Kweichow Moutai Dodges Weakest Ever Growth, Eyes Bounce

on March 24 2014 | in Daily Headlines Trending | by | with No Comments

Kweichow Moutai Co Ltd , whose premium, fiery liquor “baijiu” has been hit by a fierce luxury crackdown in China, beat market estimates to dodge its weakest ever profit growth on Monday.

China’s top baijiu maker saw 2013 net profit rise 13.7 percent to 15.1 billion yuan ($2.43 billion), above market estimates of 14.6 billion yuan, though a sharp drop from 52 percent growth last year and the second slowest since listing as it grappled with a slower economy and government-led crackdown.

But Moutai has seen its stock rebound by a third this year, far outpacing the wider Shanghai index, as it shows its ability to maintain sales and profit growth despite facing its “most difficult year”.

But despite cut-price deals and online tie-ups that have begun to win back investors, the shares are still down by close to 40 percent since China launched the crackdown in 2012.

Once the tipple of China’s generals and political elite, Moutai was famed for its high prices, often pumped up by the company itself to stoke the brand’s exclusive image among the officials, military and executives who would serve the drink at banquets and give it as gifts as a sign of prestige.

But prices have halved, with Moutai’s famous “53° Feitian” brand dropping from over 2,000 yuan ($320) in 2012 to around 1,000 yuan now. The firm has also launched more affordable, mid-range products to attract mainstream shoppers.

Lower prices and a more diverse consumer base will raise costs and squeeze margins for Moutai, meaning the sky-high growth rates of the last decade are unlikely to be repeated.

Read more at Reuters.

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