A Kweichow Moutai manufacturing line. (Photo/Xinhua)
Kweichow Moutai Company, a producer of distilled Chinese white liquor, has recently made a number of strategic moves including raising prices and diversifying into other businesses in a bid to reach its planned growth target, despite a slowing Chinese economy, the China Business Journal reported.
The company based in southern China's Guizhou province raised the ex-factory price of one of its premium products, the 53-degree Feitian, from 619 Chinese yuan (US$98) to 805 yuan (US$127) on Sept. 1, which a source close to the company said was aimed at boosting revenue.
As the company's revenue calculations are based on sales of the liquor at ex-factory prices, mainly to distributors, the source said the price hike was expected to provide a 15% boost to the company's sales.
The source added that the increase was also aimed at squeezing the profit margins of the company's distributors, who sold the liquor at retail prices of around 1,650 yuan (US$262), and at helping expanding the company's own retail operations, where the same product is sold at a lower price of 1,519 yuan (US$241).
Kweichow Moutai's retail operations, which to date stand at 60 stores, are expected to boost revenue by 1.2 billion yuan (US$190 million), the newspaper said.
China Merchants Securities also noted in a report that factory price hikes and running its own retail business are both ways the company could continue augmenting revenue.
Meanwhile, the company is also expanding into other areas, including an investment in an airport operator and in the tea retail business.
In early September, Kweichow Moutai announced an investment of 1.07 billion yuan (US$170 million) to acquire a 29.7% stake in the operator of the Longdongbao Airport in Guiyang, the provincial capital of Guizhou.
On Sept. 25, the company further announced a plan to venture into the tea retail trade, which would include opening 300 stores in five years, the newspaper said.
The newspaper pointed out that besides these newly announced ventures, Kweichow Moutai is now a group with nearly 20 subsidiaries, with business interests ranging from property, banking and insurance to wine.
However, Wang Lin, president of a consultancy firm in Chengdu, said the company needs a more professional management team to carry out its diversification plan, since most of its managers were promoted from within the company's distilleries and had limited experience in investing and in other sectors.
The company has also encountered challenges in its businesses outside of liquor. It recently retreated from the beer market and handed over the reins of its loss-making beer unit to its partner China Resources Snow Breweries.
Yet, an official said that Kweichow Moutai remained confident about achieving the group's targeted revenue of 50 billion yuan (US$7.95 billion) by 2015.