China Liquor Giant Moutai Sees Lowest Sales Growth in Five Years

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(Bloomberg) -- Chinese alcohol giant Kweichow Moutai Co. sees sales growth tumbling to its weakest in five years as the coronavirus outbreak causes a historic pullback in the world’s largest consumer economy.

The distiller expects full-year sales to rise about 10% from a year ago, it said in a filing with the Shanghai stock exchange on Tuesday. The projection is its lowest since the 1% growth it forecast in 2015, when China’s anti-corruption campaign saw government officials abandon purchases of luxury items including Moutai’s ultra-premium liquor.

The sales growth target was announced after Moutai posted 15% sales growth in 2019 to 88.9 billion yuan ($12.5 billion), in line with expectations. Profit climbed 17% to 41.2 billion yuan, it said.

While Moutai has since roared back from the anti-corruption setback to post even higher growth in recent years amid strong demand from China’s growing middle class, the coronavirus could potentially be a longer-lasting blow. China is now re-opening its economy after containing its domestic outbreak through draconian lockdown measures, but consumers are still fearful of social gatherings or returning to restaurants and bars.

Chinese grain liquor, or baijiu, is a social drink enjoyed during large banquet feasts and a liquor usually brought out for celebratory occasions. In its post-virus reality, Chinese consumers are signaling a preference to stay home and have pivoted to using live-streaming for social experiences like clubbing and fitness classes.

Still, the scarce supply of Moutai liquor, which has a five-year distilling period, should help prop up sales, and analysts see the epidemic’s impact on the high-end baijiu industry as temporary. Moutai’s stock, an investor favorite, has rallied 16% over the past month.

The Guizhou-based company is also going through a leadership transition after naming a former government official its new chairman last month. The move to install Gao Weidong, 47, at the helm is its second change of leadership in two years as the distiller undergoes restructuring to bypass its cozy network of distributors, who were often accused of taking kickbacks from customers.

©2020 Bloomberg L.P.

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