Moutai Expects Sales Growth to Slow After Reaching 5-Year Low

Chinese liquor giant Kweichow Moutai Co.. expects revenue will grow 10.5% in 2021, a further easing after posting its slowest annual sales increase in five years in 2020 due to the pandemic’s drag on consumer spending.

The sales forecast, reported Tuesday, misses the consensus of 15.9% in a Bloomberg survey of 30 analysts.

The world’s most valuable distiller reported revenue growth of 11% in 2020 to 94.9 yuan ($14.4 billion), while full-year net income grew 13% to 46.7 billion yuan. The finalized numbers were slightly better than preliminary figures and net income figures released by the company at the start of the year.

The weaker-than-expected sales forecast figure reflects Moutai’s inability to raise prices despite strong, virtually inelastic demand, as Chinese regulators frown on its status as a coveted item often used in bribery. Still, the state-owned behemoth is moving to increase direct sales channels so it can control prices better, and is expanding production capacity, Sanford C Bernstein analysts led by Euan McLeish said in a note earlier this year.

The distiller has been cautious about raising the price of its prized fiery liquor to avoid attention from China’s regulators, instead of pursuing ambitious growth. The increase in direct sales is also a response to Chinese regulators’ call against distributors hoarding and bidding up the price.

Cash-Rich Moutai to Boost Investments in Impoverished Province

It’s been several years since Moutai has raised the factory-gate price of its core baijiu product Feitian, which has stayed at 969 yuan a half-liter for three years. The retail price, however, surged to about 3,000 yuan from 2,000 yuan at the beginning of 2020 as China’s growing middle class sought out bottles of the liquor, made out of sorghum and wheat.

Moutai’s stock is one of China’s most expensive, and has been a favorite of investors over the past several years, with gains driven by institutional money and fund managers piling in for fear of losing out among peers because of insufficient exposure.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.