As the enterprise with the highest A-share market value, Kweichow Moutai’s frequent leadership changes also caused market concern to some extent.
The news of Maotai’s reshuffle has finally settled.
On the evening of April 29, Kweichow Moutai (600519. SH) announced that according to the relevant documents of the People’s Government of Guizhou Province, Zhang Deqin was recommended as the candidate for the director and chairman of the company, and Ding Xiongjun was recommended not to be the chairman and director of the company.
The reporter from First Financial News noticed that on the evening of April 26th, a few days ago, the company announced plans to hold performance briefing meetings for 2023 and the first quarter of 2024, but Ding Xiongjun did not appear on the list of proposed participants.
This is the fourth time that the leader of Kweichow Moutai has changed in the past six years. Zhang Deqin, the successor of this time, belongs to the “old Moutai people” and grew up from the grassroots of Kweichow Moutai in his early years.
Generally speaking, Kweichow Moutai and the chairman of the parent company Moutai Group shoulder to shoulder. This time, according to the announcement of Kweichow Moutai, Zhang Deqin also succeeded Ding Xiongjun as the new chairman of Moutai Group.
As the enterprise with the highest A-share market value, Kweichow Moutai’s frequent leadership changes also caused market concern to some extent.
Observers who have studied Kweichow Moutai for many years told China Business News that the frequent change of the head of the company is a good thing for the stable development of a company, because it may affect the strategic stability of the company.
When the first three chairmen changed, the Baijiu industry in Kweichow Moutai was in an upward phase. Now, the Baijiu industry has entered a period of deep adjustment, and the recent instability of Feitian Moutai’s wholesale price has also become the focus of the market.
Can the newly appointed chairman maintain stable wine prices? In recent years, Kweichow Moutai has gradually strengthened its control over sales channels behind the frequent change of chairman. The newly appointed chairman still faces the issue of balancing the interests of direct sales channels and wholesale channels.
Ding Xiongjun resigns from office
Ding Xiongjun succeeded Gao Weidong as the new leader of Kweichow Moutai at the end of August 2021.
After Ding Xiongjun took charge, the operating revenue of Kweichow Moutai increased from 106.19 billion yuan in 2021 to 147.694 billion yuan in 2023, and the net profit attributable to shareholders of listed companies also increased from 52.46 billion yuan in 2021 to 74.734 billion yuan in 2023.
During Ding Xiongjun’s tenure, in order to promote performance growth, Kweichow Moutai frequently optimized product structure and expanded direct sales channels.
Among them, the expansion of direct sales channels contributed greatly to the performance growth of Kweichow Moutai.
In March 2022, Kweichow Moutai launched the digital sales platform “i Moutai” APP in the direct sales channel segment. Kweichow Moutai direct marketing channels mainly include self operated and “i Moutai” digital marketing platform channels.
The direct sales channel revenue of Kweichow Moutai increased from 24.029 billion yuan in 2021 to 67.233 billion yuan in 2023. In 2023, iMaotai achieved a sales revenue of 22.374 billion yuan, accounting for more than 30% of its direct sales revenue.
Ding Xiongjun is also trying to promote the youthful and fashionable signal of Maotai brand, from ice cream to coffee, and then to chocolate, frequently crossing boundaries, but the effect remains to be observed.
During Ding Xiongjun’s tenure, he also raised the factory price of Maotai liquor. From November 2023, Kweichow Moutai officially raised the factory price of 53 degrees of Maotai liquor (Feitian, Wuxing), with an average increase of about 20%. The factory price of Feitian Maotai liquor has also been raised to 1169 yuan.
This is after nearly six years, the company has once again raised the factory price, exceeding market expectations. This price increase does not involve terminal price hikes, but mainly divides the profit cake of wholesalers.
“In the past two years, Ding Xiongjun has realized the brand activation and rejuvenation of Kweichow Moutai through product diversification and direct marketing reform, and through the beauty of Kweichow Moutai, cross-border cooperation and other ways. It should be said that these measures have improved the brand reputation and corporate profitability of Kweichow Moutai, and Kweichow Moutai has also maintained a stable high-speed growth trend during Ding Xiongjun’s period. Last year, Kweichow Moutai’s sales expenses rose by 40%, which may also be related to the implementation of a large number of brand landing promotion activities in Kweichow Moutai last year, Kweichow Moutai’s active cross-border attempts, and the internationalization of Moutai.” Wine analyst Cai Xuefei told the First Finance and Economics reporter.
The chairman has changed four terms in the past six years
After May 2018, in the eyes of the outside world, the chairman of Kweichow Moutai changed his position like a horse watching a flower.
