Saturday, June 21, 2014, 11:36
Moutai looks to spread reach in China
By Qiu Bo in Beijing and Jia Tingting in Guiyang

Kweichou Moutai, the maker of of high-end liquor that is a staple of elegant Chinese banquets, will lower the threshold for franchisors in unexploited areas to further extend its dealership network.

Experts see the campaign as aiming to engage in the mass market and burn off current inventories. Enterprises and individuals can apply for dealerships at county-level, provincial capital-level or economic development zones where the brand does not have a presence yet, Kweichou Moutai said in an online statement.

An insider, who asked not to be named, said an earlier note from the company had forecast the possible launch of 100 to 200 new dealerships this year.

Meanwhile, the baijiu giant also laid out extremely strict ground rules for applicants, such as more than two years' liquor-trade experience, top-three sales performance in local areas and strong social relationships with mature sales teams.

Applicants are also required to accept annual sales targets of over 4.5 tons that can cost as much as eight million yuan ($1.28 million).

But the terms have been significantly loosened from the entry barrier of 30 tons that cost more than 60 million yuan a year as of last July.

Moutai is obviously seeking to embrace a mass market, which is good news for general consumers, said Long Hewen, a baijiu expert working for the research policy center of the Provincial Party Committee of Guizhou, where Moutai comes from.

"Though Moutai's market campaign looks aggressive, it suggests that the brand is giving up the luxury tag and seeking a more rational market approach," he said.

After President Xi Jinping took office in 2013, China's new leadership embarked on a campaign to eradicate corruption and cut extravagant spending.

The brand's top seller, Flying Moutai, which has 53 percent alcohol by volume, has slashed prices recently. A bottle that cost over 2,000 yuan in 2011 was priced at 1,200 yuan last year and even less now in the market.

"Moutai is just not as profitable as it used to be," said Li Ding, a 25-year-old dealer in Guizhou.

"Moutai is now priced at 900 yuan a bottle, after the government's curbs on lavish spending," said Li, who began to sell Moutai two years ago.

"Dealerships' profit margin has fallen, but it won't stop new dealers from hopping on board," Long said. "The brand still has its irreplaceable influence."

"Moutai is grabbing more market share by increasing stores," said Wang Wenming, a 50-year-old dealer in Sichuan with Kweichou Moutai Group.

"Profit margins might be diluted, but Moutai's market expansion will generate a bigger customer base, which in turn will boost sales," said Wang.

On the other hand, reaching this year's sales goal is also seen as a major step by companies to accelerate Moutai's distribution, said Xia Linlin, an expert in the industry. "Don't forget they have overloaded inventory to clear out."

Many luxury liquor brands have been struggling this year. Kweichou Moutai lately announced it will adjust its sales target to a 4 percent year-on-year growth this year, the lowest in the past five years.

In 2013, sales revenue for high-end liquor showed a year-on-year decrease of 63.56 percent, while only Moutai maintained a growth of 16.88 percent, according to the China Alcoholic Drinks Association.

Contact the writers at qiubo@chinadaily.com.cn and jiatingting@chinadaily.com.cn.