Since this year, with the rise of raw materials, labor and other costs, the consumer goods industry is ushering in a new round of price rise cycle, and various industries such as oil, salt, soy sauce, vinegar and snack milk have joined the ranks of price rise. Before the Spring Festival, the liquor industry also made a noise. Recently, many Baijiu, beer and yellow wine enterprises announced the price increase plan.
For some kinds of wine, it is indeed facing pressure of cost. But for most Baijiu enterprises, they are sitting on high gross margins, but they are frequently rising prices. What is the consideration behind them?
It is not difficult to find from the announcement that most of the reasons for the price increase of beer and rice wine enterprises are related to the rising cost. The author previously learned from the market visit that since this year, most of China’s carton, glass, aluminum, barley, corn and other raw materials have increased by 20% to 60%, which has brought great pressure on the production cost of wine enterprises, especially some wine varieties with low profit level.
For example, the rice wine enterprise Zhejiang Guyuelongshan Shaoxing Wine Co.Ltd(600059) that recently announced the price increase raised the price of its fruit wine, relief, color varieties, champion Red and other products by 5% – 20%. In 2020, the average gross profit margin of the above products was 29.88%. According to wind data, the sales net profit margin of Zhejiang Guyuelongshan Shaoxing Wine Co.Ltd(600059) in the first three quarters of this year was 11.54%.
The situation of beer enterprises that successively increased their prices in the same period is similar. At the performance briefing in the first half of this year, the management of China Resources beer disclosed that the cost of packaging materials and other raw materials rose sharply in the first half of this year, bringing a cost increase of at least 4%. The data show that the net sales interest rates of China’s two major beer giants Tsingtao Brewery Company Limited(600600) and China Resources beer in 2020 are 8.38% and 6.45% respectively. Therefore, it is not difficult to understand the collective price rise of the beer industry.
The Baijiu industry, which has been repeatedly heard this year, has also seen a wave of collective price rises at the end of the year.
For example, recently Wuliangye Yibin Co.Ltd(000858) announced the price increase plan for the eighth generation Wuliangye Yibin Co.Ltd(000858) of its core products, increasing the unplanned price from 999 yuan / bottle to 1089 yuan / bottle, the planned price of 889 yuan / bottle remains unchanged, and the contract volume inside and outside the plan is 3:2. It is estimated that, taken together, the ex factory price of the eighth generation Wuliangye Yibin Co.Ltd(000858) has increased from 889 yuan to 969 yuan, an increase of nearly 9%.
Luzhou Laojiao Co.Ltd(000568) followed up and raised the planned quota supply price of Guojiao 1573, a 52 degree and 38 degree core product in North China and other regions; In the same period, Shede Spirits Co.Ltd(600702) , Jiannanchun, Anhui Gujing Distillery Company Limited(000596) and other well-known liquor enterprises also adjusted the prices of their mainstream products.
But compared with the two Baijiu varieties, the logical relationship between liquor price increase and cost growth is not so close.
The author notes that Baijiu liquor enterprises raise their prices mostly by their core high-end products. Such products do not have high cost pressure, and the channel bargaining power is very strong, which can transfer costs to channels, terminals and consumers. Meanwhile, the sales margin of Baijiu enterprises is mostly between 70% and 80%, and the net interest rate is between 20% and 40%, especially for the famous liquor enterprises.
It is quite common for the Baijiu Baijiu to rise in the “small step” and “jog” style since the recovery of the Baijiu industry in 2015.
Baijiu Baijiu Baijiu, on the one hand, although the supply of liquor industry is oversupply, in recent years, with the upgrading of consumption in China, liquor consumption is concentrating on the head brand, while the liquor making enterprises of the head also benefit from it. Because of its limited capacity, “scarcity” has also become an important factor in boosting the price of high-end liquor. While the Baijiu liquor enterprises increase their performance revenue through raising prices, they also make use of the unequal resources and constantly push the control and price increase according to their own strategic needs to further create “scarcity”.
On the other hand, it is related to the particularity of Baijiu products, especially the high-end baijiu. It is not only a product of liquor and drink, but also plays a role of social media, namely, human contact, business exchange, drinking and gift consumption. China’s Baijiu Baijiu has long consumed its social attributes, so it has more specific requirements for liquor brands and price benchmarks.
Baijiu Baijiu Baijiu is an asymmetric product, so it is difficult for consumers to determine their value through the product itself. Most of them are judging the value of liquor through the brand and price of Baijiu. Therefore, liquor companies frequently raise prices, which is also a market tool to seize the price band, consolidate channels and maintain their own brand value.
China’s high-end Baijiu prices have entered a new historical high. After nearly two years of market, the brand strength of some Baijiu brands has already overdrawn, and it is difficult to sustain its rising prices, and the growth of its performance has slowed down. However, due to inertia, the Baijiu industry has continued to maintain a small market strategy for sustained price increases this year.
The author believes that although high-end Baijiu has its particularity and market dividend, it is still a consumer product. After all, it can not jump out of the market rule of supply and demand. If we simply use the price to influence the market and ignore the market environment, we may be faced with the bubble and business risk caused by the fault of consumer groups. Especially in the epidemic situation, consumers are becoming more rational. If the price of Baijiu finally exceeds the consumer’s recognition and consumption ability, consumers will vote with their feet.
(First Finance)