Before that, the chairman of Kweichow Moutai was Yuan Renguo, who grew up step by step from the front-line liquor making staff of the company. He steered Kweichow Moutai for 18 years. Under the leadership of Yuan Renguo, Kweichow Moutai has developed a huge dealer network system. Both franchised dealers and Kweichow Moutai liquor stores have played an important role in the process of becoming stronger and larger. However, with the increasing premium capacity of Feitian Moutai liquor brand, when the products are under the joint control of manufacturers, resulting in long-term supply exceeding demand, the price chaos of Moutai liquor starts from dealers, even price rent-seeking, manufacturer price out of control, etc.
On May 6, 2018, Li Baofang succeeded Yuan Renguo as the new chairman of the company. At the beginning of Li Baofang’s term of office, it coincided with the recovery of the whole Baijiu industry. As the leader of the Baijiu industry, Kweichow Moutai attracted more attention from the market due to the soaring price of its main product Maotai.
At the time of the soaring price of Moutai liquor, Kweichow Moutai has launched a huge round of anti-corruption action, and its own marketing system has also opened the prelude to reform. In this transformation, a large number of illegal Maotai liquor distributors were cleared out, and several executives were also investigated for suspected bribery, including Yuan Renguo.
Li Baofang once responded to the reasons for the company’s internal marketing system reform at a shareholder meeting. He once stated that the traditional marketing system has extensive management, single channels, excessive discretion, and an open, unfair, and opaque allocation of resources, creating a space and soil for rent-seeking power. With the development and changes of the economy and society, the existing marketing system of Maotai is relatively traditional and single, and contradictions and problems such as unsuitability and lack of coordination have become more prominent; The marketing system is incomplete, and there is no effective complementarity between self operated channels and social channels; The degree of market flattening is not high, and the ability to regulate and balance the market is insufficient.
Under Li Baofang’s iron hand reform, Kweichow Moutai’s direct sales channels began to expand. He is also emphasizing the development of a series of liquors, attempting to break the monopoly of Maotai liquor.
In March 2020, Li Baofang stepped down and was replaced by Gao Weidong, but his tenure did not exceed two years. However, in the eyes of the outside world, Gao Weidong has not left a deep imprint on the development of Maotai Group. Later, Gao Weidong was also sentenced to life for accepting bribes worth billions of yuan.
Ding Xiongjun served as the Chairman of Maotai Group for two years and eight months.
It can be said that after Ding Xiongjun took office, he continued the direct sales channels of Li Baofang’s era and expanded the development strategy of Maotai series liquor.
In the past six years, the chairman of Kweichow Moutai has changed four times. From Li Baofang to Gao Weidong, and then to Ding Xiongjun, all of them did not come from the liquor industry, but were parachuted into Maotai as officials.
At present, Zhang Deqin, who has succeeded Ding Xiongjun, has not only struggled in the Baijiu industry for many years, but also is an old Maotai man.
According to public data, he entered Kweichow Moutai Liquor Workshop after graduation in July 1995, and served as the assistant to the general manager of the company and the director of the liquor warehouse workshop from April 2004 to May 2010.
From May 2010 to December 2011, Zhang Deqin was promoted to assistant general manager of Kweichow Moutai Group, and also served as deputy secretary of the party committee, chairman and general manager of Guizhou Maotai Distillery (Group) Xi Liquor Co., Ltd.
From December 2011 to August 2018, he successively served as Deputy General Manager of Kweichow Moutai Group, Secretary of the Party Committee and Chairman of the Board of Directors of Guizhou Maotai Distillery (Group) Co., Ltd.
From June 2019 to July 2019, Zhang Deqin briefly left the liquor industry and then returned to it. After returning, his identity had changed to the head of Guizhou Xijiu Investment Holding Group Co., Ltd.
It is worth mentioning that Xijiu Holdings is a group company formed after Xijiu was spun off from Maotai Group, with full ownership by the State owned Assets Supervision and Administration Commission of Guizhou Province behind it. Before taking up the position of Chairman of Maotai Group this time, he was the Secretary and Chairman of the Party Committee of Guizhou Xijiu Investment Holding Group Co., Ltd., and the Secretary and Chairman of the Party Committee of Guizhou Xijiu Co., Ltd.
The channel game is still ongoing
Over the years, in the process of frequent changes in the chairman of Kweichow Moutai, we can see that the internal control of the channel is gradually strengthened.
In 2018, Kweichow Moutai’s direct sales channel revenue was 4.376 billion yuan, accounting for nearly 6%. By 2023, Kweichow Moutai’s direct sales channel revenue will reach 67.233 billion yuan, accounting for 44.65%. In the first quarter of 2024, the proportion of Kweichow Moutai direct sales channels in the main business income will slightly decrease to 42.33%.
Maotai’s promotion of direct sales channel reform has touched the interests of distributors. A liquor dealer told a reporter from First Financial News that due to the quota of Maotai liquor meaning huge income, many Maotai distributors, although dissatisfied with some of the new policies, dare not speak up.
At present, it is left to the successor Zhang Deqin to face the problem of balancing direct sales channels and wholesale channels.
