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Baijiu distiller becomes first to list outside of mainland China

19 April 2023 By Ron Emler

International investors will have a chance to take a slice of the giant baijiu market through distiller ZJLD as it launches its public offering in Hong Kong this week.

This week baijiu producer ZJLD will seek to raise as much as HK$6.37 billion (US$8 billion) through an initial public offering, in Hong Kong. Its first day of trading is scheduled to be 27 April.

Backed by US private equity giant KKR, ZJLD is offering 490.7 million shares at between HK$10.78 and HK$12.98 each. The minimum investment is HK$2,622 (about $350) per lot of 200 shares.

The launch will make ZJLD the first Chinese maker of baijiu to list outside the mainland. Shares of baijiu giants such as Kweichow Moutai are listed in Shanghai.

The launch comes on the back of buoyant sales in China by LVMH, which reported very strong first quarter figures on bumper Chinese spending. Baijiu market leader Kweichow Moutai also predicted that its net profit in the same period will soar by 19% against last year on sales up 18%.

International investors have been seeking entry to the baijiu market because of its high margins and resilience to economic vicissitudes.

According to ZJLD’s prospectus, baijiu accounts for 69.5% of the alcoholic beverage market in China. which it says is greater than wine’s market share in France and beer’s market share in the US.

ZJLD was founded in 1975 as a state-backed project in Guizhou province. Its flagship brand Zhen Jiu means ‘treasure of liquor’ in Chinese.

For its part, Kweichow Moutai is forecast to make net profits of CNY20.5 billion (US$2.9 billion) in the first three months of this year on sales of $5.7 billion, according to its latest earnings report.

That represents a gentle diminution from the 23.5% rate chalked up in the first quarter 2021, but maintains last year’s average growth rate of 19%.

Kweichow Moutai’s has been on a drive to expand its recent direct sales drive, including through an expansion of its own retail outlets, adjustments to its product mix (including launching a baijiu ice cream) and increased production.

But investors have noted that despite the spending boom in China so far this year, some 90% of Chinese distillers listed on its domestic stock exchanges have seen their shares slide during April, some by as much as 5%.

They are wary about the high stocks held in all sales channels after smaller producers kept up production during the Covid lockdowns and who are now seeking to unload excess inventory at knockdown prices.

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