Moutai boosts control over sales network

Kweichow Moutai Co announced Wednesday it would add 31 more direct retailers nationwide in 2012, a move analysts said "would help Moutai better control its distribution network and regulate chaotic price situation."

The top liquor maker by market value in China said Wednesday that it will spend 850 million yuan ($135 million) to open 31 direct retailers in 31 capital cities, municipalities and some other cities nationwide this year. Besides, it will invest an additional 180 million yuan on a tracing system in its liquor circulation.

Having more direct retailers is a strategic move by Moutai as it plans to expand its direct retailing network to third-tier cities and counties in the future, Yang Qingshan, an expert with the China Brand Strategy Association, told the Global Times.

The move can help the producer better manage its distribution network and have more say in the retail market. It can also help avoid chaotic pricing and fight fakes, he said.

Guizhou-based Moutai has long been troubled by the problem of retail price hikes at multilevel distribution networks despite the company putting a cap on prices for its distributors and dealers.

Some distributors in Guangzhou, South China's Guangdong Province, for instance, have priced Feitian Moutai at some 2,000 yuan per bottle last year despite the wholesale price of just 600 yuan and a suggested retail price of 1,000 yuan, according to earlier reports.

During the second half of 2011, Moutai, which has over 1,000 exclusive shops nationwide, opened its first group of 13 direct retailers to enhance its control over retail prices.

Moutai wants a larger share in profits against its distributors. Besides, it doesn't want the public to perceive it as a luxury brand because of high retail prices, said Su Guohua, a liquor marketing expert Wednesday.

Moutai is not alone in trying to better control its distribution network.

Sichuan-based liquor brand Wuliangye has conducted similar trials for boosting its control over marketing by setting up a marketing center in East China, Su told the Global Times.

Yanghe liquor produced by Jiangsu Yanghe Brewery Joint-Stock Co is also following the mixed marketing model having both direct retailers and distributors.

Analysts believed that the presence of more direct retailers in its distribution network would be a long-term strategy for Moutai. However, Yang cautioned that Moutai should be careful in pricing products for its direct retailers.

"If the prices of direct retailers and distributors are hugely different, there might be conflicts of interest," Yang said, noting that liquor sales in China still heavily rely on distributors and dealers.

Shanghai-listed Moutai Wednesday reported a profit of 12.3 billion yuan from sales last year, a 72.3 percent year-on-year growth. The company set a new record in the market by paying cash dividend of some 4.0 yuan per share Wednesday.