Author：Yue Liu Editor：Luke Sheehan Jun 18, 2020 06:15 AM (GMT+8)

Will Langjiu, the Chinese spirits company, become the second Kweichow Moutai?

A bottle of Langjiu. Image Credit: Langjiu

► Langjiu’s profits increased by 140% and 237% respectively in 2018 and 2019.
► Having generated revenue in 2019 which was only one-tenth of Moutai, Langjiu has a lot of catching up to.

Langjiu Group released its prospectus on June 5, 2020, which saw it plan to issue no more than 70 million shares on the Shenzhen Stock Exchange, after stranding twice in 2007 and 2009. If the company is listed successfully, the total market value could reach about CNY 80 billion.

In the past two years, Langjiu Group, adopting a distribution model, experienced rapid development. Revenue increased by 12%, and net profit increased by 237% over the same period in 2019.

The 'baijiu' maker's product structure is divided into high-end, sub-high-end, middle-end and low-end alcohol, with high-end beverage revenue accounting for 38.45%.

Founded in 1903, the company suffered sharply declining sales and losses due to its limited brand awareness after 1998. Wang Junlin took over the company as Chairman in 2002, giving it a new life. In ten years, the group shifted from loss to revenues of CNY 10 billion. The baijiu 'invader' leapt into the public’s perspective with beautiful financials.

Wang Junlin, whose ambition not only covers the liquor industry, stepped into the real estate, financial and medical fields to expand his business. Taking the Chengdu Wanhua Investment Group as an example, one of Wang Junlin’s companies, we find it concentrated in the financial, commercial, health and vacation sectors, aiming to build a creative industry cluster.

Wang Junlin is likely to become the richest man in China’s alcohol industry, but the market is full of challenges. According to data from the National Bureau of Statistics, in 2019, there were 1,176 liquor companies above designated size across the country, a figure which had been on a downward trend for two consecutive years.

The competition in the liquor industry has intensified over the years, and the trend of centralization is noticeable. Excepting Moutai and other leading companies, most liquor brands are showing a downward trend in sales. Although Langjiu and Moutai both produce 'sauce-flavored' alcohols, in 2019, Moutai’s income was ten times that of Langjiu.

“In the domestic sauce-flavored liquor industry, Moutai is the leader, followed by Langjiu, and each product has its characteristics. Langjiu does not have to catch up with anyone, instead, it is fully devoted to serving users, and ultimately the consumer has the final discretion,” said Wang Junlin, chairman of Langjiu.