Yiqing ups white liquor play for heady growth

Beijing Yiqing Holding Co Ltd, a time-honored State-owned enterprise that manages beverage brand Beibingyang and snack business Yili, is increasing its investment in the white liquor sector where it sees strong momentum in development and expects new growth points.

"Chinese food and beverage brands will enter a period of great development this year. Yiqing will actively tap the trend and step up efforts to raise the market competitiveness of its traditional Chinese white liquor, or Baijiu, business. The goal is to make the company one of China's top liquor brands in five to 10 years," said Liu Liqing, general manager of Beijing Capital Liquors, a subsidiary of Beijing Yiqing.

In July last year, Beijing Capital Liquors founded China Liquors (Guizhou Renhuai) Co Ltd in Renhuai, Guizhou province, marking its move into the high-end white liquor industry. Guizhou is home to many well-known white liquor brands such as Kweichow Moutai and Guizhou Xijiu.

For this year, it planned a production capacity of 1,400 metric tons of white liquor to tap the booming market. The company also has plans to set up a liquor brewing base in Renhuai spreading over 21 hectares and with a designed annual production capacity of 8,000 tons.

"The company is mainly focusing on launching high-end white liquor products. The first batch was launched on Jan 1, sold both offline and online, via e-commerce platform JD," Liu said.

Despite the COVID-19 challenges last year, Chinese white liquor companies showed good financial performance and will seek to ride the strong momentum of development this year, experts said.

According to a recent report by Red Star Capital, a Chengdu-based research and financial news group, China's white liquor sector has experienced a three-year adjustment period due to the impact of the pandemic on the consumption sector, and will maintain steady growth with the recovery of the economy.

In 2022, the market scale of China's white liquor sector was 621.1 billion yuan ($90.6 billion), and is expected to reach 769.5 billion yuan in 2026, with a compound annual growth rate, or CAGR, of 5.5 percent, the report said.

Data from the National Bureau of Statistics showed that there were 963 white liquor enterprises whose annual sales revenue exceeded 20 million yuan each last year. Their total output of white liquor reached 6.712 million kiloliters, down 5.6 percent from 2021. However, their combined sales revenue was 662.65 billion yuan, up 9.6 percent, which generated a total profit of 220.17 billion yuan, up 29.4 percent.

Song Shuyu, chairman of the China Alcoholic Drinks Association, said at a recent forum that Chinese liquor companies strove to make progress last year despite COVID-19 challenges such as lack of consumption scenarios. Overall, they maintained stable business operations with several enterprises showing a better-than-expected performance.

Last year, Kweichow Moutai's revenue rose nearly 17 percent year-on-year to 124 billion yuan, creating a net profit of 62.72 billion yuan, up around 20 percent. The company said in its financial report it is targeting a revenue growth of about 15 percent this year.

Luzhou Laojiao, another leading white liquor company, located in Sichuan province, also reported good business performance. Its chairman Liu Miao said in March that from 2019 to 2021, the company's revenue grew by 58 percent, with a CAGR of 16 percent. Net profit grew by 126 percent cumulatively, with a CAGR of 31 percent.

Liu Miao said the full-year sales performance in 2022 is expected to reach a record high. Further details will be disclosed later this month.

Song of the CADA said the Chinese liquor industry will undergo profound changes this year, with cultural innovation becoming the new driving force of its development. Corporate social responsibility, or CSR, as well as environmental, social and governance — ESG — factors are becoming even more important contributors to liquor companies' sustainable development.