Moutai Price Cap Doesn't Tackle Root of Short-Supply Problem, Insiders Say
Lin Zhiyin | Lv Jinyu
DATE:  Aug 08 2017
/ SOURCE:  Yicai
Moutai Price Cap Doesn't Tackle Root of Short-Supply Problem, Insiders Say Moutai Price Cap Doesn't Tackle Root of Short-Supply Problem, Insiders Say

(Yicai Global) Aug. 8 -- Moutai distributors have initiated a price-capping campaign after a lack of supply has seen prices soar across the country.

During this year's National Week, Oct. 1 to Oct. 8, Guizhou-based China Kweichow Moutai Distillery Group Co. [SHA:600519] will contribute half of its scheduled capacity to satisfying consumers' real demand for Moutai, a distilled Chinese liquor, the firm said on Aug. 6. The campaign will allow consumers to buy one bottle of Moutai for CNY1,299 (USD191).

Some 70 distributors in Beijing have already joined the campaign, made up of mostly specialty shops and franchised dealers.

The campaign should be a great demonstration for other markets in China and regional Moutai markets, the firm said.

So far this year, Moutai has been in short supply, leading to a rising price on the consumer market. Kweichow Moutai, regularly priced at CNY819 (USD12) a bottle, now costs over CNY1,500. Many areas are out of stock, and in some regions the price of Shengxiao Moutai has surpassed CNY7,000 a bottle.

However, insiders don't see the campaign making any real progress or resolving the lack of supply.

"This would be a last resort for Moutai to self-regulate the price," said Zhu Danpeng, a Chinese food industry analyst. "Moutai has given much thought to choose Beijing dealers as its first step. The capital, a political and cultural center, is also the largest distribution market for the liquor. The company hopes to draw support from the city and set an example."

"Moutai's price-stabilization measure solves the symptoms, but not the cause of the problem," said Xiao Zhuqing, general manager of Shandong Wenhewang Wine Group. "The market expectations already exist, the problem is on the supply-side and not the consumer end."

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Keywords:   MSCI,Limited Price