(Bloomberg) -- Kweichow Moutai Co. reported a slower growth in net income in the first half of the year as the Chinese premium liquor maker copes with volatility in the price of its flagship liquor.
Net income for the first half ending June 30 rose 16% to 41.7 billion yuan ($5.8 billion), compared with a 21% growth a year ago, according to an stock exchange filing Thursday. Revenue jumped 18% versus a 20% rise a year ago. In a separate filing, Moutai said it plans cash dividends each year of no less than 75% of yearly net income for 2024 to 2026.
Moutai’s flagship liquor, Feitian, saw prices slide earlier this year as China’s sustained property slump and anemic economic recovery reduced the frequency of occasions where the high-end beverage is consumed.
The wholesale price of a bottle of 2023 Feitian Moutai in its original packaging hit an all-time low of 2,580 yuan ($360) in mid-June, 13% lower than it cost in early January, according to a note from Bloomberg Intelligence analysts.
Moutai currently sells its sorghum-based liquor, known as baijiu, to distributors at a fixed price of 1,169 yuan per 500 milliliter bottle.
The falling prices distributors charge alcohol retailers has taken a toll on Moutai’s stock. The company has seen 17% of its market cap wiped out so far this year, losing its crown as China’s most valuable stock to Industrial and Commercial Bank of China Ltd.
UBS downgraded Moutai and other Chinese baijiu stocks last month, citing capacity expansion by top distillers and high in-market inventory over the next 12 months in the weak economic environment.
The company also faces a longer-term challenge: How to appeal to a younger generation of Chinese drinkers drawn more to western alcohol like whiskey and wine, and less interested in baijiu. To expand its appeal, Moutai last year collaborated with local coffee giant Luckin Coffee Inc. on a latte laced with its liquor, and an alcohol-infused chocolate under Mars Inc.’s Dove brand.
To try and shore up prices, Moutai has limited supplies of 12-bottle cases of Feitian. While local media has reported the beginnings of a recovery in its wholesale price per bottle — on expectations that demand will increase in the run up to the Mid-Autumn Festival holiday in September — it’s still lower than early in the year.
--With assistance from Danny Lee and Neha D'silva.
©2024 Bloomberg L.P.
