Higher Prices Fuel Profit Jump for Chinese Liquor Titan Moutai

(Bloomberg) -- China’s Kweichow Moutai Co., the world’s most valuable distiller, posted a 40 percent jump in first-half profit on higher prices for its ultra-premium lines and growing sales for non-core brand liquors.

Net income rose to 15.8 billion yuan ($2.32 billion) in the six months ended June 30, the company -- which is based in the mountains of China’s Guizhou province -- said in an exchange filing on Wednesday. Revenue climbed 38 percent to 33.4 billion yuan.

Moutai boosted its annual revenue forecast in March after raising prices, including those for its core baijiu product Flying Fairy, by an average 18 percent from the start of this year. The fiery grain liquor, traditionally the toast of choice among China’s leaders, has found widespread popularity among the country’s middle class as they embrace a more affluent lifestyle.

The company -- which overtook Johnnie Walker-brand owner Diageo Plc as the most-valuable distiller last year -- is also pushing sales of its cheaper and more accessible non-core brand liquors. That will help Moutai sustain growth as it faces supply constraints with Flying Fairy, according to Sealand Securities analyst Chunsheng Yu. In May, the company said that non-core brand liquor sales, which currently account for 10 percent of company revenue, were up 84 percent from a year earlier.

Shares of Moutai dropped 1.6 percent on Wednesday as equities in China’s mainland markets retreated. Since the start of the year, the stock has climbed 2.5 percent, a lackluster performance compared to its staggering 109 percent gain in 2017.

©2018 Bloomberg L.P.