Close Menu

Can Kweichow Moutai defeat China’s ‘banquet ban’?

China’s crackdown on extravagant banquets thrown by the super-rich has seen shares fall for spirits giant Kweichow Moutai. But reports of an 11% revenue increase for the company so far this year tell a different story.

The world’s biggest producer of spirits, China’s Kweichow Moutai, increased its revenue from sales of baijiu by 11.05% in the first nine months of this year compared with the same period in 2020.

Total sales were 74.64 billion yuan (US$11.68 billion), with net profit up 10.17% on last year.

Despite the buoyant sales and profits, shares in the partly privatised Kweichow Moutai have been under a cloud since late summer when Beijing signalled potential curbs on extravagant banquets at which expensive styles of baijiu are typically served and gifting of prime bottles to state officials.

This is part of president Xi Jinping’s drive to distribute wealth more evenly throughout the country.

Since Xi Jinping signalled the changes a month ago, LVMH’s shares have fallen 10% and Kweichow Moutai, the dominant player in the high end of the baijiu market, has lost almost 15% in value on fears that sales of luxury goods, including premium alcohols, will be hit.

LVMH has played this down, however, suggesting that as 80% of its sales in China go to the rapidly emerging middle class who will benefit from wider distribution of spending power, the effect of Beijing’s actions could be to expand its market further in China.

The same factors could boost demand for imported premium wines and spirits.

Meanwhile, there is strong evidence that Pernod Ricard is forging ahead globally as buoyant demand in China, the company’s second largest single market, helped it post above-forecast sales.

In China, Pernod Ricard’s was 22% ahead.

Analysts have pencilled in sales growth of about 9.7% for the rest of Pernod Ricard’s financial year to the end of next June. But Ricard himself sought to temper expectations for the next nine months because the very low figures in 2020 distorted comparisons.

“We are confident but we need to go through Christmas and the Chinese New Year (to have more visibility),” he told Reuters in an interview.

“The Mid-Autumn Festival went well and our inventory level is healthy,” Ricard said of the China market.

However, Beijing’s plans to engineer wider distribution of wealth and crack down on the ultra rich may have longer-term implications on both Pernod Ricard and Remy Cointreau, by far the market leader in top end Cognacs.




It looks like you're in Asia, would you like to be redirected to the Drinks Business Asia edition?

Yes, take me to the Asia edition No