Moutai eyes tonic liquor market

The production line of Kweichow Moutai Co in Renhuai, Guizhou province. YANG JUN / CHINA DAILY

Chinese liquor giant Kweichow Moutai Co plans to expand into the health tonic liquor market by partnering with Xiuzheng Pharmaceutical Group.

The two companies have signed a strategic partnership agreement to start cooperation production and sale of the liquor. The two companies also plan to set up a joint venture.

Moutai Chairman Yuan Renguo said health tonic liquor was a major new business of the company during the 13th Five-Year Plan (2016-20), in response to surging demand for health related products.

Health tonic liquor is a transparent medicated liquid obtained by using wine as a solvent to soak out the effective components of herbs or animals which can reinforce body fluid and nourish the blood.

Moutai's revenue reached 13.31 billion yuan ($1.93 billion) in the first quarter of 2017, up 33.24 percent year-on-year. Its share price moved above 400 yuan a share in April.

The company established its health tonic liquor unit in 2005. However it only has a single digit market share currently, compared with leading brand Jing Brand Co Ltd, which had a 40 percent of the market last year, according to a report conducted by Xiuzheng Pharmaceutical Group.

The Xiuzheng's report said the value of the health tonic liquor market was expected to exceed 44 billion yuan by 2020, with an estimated annual growth of 15 percent.

Founded in 1995, Xiluzheng ranked third in 2015 among the top 100 Chinese pharmaceutical companies with total assets of 17 billion yuan, according to data from the Ministry of Industry and Information Technology of China, released last year.

The company began to develop health tonic liquor in 2002 and the business reaped about 54 million yuan per year in sales, the report said.

"The share of resources between two major companies in the baijiu and pharmaceutical industries will be a typical example of cross-industry cooperation," said Xiuzheng Pharmaceutical Chairman Xiu Laigui.

Wang Qi, deputy executive director of the China Alcoholic Drinks Association, said health tonic liquor could be a new growth engine for the liquor industry.

China's health tonic liquor market grew 8 percent to reach 24 billion yuan in the first three quarters of last year, according to data from the association.