Kweichow Moutai Falls into the Swamp Again After People's Daily Criticism

Consumer Staples Author: Yue Liu Editor: Luke Sheehan Aug 06, 2020 08:37 PM (GMT+8)

The market value of Kweichow Moutai, a prestigious Chinese liquor company, surpassed the GDP of Kweichow province in 2019.

Image credit: EqualOcean

The Guizhou Provincial Market Supervision Department conducted administrative interviews with all Moutai dealers in the province. It required all dealers to follow the 'five nos:' not to increase the price, not to hoard in order to drive up prices, not to cooperate with the 'scalper parties,' not to sell infringing and counterfeited products, and not to fabricate sales records to avoid supervision.

This is the company's second turmoil since the People's Daily criticized Kweichow Moutai's high stock price. According to industry insiders, dealers have never increased prices, and they believe that the price needs to be controlled below CNY 2,600. Only when the income level of residents rises will the increase in retail prices be put back on the agenda.

Moreover, rising prices are not the only option to increase revenue and profits. Moutai can reduce the number of dealers and increase earnings through direct sales. But this move is to redistribute resources instead of making the 'cake' bigger, with a production capacity of up to 50,000 tons per year. With the decline in revenue growth in the past two years, Moutai needs to explore new ways to win over investors.