Corruption campaign leaves Wuliangye with bottom-line hangover

A sales assistant showcases a bottle of Wuliangye white spirits at a supermarket in Ganyu county, Jiangsu province. Wuliangye Group Co Ltd reported record low profits and sales in the first six months of this year. [Photo/China Daily]

Top distillers' struggles have deepened amid the government's campaign against corruption and extravagance, with Wuliangye Group Co Ltd reporting record low profit and sales in the first six months of 2014.

The company said on Thursday that first-half revenue slid 24.9 percent to 11.6 billion yuan ($1.87 billion), while net profit sank 31 percent to 4 billion yuan compared with the same period a year ago.

Sales and marketing expenses increased nearly 50 percent year-on-year, it said.

Wuliangye said the baijiu (white spirits) industry is still undergoing adjustment. The distiller has been modifying its marketing strategy by targeting business and mass-market consumers, an effort that includes some personalized products.

Working with e-commerce platforms has also been part of its efforts to revamp of its sales and distribution channels, according to Wuliangye.

Jin Yufeng, a liquor expert, said Wuliangye's profitability will probably improve during the second half.

But with the government's austerity campaign continuing, most of the 14 listed liquor companies are likely to report lower first-half net profit and falling sales of high-end products.

Shanxi Xinghuacun Fenjiu Liquor Group Co Ltd's net profit fell about 70 percent in the first half, the company said on July 22.

Sichuan Chengdu Shuijingfang Group Co Ltd, a wholly owned subsidiary of premium alcoholic beverage company Diageo Plc, estimated that it lost 120 million yuan in the first half.

Jiugui Liquor Co Ltd estimated that its first-half net profit ranged from 39 million yuan to 49 million yuan, down 227 percent to 260 percent.

An industry analyst said the liquor industry is in a long-term "depression", even though some of the high-end white spirits brands will stage a seasonal recovery in the third quarter, when there are many festivals and holidays that call for gift-giving.

Premium distiller Kweichow Moutai Co Ltd plans to start offering its products in supermarkets and open online stores to offset flagging margins. Kweichow Moutai said that it will form a joint venture with Yonghui Superstores Co Ltd and Shenzhen Guomaoyuan Commerce and Trade Co Ltd to sell its products through Yonghui supermarkets. No details of its e-commerce plan have been announced.