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Author | Feng Biao Editor | Liu Peng

"You can't buy today's Feitian Moutai at yesterday's price. All previous quotations are invalid!" After the price of Moutai bottomed out and rebounded, a veteran "Moutai" scalper who had been snapping up Feitian Moutai all over the country for many years cheered the price rebound in his circle of friends and congratulated the wine lovers who bought Moutai "yesterday".

The market price of Feitian Moutai fluctuated and fell in May and June. According to industry statistics, the lowest price of Feitian in a bottle fell to around 2,100 yuan. There were rumors of price drops and scalpers leaving the market. In addition, the share price of Kweichow Moutai fell below the 1,600 yuan and 1,500 yuan mark in succession, and market confidence was put to the test.

However, the price of Moutai soon rebounded. After entering July, the price of loose bottles of Feitian Moutai returned to around 2,400 yuan, and the price of original Feitian Moutai rose to around 2,600 yuan. By mid-August, the price of original bottles was even close to around 2,800 yuan. Coupled with the approaching Mid-Autumn Festival peak season, many wine merchants said that the supply was tight.

As prices rebounded, Kweichow Moutai submitted a brilliant semi-annual report on August 8, achieving total operating revenue of 83.451 billion yuan, a year-on-year increase of 17.56%, and net profit of 41.696 billion yuan, a year-on-year increase of 15.88%. In the downward adjustment period of destocking in the industry, Kweichow Moutai's semi-annual report is, to a certain extent, a strong response to various doubts and bearish voices in the first half of the year.

Looking closely at the semi-annual report, the contribution of the agency wholesale channel to revenue is indispensable, with a year-on-year increase of 26.5%, far exceeding the year-on-year increase of 7.35% in the direct sales channel. The proportion of direct sales channels has dropped to 41.17%, a decrease of 3.99 percentage points from 45.16% in the same period of 2023.

Behind the price recovery and sales growth, Kweichow Moutai’s “rebalancing” of sales channels has quietly begun.

Rebalancing of self-operated direct sales and agency channels

Moutai’s sales channels include direct sales and wholesale agents. Direct sales channels refer to self-operated channels and digital marketing platform channels such as “i Moutai”, and wholesale agent channels refer to social distributors, supermarkets, e-commerce and other channels.

In recent years, with the market price of Feitian Moutai significantly higher than the market guidance price set by Kweichow Moutai, Moutai has vigorously developed its own direct sales channels and sold it at the market guidance price of 1,499 yuan. Even in the wholesale agent channel, Kweichow Moutai also requires the price of 1,499 yuan to be sold through cooperation with e-commerce and supermarket platforms.

In the industry's view, Moutai's increased self-operation has undoubtedly diverted some of the customers of traditional distributors and cut a big piece of the pie of traditional social distributors. In particular, on March 31, 2022, Moutai's e-commerce platform "i Moutai" was launched. As soon as it was launched, i Moutai was hotly sought after by netizens, and once topped the download list of major application platforms. There was even a phenomenon of tens of thousands of people scrambling for a few bottles of Moutai.

In the past few years, Kweichow Moutai's direct sales revenue has risen rapidly, accounting for more than 45% of total revenue last year, up from less than 10% in 2019. In 2023, iMoutai's sales revenue was 22.374 billion yuan, a year-on-year increase of 88.29%.

However, judging from the growth rate, iMoutai has cooled down significantly this year. In the first half of this year, iMoutai's sales revenue was 10.249 billion yuan, a year-on-year increase of 9.76% compared with the first half of 2023. iMoutai's sales revenue in half a year did not reach half of last year's full-year sales revenue.

The changes in the proportion of self-operated direct sales and wholesale agents can better reflect the changes in Moutai's sales channels. In the first quarter of this year, the proportion of self-operated direct sales has begun to decline, from 45.61% in the whole year of 2023 to 42.33%. As of the first half of this year, the proportion of direct sales continued to decline to 41.17%, a decrease of 3.99 percentage points from 45.16% in the same period of 2023.

