Moutai moving into online markets

Premium liquor maker Kweichow Moutai Co Ltd is planning to enter supermarkets and open online stores to offset flagging margins from the recent government austerity measures.

The company said on Monday that it was forming a joint venture with Yonghui Superstores and Shenzhen Guomaoyuan Commerce and Trade Co Ltd to sell its products through Yonghui supermarkets.

The move is considered a new attempt to explore alternate distribution channels and combines manufacturers, dealers and retailers, unlike the traditional method of manufacturers, general dealers and sub-dealers.

According to Moutai's statement, Kweichow Moutai will hold 60 percent of the new joint venture with Yonghui and Shenzhen Guomaoyuan taking 20 percent each respectively. Moutai's liquor products will be displayed at 100 prime Yonghui stores and will also be backed with support services.

As one of the most prestigious liquor brands in China, Moutai was hit badly by China's austerity campaign. Its retail prices nosedived as a result of the government measures and demand tapered off.

Jason Yu, general manager of Kantar Worldpanel China, a research institute and consultant on the fast-moving consumer goods market, said Moutai needs to take steps to become more accessible to ordinary consumers.

Rather than relying on traditional liquor specialists and its own distribution outlets, Moutai's efforts seem to be aimed at building more direct connections with everyday shoppers who visit Yonghui and other supermarkets, he said.

According to Kantar Worldpanel China, Yonghui has been one of the fastest growing retailers in China in the past two years and is expanding its presence rapidly in the west and north regions where consumers traditionally favor Chinese liquor.

The alliance will help build a win-win proposition between the retailer and Moutai. It will potentially bring Yonghui more affluent shoppers, said Yu.

Pricing system of Chinese baijiu has been challenged in recent years as a result of the rapid development of online liquor sales.

Moutai ended its collaboration with websites that sell liquor including jiuxian.com earlier this year.

Nie Yong, deputy general manager of Moutai E-commerce Co, said: "The chaotic pricing system of websites that sell liquor had a negative impact on Moutai's brands and pricing."

According to sources, the company is toying with the idea of setting up its own website to market and sell products online. However, no further details of the plan are available yet.

In the e-commerce sector, Moutai should consider expanding its collaboration with major platforms such as Tmall, JD and Yhd, said Yu. Building traffic is always a major challenge for companies that want to open their own branded online store, he said.