Wuliangye Group Co Ltd's booth at a liquor expo in Wuhan, Hubei province. CHINA DAILY
The country's top producer of baijiu, China's famous "white liquor", Wuliangye Group Co Ltd, has lowered some wholesale prices to alleviate the loss of retail dealers, which has forced mid-end distiller brands into a fierce price competition.
The wholesale price of one of the group's key products - 52-proof "crystal" Wuliangye - was cut from 729 yuan ($117) a bottle to 609 yuan, a 16.46 percent reduction.
Zhu Zhongyu, vice-general manager of Wuliangye, said the price change was the result of market research and would continue through the rest of this year.
Liu Zhongguo, chairman of Wuliangye, said the group has extended its sales target of 100 billion yuan to 2017. The target was initially set to be reached by next year.
Jin Yufeng, a liquor industry expert, said that only by prioritizing quality can the pricing system be restored.
Despite the reduction in wholesale prices, Wuliangye's retail price had long ago fallen below 600 yuan.
Jin said the price range lingered between 570 and 590 yuan in the first three months after the recent Spring Festival.
Wuliangye's new price range is expected to squeeze the luxury units of second-tier brands such as Langjiu, from Sichuan Langjiu Co Ltd, and Jiannanchun, from JNC Group Co Ltd.
Hu Zhiliang, director of CIConsulting, said the price cuts were a consequence of Wuliangye's previous decision to raise prices when the industry was hammered by the government's austerity campaign. Liquor producers have to comply with the market and lower prices in the current environment, Hu said.
Net profits of liquor giant Wuliangye Yibin Co Ltd dropped 27.79 percent to 2.62 billion yuan in the first quarter.
It was the first January-March decline in net profits since 2003. Sales revenues of the baijiu producer totaled 6.72 billion yuan in the first quarter, down 22.54 percent year on year.
The ongoing nationwide campaign to curb extravagance has dealt a blow to high-end liquor brands such as Wuliangye. Growing inventory and mounting costs have pushed liquor retailers to lower their retail prices.
On April 17, the company reported it posted a 19.75 percent decrease in net profits last year, its first drop since 2005.
Another high-end baijiu producer, Kweichow Moutai Co Ltd, said it was going to maintain its price range despite Wuliangye's move.
As one of the country's high-end liquor producers, Moutai has a different customer base than Wuliangye.
