High-end liquor growth slows

   Date:2012/05/15

High-end liquor producers are not likely to repeat their rapid growth as in 2011, analysts said yesterday, given that the demand for high-end liquor is expected to remain weak amid a slowing economy.

Liquor prices have been falling for almost four months. The retail price of Wuliangye of 52 percent alcohol by volume has dropped almost 20 percent from the Spring Festival peak to some 1,100 yuan ($174.01) per bottle.

The price of high-end Moutai is also declining. The Moutai of 53 percent alcohol by volume is currently sold at some 1,600 yuan per bottle, nearly 400 yuan less than the peak price of 2,000 yuan during the Spring Festival holidays.

"It is unlikely for the sector to repeat the rapid growth of 2011, and the whole industry will experience slowdown in 2012," Chen Gang, an industry analyst with Sinolink Securities, told the Global Times yesterday.

In 2011, Kweichow Moutai reported net profit of 8.76 billion yuan, up 73 percent year-on-year, and Wuliangye Group saw its profit surge 40 percent to 6.16 billion yuan.

The sector carried that growth momentum into the first quarter of 2012, when Wuliangye achieved net profit growth of 46 percent and Kweichow Moutai 57.6 percent.

But analysts said that it will take time before the recent drop in prices reflect on the producers' profits, predicting that the prices are unlikely to see a big rebound within this year.

Chen noted that with a slowing economy and government curbs on expenditure on official banquets, demands for high-end liquor are expected to remain the same or even a bit lower than that of 2011.

Zhao Yong, an analyst with Haitong Securities, told the Global Times yesterday that the whole sector has reported a high growth of 49 percent in net profits in 2011, but this year, the growth may drop to some 30 percent.

Some liquor producers are trying to build their own distribution channels, which sell liquor products at factory prices. Zhao noted that this will help to control the retail prices, since distributors used to reap huge profits by pushing up the retail prices.

Moutai announced in April that it will build its own distribution channel, with initial investment of 850 million yuan. The company said the channel will account for 10 to 20 percent of its total sales in the future.

But Chen said that liquor producers will still rely heavily on traditional distributors in the long term, after all, "they have accumulated vast resources during the past few years."

Source:chinesestock

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