Liquor firms predict H1 losses

The first-half reports released so far by China's liquor producers reveal that most of them are predicting losses or profit declines, according to the latest data provided by a financial information agency Monday, as the industry reels from the central government's curb on extravagant consumption by officials with public money.

A total of five mid-range liquor producers have posted their first-half reports, with only one of them, Qinghai Huzhu Barley Wine Co, forecasting a rise in net profit, according to data from financial information agency Zhejiang Hithink Flush Information Network Co.

Sichuan Tuopai Shede Wine Co reported a possible net profit decline of around 80 percent in the first half year-on-year.

The liquor maker explained that policies this year, including the central government's curb on extravagant consumption, were the major cause of decline in its net profits.

"The sales of our high-end products declined, while fees for promoting the products climbed dramatically," Tuopai Shede said in its report.

JiuGuiJiu Co also posted a projected net profit decline of around 87 to 89 percent in its semi-annual report. It ascribed the drop to the "poor" environment for the liquor sector.

Zhao Yong, a beverage analyst with Haitong Securities, told the Global Times Monday that the liquor companies have yet to see the worst of it, and "their net profits will decline further in the third quarter."

Wholesale prices of some high-end liquor such as Moutai dropped to around 1,000 yuan per bottle currently from more than 1,400 yuan in January, and "it is very likely that the price will drop below 1,000 yuan per bottle in the future," Zhao said.

"If the sales prices of high-end liquor continue to decline, mid-level brands will face more serious challenges," he noted.

Some high-end firms such as Wuliangye Group have already expanded their mid-level product lines as the driving force behind alcohol consumption moves away from government officials and toward spending by the general public.

The wholesale prices of Wuliangye have dropped by 300 yuan to around 660 yuan per bottle, while one of the company's mid-level liquor products, Wuliangchun, sells for only around 100 yuan per bottle, according to Zhao.

"High-end liquor firms like Moutai and Wuliangye will not likely see profits drop too much in the first half although sales prices declined," Liu Hui, an industry analyst at Capital Securities, said Monday.

To survive the difficult time, Liu said all the liquor producers need not only to reduce their sales prices, but also to broaden their sales channels.

Kweichow Moutai signed an agreement with liquor and wine e-commerce website jiu­xian.com earlier this month to sell all its liquor products online.