The increase in direct sales and wholesale agents is also related to the price adjustment of Kweichow Moutai last year. Kweichow Moutai announced that it would increase the ex-factory price of Kweichow Moutai (Feitian, Wuxing) by 53%vol from November 1, 2023, with an average increase of about 20%. This adjustment does not involve the market guidance price of Moutai products, which means that this price increase mainly affects the wholesale channel.

In addition to the price adjustment, at the market work conference held on July 23, Kweichow Moutai changed its strategy of emphasizing self-operation and direct sales in previous years and instead emphasized "synergy", including balancing the relationship between online and offline, public and private domains, and building an ecosystem through investment synergy, resource synergy, and policy synergy to empower offline online, serve online offline, and complement channel advantages, thereby reaching a wider range of C-ends.

Wang Chuancai, an expert at the liquor industry think tank, believes that Kweichow Moutai has been looking for a balance between self-operated direct sales and channels. In the past few years, self-operated direct sales have been a bit too aggressive, resulting in a certain overdraft of the interests of Kweichow Moutai's channel system. After Zhang Deqin took over as the head of Kweichow Moutai this year, he consciously controlled and slowed down the direct sales ratio in order to appease channel distributors.

Cai Xuefei, a marketing expert in the liquor industry, also believes that the increase in the proportion of wholesale agent channels may be due to Moutai's focus on the interests of core channel dealers and the continuous improvement of the price and product structure between different channels. In Cai Xuefei's view, from the perspective of product layout, Moutai's channel structure has basically stabilized, and the integration of direct sales channels and traditional agent channels may be the main development direction of Moutai in the next stage.

Stabilize the confidence of traditional dealers

Looking back at the evolution of Moutai's distributor policy, it is not difficult to find that in years when the market is hot and sales are booming, Moutai often strengthens its control over distributors, increases restrictive sales requirements, and increases its efforts in self-operated direct sales. In years when liquor is not popular, Moutai pays more attention to the channel advantages and prepayments of traditional distributors to stabilize sales revenue.

As the liquor industry enters a period of adjustment, the social inventory of many liquors has increased, and the sales are weak. Recently, a report released by UBS Securities has attracted attention. The report believes that the wholesale price of Feitian Moutai has risen sharply from 2016 to early 2021, encouraging speculators and end consumers to accumulate social inventory. The report estimates that about 14-15 months of Moutai sales were accumulated as social inventory during the period of 2016-23. Therefore, the report predicts that the retail price pressure of high-end liquor companies will intensify in 2024-25.

In addition, Kweichow Moutai’s financial report also shows that inventory has increased in recent years, with inventory increasing by 16.88% year-on-year in the first half of this year.

In Wang Chuancai's view, the traditional distributor channel is not only a balance of interests, but also a price reservoir. If the channel system is lost, Moutai will face severe price tests. Slowing down direct sales is more about controlling the supply and demand relationship and improving premium capabilities.

Wang Chuancai further stated that in the past five years, traditional distributor channels have been very confident, believing that Moutai is still in short supply and that Moutai prices will remain strong. However, if Moutai continues to maintain a high direct sales ratio, it will break the balance between distributor channels and self-operated direct sales, leading to a loss of distributor confidence. If this happens, it will lead to a "lean" in the distributor channel, which will have a great impact on the price of Moutai.

Recently, the adjustment of Moutai's sales strategy has indeed shown a friendly side to traditional distributors. Xiao Zhuqing, a liquor marketing expert, learned from Moutai distributors that Kweichow Moutai no longer requires specialty stores to sell products in unpacked boxes, and ships in batches according to the inventory and sales of distributors and direct stores, which effectively affects market sentiment and market expectations. According to Xiao Zhuqing, in the past 15 years, Moutai and Zhenpin Moutai no longer force distribution, but instead voluntarily apply for purchase, with the goal of influencing market expectations through market means to prevent price fluctuations caused by oversupply.