Prices for Chinese liquor drop ahead of Spring Festival
Well-known Chinese baijiu brands including Moutai and Wuliangye have lowered their prices just before Spring Festival, which is usually the peak season for liquor sales.
The price cuts come amid a recent ban on alcohol in military units, as well as a commitment by the central authorities to crack down on extravagance in Party organs, government departments, public-funded institutions and State-owned companies.
At Hai Yan, a chain store that sells tobacco and alcohol in Shanghai, prices for Moutai and Wuliangye have dropped by 700 yuan ($112).
A sales representative at Shanghai First Food Mall on East Nanjing Pedestrian Road in downtown Shanghai said the prices of all Moutai liquors have been slashed by 10 percent, while the prices of Wuliangye have not changed.
The price of Moutai at the Changcheng chain store of tobacco and spirits of Shanghai Huaihai Commercial (Group) Co Ltd in Shanghai has been reduced by 500 yuan.
Moutai has now fallen out of the top 10 preferred brands for gifts among Chinese millionaires, according to Hurun Report's 2013 Chinese Luxury Consumer Survey.
The drop in popularity came "on the back of a public debate about whether government officials, the largest customer base for Moutai, should be allowed to consume a brand which is effectively a luxury brand with its main product retailing at 1,800 yuan a bottle, and also a health scare involving the use of plasticizers", said Rupert Hoogewerf, founder and chief researcher of Hurun Report.
Yuan Renguo, Kweichow Moutai's chairman, said at the recent two sessions of the legislative and consultative bodies in Guizhou that the company will slow its growth rate to reach an 18 percent year-on-year rise by the end of this year.
Stocks of major listed liquor makers slumped on Monday, with Moutai dropping more than 5.58 percent and Wuliangye falling more than 2 percent.
According to iFind, a financial information product developed by Zhejiang Hithink Flush Information Network, Moutai lost more than 10.9 billion yuan in market value on Monday, and the 13 major listed baijiu stocks lost a combined 26 billion yuan. Since November, the 13 companies have seen their market value shrink by about 200 billion yuan.
Yang Chengping, chief adviser of Jiangxi Association for Liquor and Spirits, said the drop in value has been compounded by a decline in overseas capital flowing into the Chinese baijiu industry.
"Overseas money flooded the Chinese baijiu industry in 2008, especially speculating on the price of Moutai. Now they are retreating from the market and thus the recent decline in prices," Yang said.
But the most urgent issue for the baijiu industry is introducing a production standard, Yang said.
"With this price fluctuation and industry adjustment, we hope Chinese baijiu will make their brand names better known and provide consumers products which are safe and of better quality," he said.