(Yicai) Aug. 9 -- Kweichow Moutai reported a 16 percent profit gain for the first half of the year, despite facing stiff competition and price swings. The Chinese liquor giant also announced an increase in its dividend payout ratio.

Net profit was CNY41.7 billion (USD5.8 billion) in the six months ended June 30 on a 18 percent jump in revenue to CNY81.9 billion (USD11.4 billion), the Guizhou-based company’s earnings report showed yesterday. The firm lifted its dividend payout ratio to 75 percent from 52 percent for this and the next two years, according to an exchange filing the same day.

To tackle the fierce market competition, Kweichow Moutai hiked its marketing and promotion spending in the six months, resulting in a nearly 47 percent increase in sales costs, which was nearly 30 percentage points higher than a year ago.

After gaining by as much as 2.7 percent earlier today, Kweichow Moutai’s shares [SHA: 600519] closed 0.4 percent up at CNY1,436.80 (USD200.29) each in Shanghai. The stock has fallen 19 percent from this year’s closing high of CNY1,770 on May 7.

Competition weighed on product prices in the first half. In June, the wholesale price of Kweichow Moutai’s main product Feitian Moutai fell to CNY2,100 (USD293) per bottle from about CNY3,000 at the start of the year.

The firm then implemented a new goods and pricing control policy, especially for subsidized e-commerce channels, which helped prices to rebound. The wholesale price of 2024 Feitian Moutai was CNY2,420 per bottle on Aug. 6, and that of 2024 Feitian Moutai in multiple-bottle packs, which are popular in China as gift boxes, exceeded CNY2,700 per bottle.

But Kweichow Moutai’s price rebound does not fully reflect the actual market situation, several liquor merchants told Yicai. Liquor sales, including those of Kweichow Moutai, have been poor recently, they noted, adding that concerns about price swings has crimped stocking by vendors.

Kweichow Moutai’s sales are directly proportional to China’s high-income population and have a strong correlation with the macroeconomy, Pacific Securities recently said in a research report. Nearly 80 percent of the demand comes from the premium and gift liquor markets.

Liquor demand remains under pressure despite the modest economic recovery since the pandemic, the report said. The bottom wholesale price range for Kweichow Moutai’s products is expected to stay between CNY1,814 and CNY2,350 a bottle.

Its prices have been in the lower range mainly due to weak demand, said Cai Xuefei, a baijiu market analyst. But in the long run, given the limited capacity of China’s high-end and gift liquor markets, Moutai still has an irreplaceable value in social consumption. Prices will steady this half, as the liquor drinking season with more festivals approaches, Cai said.

Editor: Futura Costaglione