“Zhang Deqin has a better understanding of the development history and logic of Kweichow Moutai. Zhang Deqin, the new chairman of the company, still has to face the problem of how to balance the channel development after taking office. Whether to expand Kweichow Moutai’s proprietary channel or rely on the traditional channel agents of Kweichow Moutai, local traditional dealers in Kweichow Moutai have strong cohesive high-quality circle resources and social influence, and have played an important role in maintaining the price and market order of Moutai.” Xiao Zhuqing, an independent commentator of China’s liquor industry, said that the proportion of sales performance of Kweichow Moutai’s direct marketing system has reached nearly 50%, and further improving the proportion of direct marketing performance may lead to the traditional channel partners in Kweichow Moutai to slow down and resist. Or with high net worth private domain traffic resources, it will affect the foundation of Maotai channel.
For Zhang Deqin’s arrival, some dealers think it is a good thing. As a manager from the liquor industry, he thinks more comprehensively about Maotai and sauce liquor, which is conducive to the development of Maotai and Baijiu industry.
Downward pressure on alcohol prices
When Ding Xiongjun left office, Kweichow Moutai began to face the pressure challenge of liquor prices.
Xiao Zhuqing told a reporter from First Financial that the recent unstable transaction prices in the Maotai liquor market may be a major factor contributing to the change of company leaders.
Since 2023, the whole Baijiu industry has entered a period of deep adjustment, with weak market demand and slow dynamic sales. Recently, the wholesale price of Maotai liquor represented by 2024 (loose bottle) Feitian has fallen below 2600 yuan, attracting market attention.
Since 2023, the whole Baijiu industry has entered a period of deep adjustment, with weak market demand and slow dynamic sales. Recently, the wholesale price of Maotai liquor represented by 2024 (loose bottle) Feitian has dropped below 2600 yuan in the channel.
Baijiu industry is a cyclical industry, which has gone through several cycles in history. The last round of recovery of Baijiu industry will last from 2015 to 2022.
Starting from the second half of 2022, domestic alcohol consumption has been weak. At that time, the industry judged that the Baijiu industry and Baijiu market had entered a new round of adjustment.
On the other hand, since 2015, the price of Feitian Maotai liquor in the market has been continuously rising, which has driven up the prices of other alcoholic beverages. Compared with other Baijiu, the price of Feitian Moutai Liquor is firm. By 2023, the wholesale price in the channel will remain above 2700 yuan/bottle.
Has the price of Feitian Maotai liquor reached its peak now? In history, Feitian Maotai liquor has encountered the phenomenon of unsold liquor and inverted prices. Maotai liquor once had its production capacity affected by market price fluctuations.
At present, not only the price of Feitian Moutai shows signs of pressure. During Ding Xiongjun’s tenure, Kweichow Moutai launched a series of high-end liquors, Moutai, which came into the market in 1935 and 2022. Due to the impact of external factors, the market is not smooth and dealers feel pressure.
Maotai launched Maotai 1935 in the hope of competing with other famous liquors in the thousand yuan price range. Wuliangye’s Puwu and Luzhou Laojiao’s Guojiao 1573 are both in the thousand yuan price range. According to previous official data, the factory price of Maotai 1935 was 798 yuan/bottle. However, after its launch, Maotai 1935 was actually divided into planned and unplanned products, with the latter priced at 1088 yuan/bottle, which also increased the purchase price of Maotai 1935.
In 2023, due to the weak domestic consumption of Baijiu, the market price of Moutai 1935 will gradually fall back. On e-commerce platforms, there are many Moutai 1935 with a price of about 900 yuan.
Some dealers believe that it is not impossible to drive a thousand yuan single product with the Maotai brand, but in the current situation, this action is somewhat rushed.
Recently, several market insiders have told First Financial reporters that some of Maotai’s internal liquor products have unstable prices or are related to the external environment, resulting in insufficient purchasing power in society.
However, in a recent research report released by Everbright Securities, it is believed that the wholesale price of Maotai liquor is a synchronous indicator reflecting supply and demand, rather than a forward-looking indicator. Although the pace of demand recovery cannot be predicted, Maotai has sufficient means to adjust the quantity price relationship. The company can still reduce its demand for quantity increase by optimizing its channels and product structure, thereby effectively easing the pressure on prices from the supply side.
But this round of Baijiu industry adjustment, whether Moutai can carry the industry adjustment cycle itself is still in doubt.
Some private equity investors in Maotai have told First Financial reporters that they are currently even less satisfied with the performance of Maotai’s stock price. The dividend rate has not been increased yet, and special dividends may not be guaranteed. In addition, the performance is relatively transparent, which cannot give market expectations and surprises.
Looking back at the share price of Kweichow Moutai, the closing price once reached 2601 yuan/share on February 10, 2021, which was the highest in history. As of April 29, 2024, the closing price has shrunk to 1704 yuan per share.
(First Financial Journalist Luan Li also contributed to this article)