iconic traditional baijiu brand Moutai was born, lies a new, highly industrialized production facility that will manufacture a new line of affordable white spirits.
Kweichow Moutai Co Ltd, the producer of China's national spirit Moutai, started the construction of its recycling industrial park in 2014 in a move to popularize a product that was perceived as too expensive for the average Chinese consumer.
A joint venture between the baijiu producer and its partners, this eco-friendly industrial park is due to be fully completed in 2018.
The first phase of the project, which includes the mass-made liquor facility, has already been completed and put into production.
Moutai expects to produce an average of 40 million bottles here of the mid-end baijiu every year.
The new line of affordable white spirits will use the same ingredients of the company's signature product, the Flying Fairy.
"The waterwaste from the Moutai distillery is being used in the new plant for the fermentation process," said Yang Mingkai, deputy manager of the Moutai recycling project. "It is the same production process, including the same sorghum and wheat used in the premium Moutai liquor. The only difference is that the process is more industrial to increase production."
Founded in Guizhou province, Moutai is one of China's largest baijiu makers with a strong brand heritage.
Traditionally, Chinese consumers have associated the Moutai brand with special celebrations such as weddings and national holidays. The high-end liquor is also a favorite at State banquets and other celebrations.
"Chinese people like the brand but not everyone can afford our products," Yang said.
Priced between 50 yuan ($7.7) and 100 yuan, the new line of affordable spirits will complement Moutai's core portfolio of premium strong sorghum-based drinks, generally sold above 800 yuan a bottle in the market, the company said.
In 2013, the Chinese government launched an anti-corruption campaign aimed at counteracting the wasteful spending of local officials by banning the drink at government banquets.
The implementation of the austerity measures has had a lasting impact on the sales growth of China's largest spirits maker.
In 2014, at the peak of the anti-extravagance campaign, total retail sales of Chinese spirits reached 488.7 billion yuan, a decline of 1.7 percent from 2013, according to market research firm Mintel.
New adjustment
Nowadays, baijiu brands are actively working on strategies to increase their turnover, particularly the launch of mid-priced products and a focus on online distribution channels to appeal to a wider audience.
"Our marketing practice is continuously changing," said a spokesperson for Moutai. "We have responded to market changes by cutting prices and concentrating on the quick turnover strategy of low-margin products."
Moutai said the change in strategy has helped improve profitability and increase sales. In January, the company posted a 25-percent rise in sales from the same period last year.
"The slowdown of market growth has forced major players to focus more on the mass consumer market," said Hao Qiu, a research analyst at Mintel. "They have taken a more conservative approach in production to reduce inventory and lower the average retail price to reach more consumers."
This market readjustment is expected to lead to an overall recovery of the Chinese spirits industry following the weak period triggered by the anti-graft campaign.
The retail sales value of Chinese spirits is expected to grow from 508 billion yuan in 2015 to 661 billion yuan in 2019, driven by stable demand for mid-end spirits, according to Mintel.
The expansion of channels of distribution is also expected to play an important role in the sector's recovery.
Offline retail channels currently dominate baijiu purchasing, with spirits and tobacco stores, supermarkets and shopping malls being the preferred places to buy the fiery alcohol.
Nonetheless, online retail is emerging rapidly as an alternative option for buying alcoholic drinks.
In fact, Moutai already plans to start selling its new affordable line of white spirits in online stores from May.
With the rising popularity of e-commerce, Moutai said it will keep spending heavily to expand its presence in online shopping distribution channels and improve its sales network to reach a higher number of consumers.
"We attach great importance to distribution network development through e-commerce channels," said Yang Daiyong, vice-president of Kweichou Moutai Group.
"Trust me when I say that you will be able to buy Moutai online in New York in the next years," he said.
Moutai currently cooperates with more than 10 e-commerce platforms in China, including JD.com, Alibaba Group's Tmall and Gomz and does not rule out expanding into other online stores.
Moutai also said the use of big data and cloud technology is helping it understand customer needs and preferences to improve its marketing strategy and reach more potential consumers.
emmagonzalez@chinadaily.com.cn
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A Moutai executive at the company's joint venture industrial park introduces the white spirit to foreign journalists. The company's new products, using the same ingredients as its high-end baijiu that sells for about 800 yuan ($123) a bottle, range in price between 50 yuan and 100 yuan. Pang Xiaoqiao / China Daily |
