Finally! Guizhou Moutai (600519) couldn’t sit still and decided to raise prices again after a 6-year hiatus. On the night of October 31, the company issued a major announcement, stating that, after careful consideration, it would increase the factory prices of its 53% vol Guizhou Moutai liquor (Feitian and Wuxing) starting from November 1, 2023, with an average increase of around 20%.
Guizhou Moutai clarified that this adjustment does not affect the company’s market-guided price (CNY 1,499 per bottle). However, this price adjustment will have a certain impact on the company’s operating performance. It’s worth noting that the factory price for the 53% vol/500ml Feitian Moutai has been consistently set at CNY 969 per bottle, while the recommended retail price by manufacturers in the market is CNY 1,499 per bottle. However, due to high demand exceeding supply, the actual market price has been significantly higher than the recommended retail price.
According to today’s liquor price data, the market price for a 53% vol/500ml Feitian Moutai in 2023 is approximately CNY 2,900 per bottle, while the price for individual bottles is around CNY 2,600. Clearly, there is a significant gap between the market price and the factory price for Feitian Moutai, which has led to questions about Moutai’s price control and the substantial loss of profit potential for the publicly-traded company. As per the latest announcement, the factory price increase is estimated to be around 20%, which means an increase of approximately CNY 200 per bottle for the 53% vol/500ml Feitian Moutai.
Why is Moutai raising factory prices? In response to the sudden late-night price hike by Guizhou Moutai, Cai Xuefei, the General Manager of Zhiqu Consultancy and a liquor industry analyst, told Securities Times·e Company reporters, “Prices are determined by market supply and demand. Moutai has become a blend of ‘consumer product,’ ‘luxury item,’ and ‘investment item,’ with strong essential demand in the corporate, gifting, and high-end banquet markets.”
Cai Xuefei further pointed out that with the continuous implementation of relevant economic policies and the gradual recovery of domestic social consumption, Moutai’s market demand remains robust. Considering Moutai’s limited production capacity, the current high season for liquor consumption in the fourth quarter and stockpiling for the Chinese New Year, the price increase by Moutai has a reasonable market foundation. It also aligns with Moutai’s efforts to maintain market control and improve the company’s profitability.
Additionally, Xiao Zhuqing, a Chinese liquor industry commentator, stated to Securities Times·e Company reporters that the characteristic of market economy laws is that when supply exceeds demand, prices decrease; when supply falls short of demand, prices rise. Moutai liquor has consistently faced high demand exceeding supply, and the market price for a case of Moutai liquor has remained at around CNY 2,900 to CNY 3,000 per bottle for a long time. This factory price increase by Moutai comes after nearly six years without a price adjustment. It is a reasonable and normal business practice to make moderate adjustments to the factory prices of certain products, considering the company’s long-term development and the stability of the market.
According to Xiao Zhuqing’s understanding, this increase in factory prices by Guizhou Moutai primarily affects consumer-familiar products, such as the “Pu Moutai,” which includes the 53% vol 500ml Guizhou Moutai liquor (Wuxing and Feitian) and other milliliter variations of the Feitian series (e.g., 53% vol 50ml Guizhou Moutai liquor, 53% vol 200ml Guizhou Moutai liquor, 53% vol 375ml Guizhou Moutai liquor, 53% vol 1L Guizhou Moutai liquor, etc.). Additionally, adjustments were not made for the 53% vol 100ml Guizhou Moutai liquor (iMoutai) and the premium, rare, and luxury product series.
Regarding the performance of the Moutai liquor market, Xiao Zhuqing believes that the current consumer demand remains strong. With no price adjustments made in over five years, the increase in factory prices aligns with the national drive for consumption recovery. This move will boost confidence in the Baijiu (Chinese liquor) industry, meet investor expectations, and bolster confidence in the capital market regarding Moutai and the Baijiu sector. In fact, Moutai’s high demand for its liquor signifies a buoyant index for social interactions among private entrepreneurs and indicates confidence in China’s economic recovery.
Cai Xuefei also expressed a similar view, stating that Moutai, as an industry benchmark, holds significant value as a market indicator. This price increase will help boost the currently sluggish industry confidence. A reasonable price increase expectation will stimulate and drive related consumer growth. Simultaneously, it aligns with long-term capital market demands and serves the long-term interests of shareholders, thus providing a certain safeguard for Moutai’s stable development.
Cai Xuefei, however, advises that given the current relatively tight market demand, the change in retail prices will not be significant. The specific market reaction to Moutai’s price increase will need further observation.
Indeed, despite continuous growth in its business performance in recent years, Guizhou Moutai, as a leading player in the liquor industry, has seen its stock price on the secondary market not perform as expected. Since reaching CNY 2,627.88 per share in February 2021, Guizhou Moutai’s stock price has been on a continuous decline, and as of the closing on October 31, 2023, the stock was trading at CNY 1,684.58 per share. On October 19, Guizhou Moutai experienced a nearly 6% decline, and on October 20, intraday trading briefly hit a new low at CNY 1,616.25 per share, the lowest since December 2021.
On the evening of October 20, Guizhou Moutai officially released its third-quarter report for 2023. During the period from January to September, the company achieved operating income of CNY 1032.68 billion, representing an 18.48% year-on-year increase. It also achieved a net profit of CNY 528.76 billion, showing a year-on-year increase of 19.09%. However, in the third quarter alone, Guizhou Moutai’s business performance showed a significant slowdown compared to the first half of the year. In the third quarter, it achieved operating income of CNY 336.92 billion, with a year-on-year growth of 14.04%, and a net profit of CNY 168.96 billion, with a year-on-year growth of 15.68%. In contrast, in the first half of the year, Guizhou Moutai had operating income and net profit of CNY 695.76 billion and CNY 359.8 billion, with year-on-year growth rates of 20.76% for both.