Chinese Baijiu production has declined for five consecutive years and consumer demand has been weakening year by year. Under this background, liquor enterprises have launched a capacity expansion competition. The reporter of Beijing business daily learned that up to now, Maotai, Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) , Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) and other leading liquor enterprises have issued notice of production expansion. It is worth noting that the head of Baijiu enterprises in the announcement stressed that the expansion plan will be achieved after the implementation of quality liquor production capacity. On March 31, the reporter of Beijing business daily sent an interview outline to Kweichow Moutai Co.Ltd(600519) relevant people on the expansion of liquor enterprises and other related issues, but the other party did not give a clear reply.
China’s food industry analyst Zhu Dan Peng pointed out that the expansion of production and expansion is behind the competition of liquor companies from the aspects of brand tonality, service system, quality and customer stickiness. Chinese Baijiu has entered the high-end node.
intensive production expansion
Output has declined year after year, and consumer demand has become more rational. Chinese Baijiu pattern has changed. According to the National Bureau of statistics, in 2021, the total liquor production volume of the above scale Baijiu enterprises reached 715.63 million liters, a slight decrease of 0.59% compared with the same period last year. This data is far from the 13 million 583 thousand and 600 tons of liquor making enterprises in China’s Baijiu Enterprises above Designated Size in 2016.
According to the data compiled by the reporter of Beijing business daily, in March this year, Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) announced that it plans to invest 9.102 billion yuan to build and implement the expansion project of original liquor production and storage of Fenjiu 2030 technical transformation (phase I); In February, Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) announced that it planned to invest 9.076 billion yuan to implement the project of intelligent brewing and storage center in the South plant area; In January, Kweichow Moutai Co.Ltd(600519) announced that it had decided to invest 4.11 billion yuan to implement the phase I construction project of Maotai flavored wine Xishui tongminba during the 14th five year plan. In addition, a number of liquor enterprises have issued investment and expansion project announcements. It is worth mentioning that in the announcement of expansion of Baijiu liquor enterprises, the quality of raw liquor has become a hot word.
The reporter of Beijing business daily sent an interview outline to Kweichow Moutai Co.Ltd(600519) about the progress of expanding the production capacity of high-quality raw wine, but Kweichow Moutai Co.Ltd(600519) relevant persons did not give a clear reply.
Zhu Danpeng said that since 2019, it is easy to see from the development trend of the industry that the Baijiu industry has entered the stage of high-speed differentiation. The head enterprises will rely on their brand effect, scale effect, quality resources and the holding of listed companies to win the competition in the future Baijiu industry. Small and medium-sized Baijiu enterprises will slowly withdraw from the market, and some provincial leading enterprises will also encounter some oppression. Baijiu Baijiu is developing from price orientation to value orientation, and the demand for high-end liquor is further expanded. In this context, the Baijiu liquor enterprises have been distributing high-end liquor.
swarmed to the high-end Bureau
There is an inseparable relationship between quality liquor and high-end Baijiu products. Insiders pointed out that high-end Baijiu products must be high-quality, high quality wines, otherwise consumers will not recognize accounts. In recent months, the expansion of listed liquor enterprises has focused on the head liquor enterprises, production area representatives, category representatives, etc. The purpose of expanding production is to further strengthen high-end products, which need sufficient high-quality base wine reserves. Especially now, high-end products are developing towards the concepts of vintage wine and old wine.
Soochow Securities Co.Ltd(601555) released Baijiu Baijiu special report analysis, said that the market size of Baijiu high-end liquor belt in 2020 was close to 150 billion yuan, accounting for 24% of the total liquor industry revenue. The 20162020 year high end liquor market scale compound growth rate was 26%, far exceeding the annual average compound speed increase of -1.2% of the industry scale. In addition, Soochow Securities Co.Ltd(601555) expects Baijiu high price to have a 20162020 year compound sales growth rate of 15% and a compound annual growth rate of 9%.
It is worth noting that in recent years, the proportion of high consumers willing to pay a premium for high-quality products is expanding. The data show that in 2020, the number of high net worth people in China with investable assets of more than 10 million reached 2.62 million, and the growth rate of the number from 2016 to 2020 was 13%. In addition, according to McKinsey’s prediction of the development trend of China’s middle class, the proportion of the upper middle class was 14% in 2012, and it is expected that the proportion of the upper middle class will increase to 54% in 2022, becoming the proportion of the main consumer population.
Cheng Wansong, Secretary General of Beijing liquor circulation association, pointed out that although Baijiu has excess capacity, the proportion of quality liquor is relatively small. In the trend of consumption upgrading, there is an objective contradiction between supply and demand that there is no shortage of wine for a long time, but there is a lack of good wine. Therefore, qualified liquor enterprises will step up the expansion of high-quality liquor production capacity to fill the gap in the market.
roll behind the fierce battle
In succession, the notice of expanding production was launched, and new products of high-end Baijiu were introduced. The inward rolling of Baijiu enterprises was booming and the industry was filled with smoke.
Data show that in 2021, Baijiu liquor enterprises completed business income of 603 billion 348 million yuan, an increase of 18.6% over the same period last year. The total profit was 170194 billion yuan, a year-on-year increase of 32.95%. In addition to the above production decline, Chinese Baijiu industry’s revenue and profits have achieved two digit growth.
Chinese Baijiu industry has been developing rapidly, the industry pointed out. The development trend of the new Baijiu quality cycle has basically been achieved.
Kweichow Moutai Co.Ltd(600519) analyzed the current Baijiu industry’s pattern and trend in its annual report 2021. There are three major development trends in the industry. The industry is further improving quality and efficiency, further improving industrial concentration and upgrading consumption structure. In this context, the market share of the industry continues to concentrate on advantageous brands, advantageous production capacity and advantageous production areas; The structural growth pattern will exist for a long time; High quality Baijiu consumption demand will drive quality and famous liquor development.
In the Baijiu industry, the trend of change, the wine enterprises to expand production to find new growth point is not without reason. However, for wine enterprises, expanding production is not entirely a good thing.
Cheng Wansong said that quality is the cornerstone of liquor enterprises development, and capacity is the cornerstone of quality control of liquor enterprises. Because capacity is the scale advantage that Baijiu liquor quality control must have, enough capacity can meet the needs of excellent and medium quality, and meet the needs of liquor blending, so that old wine can be stored. Therefore, production capacity is an essential part of enterprise competitiveness. Of course, capacity expansion will inevitably bring pressure on enterprise capital turnover and debt ratio. At the same time, it will also put pressure on regional ecological and environmental protection. Therefore, capacity expansion should be carried out according to its capacity and should not be expanded blindly.
