Kweichow Moutai announced on its official website Tuesday it is ending marketing polices that go against the China Anti-monopoly Law. The company’s new policies will soon published under the guidance of China NDRC (National Development and Reform Commission) and Price Bureau in Guizhou Province.

According to the China Anti-monopoly Law, a company is forbidden to set fixed or base prices for distributors. It’s the first time for a liquor company to be investigated under the law since it came into force in 2008. At present, the anti-monopoly investigation is still ongoing, which is led by the NDRC and a final conclusion will be given later, said Prices Bureau of Guizhou province.

Moutai’s chairman Yuan Renguo said on Dec. 18 that the key task for Moutai is to prevent the retail market prices from decreasing. For example, the base price for Feitian Moutai of 53 Degree is set at 1,519 yuan [US$244] per bottle retail and 1,400 yuan [US$225] per bottle wholesale. “Any distributor breaks the price discipline will be punished through the agent license.”

As of the beginning of January, Moutai has punished seven distributors for breaking the company’s price discipline to sell Moutai liquors at lower prices.“The punishment given by Moutai has broken China Anti-monopoly Law,” said Huang Yong, vice director of the expert consulting group at the State Council Antimonopoly Committee told 21cbh after the recent punishment became public.

Once Moutai changes its marketing polices, distributors will have certain autonomy in deciding the retail prices of Moutai. As the coming Spring Festival is traditionally a liquor consumption boom time, many distributors will prefer to clear inventories rapidly with low prices, which is believed to affect the prices of high-end liquors to some degree.

“In fact, distributors that surrender part of the profits for more sales volume won’t affect the factory prices in short–term,” said one baijiu industry insider, “but added with the new liquor prohibition polices, it’s difficult to predict what will happen if the prices decrease too much, which is what liquor companies are worrying.”

A report published by Ping’an Securities on Jan. 7 said that the tightening the “Three Consumptions” including entertainment expenses of governmental and public departments, added with decline of economic growth, the sales of high-end baijiu in New Year season, a traditional busy season for liquor consumption is said to be equivalent to the sales in off-seasons by distributors.

Source: Morning Whistle Jan 2013

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