A bottle of Kweichow Moutai Liquor is displayed inside a direct sale store in Beijing, China November 2, 2020. Picture taken November 2, 2020. REUTERS/Tingshu Wang

HONG KONG, March 31 (Reuters Breakingviews) - Kweichow Moutai (600519.SS) Chairman Ding Xiongjun is infusing his company’s liquor with stronger marketing. The Chinese distiller rolled out its own direct sales initiative on Thursday. The flagship baijiu isn’t being stocked on the iMoutai app’s shelf for now, but four other pricey types are available.

It’s a sensible way to gin up profit. Price hikes risk drawing the attention of the Chinese Communist Party. For years, Moutai mainly has charged third-party distributors 969 yuan ($153) a bottle, leaving money on the table as middlemen sell it for more.

The business model has sparked controversy. In 2019, Moutai’s state-owned parent tried to establish a wholly owned sales division, which led to concerns that some of the markup would be siphoned away from the publicly listed company. The unit was subsequently dissolved.

Direct sales, through self-operated stores, represented a fifth of Moutai’s revenue last year, up from just 6% in 2018. Amid a 16% slide in the share price this year and a grimmer consumption outlook, higher margins will be something to toast. (By Yawen Chen)

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Source: Reuters

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