Ping An View:
At the macro level: smooth the fluctuations and resolve the crisis. Baijiu has passed through the economic downturn. We reviewed the time nodes when the macro-economy experienced great fluctuations and sudden external shocks: 1) the financial crisis broke out in Asia from 1997 to 2004, and the macro-economy entered the downward range, superimposed the impact of tax reform, Qinchi bulk liquor and other events, and the Baijiu industry fell into a cold winter. In 1998, the Baijiu production fell by 25.4% year-on-year. After 1999, various liquor enterprises led the recovery of the industry through marketing reform and the introduction of medium and high-end products. The ton price of Baijiu increased rapidly, and the industry walked out of the trough smoothly. 2) After the financial crisis in 2008, the demand for Baijiu in politics and Commerce dropped sharply, and the market fell into a liquidity crisis. Led by the rapid economic development of Anhui, Jiangsu and other provinces, real estate wine has expanded greatly to drive the development of the industry. With the stimulus of the 4trillion financial plan, the demand for Baijiu has gradually warmed up, and the industry will welcome the spring again. 3) From 2020 to 2021, the covid-19 epidemic broke out. At the initial stage of the epidemic, the fundamentals of the Baijiu industry were under pressure, and the consumption scene of middle-end liquor was damaged. However, the stability of the performance of high-end liquor has stabilized the volatility of the industry. After the epidemic situation has improved, the consumption scene has been replenished, and the Baijiu industry has rapidly warmed up.
Industry level: after many policy changes, Baijiu has not changed for the better. 1) After the promulgation of the policy of restricting public consumption in 1989, various liquor enterprises have successively arranged brand marketing, and the advertising liquor represented by Qinchi is brilliant. 2) In 2012, the consumption structure of Baijiu was changed due to the policy of restricting the consumption of “three public services”, the proportion of government consumption decreased from 40% to less than 10%, and mass consumption became the mainstream. At the early stage of the policy promulgation, the demand for Baijiu showed a precipitous decline, which had a significant impact on the industry. Subsequently, all liquor enterprises seized the historic opportunity brought by consumption upgrading, actively carried out changes in brands, channels, governance and products, and arranged sub high-end and high-end products. As a result, the industry turned to structural growth and the prosperity continued to rise. 3) Consumption tax is also an important factor affecting the Baijiu industry. Under the trend of heavier tax burden and stricter collection and management, winning by price has become the mainstream. The concentration of Baijiu industry has increased and entered the stage of squeeze growth.
Enterprise level: in the face of emergencies, all liquor enterprises quickly adjust and are not afraid of short-term difficulties. 1) Jiugui Liquor Co.Ltd(000799) because of the plasticizer event, the revenue and net profit in the fourth quarter of 2012 fell by 42.9% and 67.7% respectively, superimposed with negative events such as the disappearance of RMB 100 million deposits, the company suffered continuous losses in 13-14 years, and the operation of the company suffered heavy losses. After COFCO became a shareholder in 2015, its product marketing channels worked in three ways to promote high-end products, and the reform was effective. In that year, its revenue increased by 54.8% year-on-year, successfully leading the brand recovery. 2) In 1997, Luzhou Laojiao Co.Ltd(000568) slipped into the low-end camp due to the wrong low price strategy, and then adjusted the route to launch Guojiao 1573 to revitalize the development of the main Baijiu industry. After the three public policies in 2012, the company raised the price against the trend. Due to the weak control over the channel, the price upside down occurred, and the revenue fell by 48.7% in 2014. Subsequently, the company’s management adjusted its products and channels and returned to the 10 billion camp in 2017. 3) In 2019, Shede Spirits Co.Ltd(600702) was embezzled by Tianyang, which buried the hidden danger of operation. In 2020, Fosun will take over and be willing to actively adjust the channel strategy, alleviate the capital problem and help the company get back on track.
Regardless of the macro and micro changes, Baijiu has the ability to cross the cycle. The driving force of consumption upgrading is an important reason for the Baijiu industry to go through the cycle. With the increase of per capita income, the mainstream price band of Baijiu has been continuously upgraded, successfully opening the ceiling of high-end Baijiu and the expansion space of the industry. All Baijiu enterprises have gained new vitality through product upgrading. At the same time, the reform and progress of various wine enterprises are also the basis for the development of the industry. Under the crisis, various wine enterprises timely adjusted their product structure and marketing mode. Therefore, the occurrence of the black swan incident did not change the long-term supply and demand structure of the industry. In recent years, Baijiu channel dividends have weakened. Baijiu enterprises no longer rely on a single channel model, but promote the franchise model through e-commerce, group purchase and other channels to establish a new manufacturer relationship. In terms of marketing mode, Baijiu enterprises pay more attention to the cultivation of end consumers, focusing on circle marketing and delivering brand value. From the perspective of Baijiu itself, China has a long liquor culture. Under the cultural attribute, Baijiu integrates social attribute and collection attribute, and its vitality is enduring. We are optimistic about the future performance of Baijiu, and we suggest paying attention to three main lines: first, a national leading liquor enterprise with high quality represented by Kweichow Moutai Co.Ltd(600519) ; Second, firmly open the sub high end of the national expansion strategy, recommend Shede Spirits Co.Ltd(600702) , and pay attention to Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) ; Third, regional liquor enterprises that fully benefit from the upgrading of consumption in the province recommend Anhui Gujing Distillery Company Limited(000596) , pay attention to Jiangsu Yanghe Brewery Joint-Stock Co.Ltd(002304) , Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) , Anhui Yingjia Distillery Co.Ltd(603198) , etc.
