This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.
News
How will alcohol perform on China’s Golden Week?
It is peak holiday season in China as the long weekend gives way to the ‘Golden Week’ holiday at the start of October. What does it mean for alcohol? Ron Emler investigates.
This is a peak period with many people visiting families with gifting a central part of the celebrations. It is the highest sales periods within the world’s second largest economy.
This year, however, the festivities are at best muted with demand for luxuries, especially premium alcohols, suffering their worst slump for several years.
With baijiu comprising more than 90% of demand in China, the sector’s premium producers, notably Kweichow Moutai, are a bellwether for demand and the signals are gloomy for international distillers hoping that China will help to offset their difficulties in North America.
Campari’s CEO Matteo Fantacchiotti said last week that demand in the US “is still quite soft” for the industry, a remark that sent his shares 6% lower and depressed those of his European rivals.
For several weeks retailers in China have been fearful about reduced alcohol consumption over this year’s Mid-Autumn Festival, noting that demand for Moutai, among other products, is lower than in previous years. Accordingly, they have cut their orders.
Due to oversupply, consumption falling short of expectations and concerns about future price fluctuations, the cost of Feitian Moutai, Kweichow Moutai’s flagship brand, has continued to decline.
According to one third-party quotation platform, Feitian Moutai is priced at CNY2,535 per bottle today down about CNY145 (US$20.40) compared with early August and CNY2,500 in the spring.
On the back of China’s property slump which has left swathes of owners with negative equity and worries about the sluggish economy, premium alcohols are being left on the shelves and share prices are reflecting that.
Kweichow was long China’s largest valued consumer company, but no longer.
At their peak in 2021 the shares were CNY 2,601 (US$360), valuing the company at more than US$400 billion. Today they are about half that at CNY1,300.
Moutai’s shares have fallen by almost 25% this year and seem headed for their worst annual performance since 2013, when Beijing launched its austerity campaign to reduce government spending and lavish entertaining and gifting among officials.
And observers see little prospect of a rapid rebound.
“Looking ahead, we see that the characteristics of ‘de-real estate dependence’ and ‘de-luxury’ in liquor consumption will continue to stand out,” Guotai Junan Securities analysts wrote last week.
“The sales volume of the liquor industry in August and September has slightly rebounded month-on- month, but the total demand in most regions has still fallen year-on-year.”
Related news
Alibaba boss buys Burgundy vineyards