Guizhou Moutai direct sales expansion, production increase does not increase, prices rise or not? The official narrative is coming

On the afternoon of May 19, Guizhou Moutai held a performance briefing meeting for the first quarter of 2020 and 2021 online.

Guizhou Moutai released the first quarter of 2021 financial report last month, showing that the first quarter achieved operating income of 27.27 billion yuan, an increase of 11.74% year-on-year; net profit attributable to shareholders of listed companies was 13.95 billion yuan, an increase of 6.57% year-on-year. Compared with 2019 before the epidemic, Moutai has significantly slowed down in terms of revenue and profit.

Since the beginning of this year, the stock price of Moutai in Guizhou has rebounded sharply, once falling below 2,000 yuan, and in this context, the performance briefing has attracted much attention. In the more than two-hour meeting, Guizhou Moutai responded to investors' concerns such as whether direct sales have expanded, whether production has increased, and whether prices have risen.

<h2>Capacity: Demonstration of capacity expansion is being carried out</h2>

Due to the characteristics of moutai wine production process, the company's Moutai wine production capacity will increase by 4032 tons in 2020, and the production capacity of series wine will increase by 4015 tons, both of which will be put into operation in 2021. At the "2021 Annual Production and Quality Conference" of Moutai Group, Moutai Group said that in 2021, the production capacity target of Moutai liquor base wine is 55,300 tons, which is already approaching the limit of production capacity, while the production target of series liquor is 29,000 tons.

Previously, for the expansion of base wine, Li Baofang, former party secretary of Moutai Group, publicly stated that after the production capacity of base wine reached 56,000 tons, combined with the ecological environment carrying capacity of Moutai core area, the scale of production capacity will no longer be expanded in the short term, and his personal statement is that "at least 10 years will not expand production". At the performance briefing meeting on the 19th, Gao Weidong, chairman of Guizhou Moutai, said that the expansion of production capacity should refer to market prospects, combined with Moutai technical talent reserves, land resources, productive material supply, ecological carrying capacity and other factors for comprehensive consideration, the company is carrying out relevant demonstration work.

Moutai wine has been in short supply for a long time, so the sales volume of Moutai basically depends on the company's production capacity. According to the annual report, in 2020, Guizhou Moutai produced 75,200 tons of base wine, an increase of only 0.15% year-on-year, of which the production of Moutai wine base wine was 50,200 tons, an increase of only 0.63% year-on-year.

<h2>Price increase: There are no plans at this time</h2>

The current factory price of Feitian Moutai is 969 yuan / bottle, and the suggested retail price is 1499 yuan / bottle, but in fact, the 1499 Feitian Moutai is not nothing, but "a bottle is difficult to find", in this context, investors suggest that Moutai raise prices gradually increased.

However, Li Jingren, director and acting general manager of Guizhou Moutai, made it clear that "as of now, the company has no plans to adjust product prices." At the same time, he said that the price increase of Moutai involves many factors, and it is necessary to fully listen to the opinions of many parties and seriously and comprehensively study.

In the case of 11% revenue growth in 2020, Guizhou Moutai profit increased by 13.3%, in addition to the fact that various expenses increased less or even decreased, mainly because the gross profit margin improved. The improvement of gross profit margin does not come from direct price increases, but indirect price increases. Although the ex-factory price of Moutai did not rise frequently, Moutai achieved disguised price increases through two major measures such as increasing the proportion of non-standard Moutai and increasing the proportion of direct sales, thereby increasing the gross profit margin.

The data shows that the last direct price increase of Moutai was in 2018, when the company raised the factory price of Feitian Moutai to 969 yuan, and has not been adjusted since then, while Wuliangye and Guojiao have increased to varying degrees in the same period. However, in the same period, the supply price of Moutai to supermarkets and e-commerce channels was relatively high, and according to public information disclosure, the supply price was about 1299-1399 yuan.

<h2>Sales: Direct channel sales will continue to increase</h2>

Under the reform of direct sales channels, the revenue of Moutai direct sales channels reached 13.24 billion yuan in 2020, an increase of 82.66% year-on-year, accounting for 13.96% from 8.49% in 2019, and the ton price of direct sales channels reached 3.3673 million yuan. In the same period, the growth rate of wholesale agent channels was only 4.46%, and sales volume also declined.

In this regard, Moutai Chairman Gao Weidong said at the meeting that in order to consolidate and strengthen the functional positioning and market regulation capabilities of self-operated companies, Moutai is committed to the development of the network layout of self-operated companies and the expansion of customer resources, and the proportion of sales of self-operated companies has been greatly increased. In 2021, Moutai has added an additional self-operated store in Chongqing, and will continue to increase the number of outlets according to market demand.

It has been pointed out that in the early years, distributors played a great role in helping Moutai sell wine to the whole country, but the convenience of the Internet has made their role much worse than before. Moutai can take advantage of this to "optimize" some distributors who are not good enough, and directly connect with consumers, and the result is that operating income and gross profit margin have increased.

The gross profit margin of Moutai dealers is amazingly high, and the channel gross profit margin has been higher than 40% since 2017. Some market participants said that for consumer goods channel providers, more than 30% are very good. In the fourth quarter of last year, moutai's direct sales accounted for 17.4%, compared with 14% in 2020. Previously, some people believed that about 17% of the direct sales ratio was already the upper limit for Moutai.

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