By Steve Price
Published Jan 10, 2025
Despite Moutai’s projected 15% revenue growth, the luxury spirits industry grapples with price declines, changing tastes, and trade tensions.
China’s premium spirits sector is grappling with an unprecedented confluence of challenges, even as market leader Kweichow Moutai projects revenue growth for 2024, according to preliminary guidance.
The state-owned baijiu giant announced on January 2 that it expects 2024 revenue to have risen 15% YoY to 173.8 billion RMB ($23.7 billion), with net profit reaching around 85.7 billion RMB, SCMP reports.
However, these positive projections obscure fundamental industry obstacles, including regulatory pressures, falling retail prices, a potential trade war, and shifting consumption patterns.
Baijiu blues #
Feitian Moutai, the company’s flagship product, now trades at around 2,250 RMB ($300) per bottle, down significantly from early 2024 levels. This price decline comes amid broader luxury market challenges, including China’s property sector struggles and subdued consumer confidence.
Guotai Junan Securities analysts told The Business Times they see “de-real estate dependence” and “de-luxury” in liquor consumption continuing.
Regulatory hurdles #
The premium spirits sector faces additional pressure from China’s ongoing investigation into EU brandy imports. On December 26, the Ministry of Commerce extended its anti-dumping probe until April 5, 2025, maintaining tariffs ranging from 30.6% to 39% on French cognac and other European spirits.
Major international players are already feeling the impact. Pernod Ricard China has announced plans to increase Martell cognac prices by 3% to 5%, effective February 1, 2025, after cognac imports fell 13.9% in volume and 23.7% in value from January to October 2024.
Meanwhile, younger Chinese consumers are reshaping traditional drinking culture. A survey by China Trading Desk revealed that only 17% of respondents prefer whiskey, while just 11.1% opt for brandy, suggesting a significant shift away from traditional premium spirits.
“They are creating and nurturing their own alcohol culture,” Zhang Yuan, a Beijing-based bartender and bar owner, told China Daily, noting that Gen Z customers often view bars as social spaces rather than venues for traditional business entertaining.
This cultural shift comes as China’s premium spirits sector faces renewed regulatory scrutiny. On January 2, authorities announced an investigation into former Moutai chairman Ding Xiongjun for “suspected serious disciplinary and legal violations,” marking the third ex-chairman to face investigation in recent years.
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