Moutai Wins Wealthy Chinese Fans

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!weichow "outai Co#$%%&'(#)* +%#%,-. the company known for its into/icating brew of the same name. is getting a boost from a new group of consumers0 pri1ate wealthy buyers# 2icknamed 3white lightning4 for its translucent color and swift kick. "outai had long been a staple at Chinese go1ernment ban5uets# But a clampdown on lu/ury spending by officials as a way of curbing corruption has stamped out much of that demand for more than a year# 6ith demand hit. shares of the )hanghai+listed firm more than hal1ed from a mid+2%'2 peak to a bottom in early 2%'7# But the stock is now up more than 2%- so far this year. thanks to wealthier Chinese who are increasingly buying bottles for weddings and business ban5uets. says )tella 8hang. managing director at )ingapore+based AP) Asset "anagement. which began buying the stock at the end of last year# 3"outai itself is not a corruption.4 e1en though it has been associated with that. said "s# 8hang#

A customer walks past a glass case displaying "aotai li5uors with different price tags at a supermarket in )henyang. Liaoning pro1ince August 9. 2%'2# :euters ;he price of the firm<s flagship product=a &%% mL &7- alcohol by 1olume bottle=has been falling from a more than 2%%% yuan a bottle high in 2%''# But now that Chinese consumers who may not ha1e been able to afford "outai before are buying. prices seem to be stabili>ing around ''%% yuan. says "s# 8hang# !weichow "outai<s stock has long been a fa1orite pick for AP). which first in1ested in 2%%,# ;he firm watched its in1estment surge by ten+fold before selling off 3in a ma?or way4 around the lu/ury curbs in late 2%'2# Business for !weichow "outai. which produces o1er @% different be1erages and spirits. looks promising# :e1enue rose in the second and third 5uarters of 2%'7. in part because the firm increased selling of its products through new distributors and e+commerce sites# Analysts estimate !weichow made 7% billion yuan in re1enue in 2%'7. up more than '7from the pre1ious year# Behind the rebound is "outai<s sturdy reputation as one of China<s strongest lu/ury brands# ;he sorghum+based drink takes years to ferment and has a respectable history# Party officials once used "outai to toast foreign diplomats and other elite guests 1isiting China. and Chinese embassies ha1e presented "outai as gifts to foreign countries# ;he brand got a ma?or boost in '(@2. when then Premier 8hou En+lai entertained A#)# president :ichard 2i/on with the drink at a state ban5uet in Bei?ing#

"outai<s stock trades around '% times price+to+earnings. lower than '& to 2% times for international li5uor brands=another reason that now might be a good time to buy. says "s# 8hang# )till. she says her firm isn<t e/pecting the stock<s rebound this year to be 3spectacular#4 ;he stock is still ,%- off from it<s all time high# Bne bottle of "outai<s flagship product =at almost one+third of a local<s a1erage monthly salary=is still e/pensi1e enough to e/pect sales growth to 3reco1er gradually4 by relying on the mass market# Bther local li5uor brands are faring worse# )hares of 6uliangye Cibin Co#%%%9&9#)8 + %#7'- Ltd#. another bai?iu+ or white spirits+maker. ha1e inched up less than 2- so far this year on the )hen>hen stock market# Anlike 6uliangye. !weichow "outai is known for limiting production. keeping its li5uor distributors thirsty for more# 3;he firm has strong bargaining powerD its distributors are e/tremely loyal.4 says Earl Cen. fund manager of C)E China Bpportunities. a F&$#7 million fund that begin in1esting in the stock in Ganuary# 36e think the bad news has been factored into the firm<s price and earnings already#4 ;he turn of fate for "outai has been somewhat of a surprise# "s# 8hang says that her firm<s sur1ey of li5uor distributors shortly after the go1ernment clampdown came down to a dismal 1erdict0 3;hey e/pected it to take at least two years to de+stock and for demand to reco1erD more than &%- of their clients were from go1ernment and army officials# ;hey didn<t see any contribution from that group the rest of the year#4