As the Mid-Autumn Festival and National Day approach, the baijiu market ushers in the traditional peak season for consumption. However, the wholesale price of Maotai, the skyrocketing star of baijiu, has not risen but instead fallen, continuing the recent trend of price decline.

The latest reference price from last week shows that the wholesale price of Maotai in 2024 has fallen to 2595 yuan/bottle, breaking through the 2600 yuan mark. Many analysts in the baijiu industry believe that the current problem in the entire baijiu industry is the insufficient purchasing power in society. As the supply of famous liquor continues to increase, its scarcity will also decrease. If demand growth lags behind, the pressure on prices will further increase.

Regarding the issue of price decline, Zhang Deqin, the chairman of Maotai, responded at the semi-annual earnings conference held on Monday, stating that the overall situation of the Maotai market is relatively stable. Zhang Deqin said:

Maotai attaches great importance to the market situation. The company conducts in-depth market research in various provinces and regions, holds market working conferences in various provinces and regions, and has in-depth discussions and exchanges with dealers, e-commerce platforms, group buying representatives, and representatives of provincial self-operated channels. It continuously improves a systematic and coordinated strategic and tactical system. The overall market situation is relatively stable.

Net income growth slowed in the first half of the year

On August 8th, Maotai released its first financial report after the change of leadership. The results showed that Maotai's revenue in the first half of this year reached 81.931 billion yuan, a new historical high, with a year-on-year growth of 17.76%; the net income attributable to the parent company was 41.696 billion yuan, with a year-on-year growth of 15.88%; however, both revenue and net income growth slowed compared to the same period last year. Calculations revealed that Maotai's average daily net profit in the first half of the year was close to 0.23 billion yuan, higher than the 0.199 billion yuan in the first half of the year.

Zhang Deqin made the following summary of the first half of the year's performance:

The company's operational objectives are scientifically formulated based on factors such as production, market, and base liquor. The board of directors and the management team will fulfill their duties and responsibilities diligently to ensure the timely completion of the annual growth target of 15% in total revenue. As for the growth rate for next year, the company will disclose it in a timely manner after making relevant decisions through the proper procedures.

Moutai liquor has not increased its dealers.

At the earnings conference, Jiang Yan, Deputy General Manager, CFO, and Board Secretary of Moutai, stated that Moutai liquor has not increased its dealers, and the 18 new ones are all distributors of the Moutai series. The company has no changes in its Moutai liquor distributor policy at the moment.

According to the semi-annual report, in terms of sales channels, Moutai's direct sales revenue in the first half of the year was 33.728 billion yuan, a year-on-year increase of 7.3%, accounting for 41.2% of the total revenue. In the same period last year, the proportion was 45.16%. Wholesale and agency revenue was 47.986 billion yuan, a year-on-year increase of 26.5%.

Regarding the increase in the proportion of wholesale channel revenue in the first half of the year, Jiang Yan responded that the wholesale channel revenue of the company increased significantly year-on-year in the first half of the year, mainly due to the higher factory prices of 53% vol Moutai liquor (Feitian, Wuxing). Therefore, the proportion of wholesale channel revenue increased, but the company's wholesale channel sales policy has not been adjusted.

The production volume is normal.

Due to the increased price volatility of Feitian Moutai in the first half of the year, the decline in production capacity has also become an important issue of concern for investors.

Jiang Yan stated that Moutai liquor is brewed using a natural open solid-state fermentation process, and the production volume fluctuates within a certain range, which is considered normal. So far, six rounds of fermentation for the 2024 production year have been completed, and the seventh round has started. The overall base liquor production is within the normal range.

According to public data, in the first half of 2023, Kweichow Moutai completed the production of Moutai liquor base liquor with a volume of 0.0446 million tons; in the first half of 2024, the production volume of Moutai liquor base liquor was about 0.0391 million tons.

In December 2022, Kweichow Moutai plans to invest around 15.516 billion yuan to build the "14th Five-Year Plan" technical renovation and construction project of Moutai liquor. After the project is completed, it can increase the annual production capacity of Moutai liquor by approximately 0.0198 million tons.

Zhang Deqin stated that, based on the current progress of the engineering and construction, the company has established the Thirty-One Workshop for liquor production, and plans to start production from this year's Double Ninth Festival. According to the Moutai liquor production process, this additional production capacity will not be put into the market until at least 5 years later.