Moutai slashes prices online

Kweichow Moutai Group, a high-end liquor producer based in Guizhou Province, has formed a strategic alliance with China's biggest online alcohol store to sell its products at discounted prices, possibly signaling a major strategic shift for the country's producers of baijiu, or Chinese white liquor, analysts said on Wednesday.

The deal, signed Tuesday, allows jiuxian.com and more than 10 partner websites to sell all lines of Moutai baijiu, dubbed "China's national alcohol," at discounts of up to 50 percent.

Moutai's signature 53-­degree Feitian baijiu, which has a market price of 1,998 yuan ($325.44) per 500 ml bottle, is selling for 899 yuan on jiuxian.com, a 55 percent discount.

"The baijiu consumption environment has changed. Kweichow Moutai Group's sales model is making changes accordingly and is gradually shifting its focus to the general public and business customers," Ji Keliang, honorary chairman of Beijing Jiuxian E-commerce Co, which runs jiuxian.com, told the Global Times in an e-mail.

China's baijiu market received a hard blow earlier this year, when China's new leaders showed their determination to crack down on corruption and cut government officials' spending on travel, transportation and treating guests.

Such spending is considered a major earnings source for Chinese alcohol makers, who have since been looking for new ways to boost business.

Jiuxian Chairman Hao Hongfeng believes moving online might be the solution, saying that the deal is "a landmark event, which will advance the whole baijiu market's process of trying out e-commerce," according to the e-mail.

Yang Qingshan, a senior expert at the China Association of Branding Strategy, echoed Hao's opinion, adding that Moutai's price cut is a landmark signal that China's baijiu market has entered a new era.

"It's a turning point where the prices of high-end baijiu will start to fall after increasing for 10 years," Yang told the Global Times on Wednesday. "There will be less hype about 'luxury drinks' and more rational spending on liquor in the new era, and baijiu will return to its true role as a fast-moving consumer good, rather than a souvenir or part of a collection."

Although e-commerce will become a popular distribution venue, it will not replace traditional sales within the next five years, Yang said.

"E-commerce only covers a small portion of baijiu consumers in their 20s and 30s, who are adept at shopping online. But the larger group of consumers is over 40 and still prefers purchasing liquor from brick-and-mortar stores and retailers," Yang noted.

Shu Guohua, a Beijing-based liquor market expert, told the Global Times that the alliance will benefit Jiuxian as well. "Even if jiuxian.com can only make small profits off of the deeply discounted Moutai baijiu, they will build their repu­tation from the alliance and attract a large number of small baijiu makers to list their pro­ducts on the website," Shu said.