Liquor-maker expects stable share prices

An employee of Kweichow Moutai Co Ltd puts labels onto bottles of the Chinese liquor. [Photo provided to China Daily]

Prices for China's major liquor-maker Kweichow Moutai will remain steady, despite the company undergoing a surge in its share price, the company's executive managers said.

The distiller from Southwest China's Guizhou province had reported a 109 percent jump in its share price from the beginning of 2017 to reach 719.11 yuan ($108.4) Thursday.

According to its quarterly earnings report, the company's revenue grew 59.4 percent to about 42 billion yuan from January to September. During the same period, the net profits attributable to shareholders reached 19.98 billion yuan, up 60.31 percent year-on-year.

Industrial insiders said the boom was no surprise due to the unbalanced supply and demand of the company's products among the emerging middle-class customers in the market.

Yuan Renguo, chairman of Moutai Group, said that Moutai will work on preventing rapid price increases to realize sustainable development.

"The destiny of companies was decided by customers. We will improve regulation in accordance with the market rules," he said.

A 500 milliliter bottle of Feitian 53 will be sold below 1,199 yuan to wholesalers and 1,299 yuan to customers, the company said.

It has also strengthened inspections to punish retailers who deliberately stockpile goods to raise prices or do bundle sales, it said.

Moutai adjusted its production in advance of this year's National Day and Mid-Autumn Festival to meet the enlarged demand and potential rise in price during the peak season.

In the middle of August, the distiller stopped producing most of its customized liquor, reduced its sales plan for certain drinks, and increased production of traditional Moutai products.

It also asked all its dealers, shops and branches to sell at least 30 percent of products directly to customers through online platforms in order to prevent deliberate storage of goods.

The company also increased production from 2,000 metric tons to 6,200 tons, up 200 percent year-on-year, to keep the price stable, it said.

Li Baofang, general manager of Moutai Group, said sales are expected to surpass 60 billion yuan this year, while its profit is forecast to reach 30 billion yuan.

Though the company has already put more products into the market, the supply still cannot meet demand, which means its performance in the fourth quarter will depend on how many bottles it can get to distributors, industrial insiders said.

During the meeting in August, the company said it will increase the quantity of liquor products on shelves to ease the tension of supply and demand.

Other Chinese liquor-makers, including Wuliangye, Luzhou Laojiao and Fenjiu, have also showed a quick pace of development.

According to their third-quarter reports, revenue and profit both grew at double-digit rates for companies with a business scale exceeding 2 billion yuan. Their profit increased at an average of 20 percent.

Wuliangye's revenue grew 24.17 percent to reach about 21.9 billion yuan from January to September, while net profits closed at 6.9 billion yuan, up about 36 percent year-on-year.

"The Chinese liquor industry entered a new stage of growth with products that have high quality, brand influence and unique characteristics," said Xiang Ning, executive deputy head of New Food magazine.

"There's no need to feel surprised when hearing Moutai's share price exceeded 600 yuan," Xiang said. "The future will see a general growth in share prices in the industry."