China Spirits Tracker_ Focus on sustainable growth for Strong-Start strategy for 2025

Summary of the China Spirits Tracker Conference Call Industry Overview - The conference focused on the Chinese spirits industry, particularly the strategies and performance of major companies as they prepare for the Lunar New Year (LNY) of 2025, under the "Kaimenhong" strategy aimed at sustainable growth [7][8]. Key Companies and Their Strategies 1. Kweichow Moutai - Continues to control the shipment volume of Feitian Moutai while increasing non-standard SKUs and series spirits [7]. - Monthly shipments are aligned with prepayment schedules, indicating a cautious approach to growth [7]. 2. Wuliangye Yibin - Set a target contract volume for the 8th-gen Common Wuliangye with a mild increase year-over-year (yoy) for 2025, referencing average volumes from 2022-2024 [8]. - The prepayment portion for the Strong-Start campaign is set at 40%, with net costs for distributors around Rmb942-943 per bottle after a 7.5% rebate [8]. 3. Luzhou Laojiao - Aims for over 20% volume growth for Guojiao in 2025, with regional variations expected based on performance [9]. 4. Shanxi Fen Wine - Targets Rmb40 billion in sales for 2025, focusing on channel health and stability, with new product Qinghua 26 expected to contribute to incremental volume [9]. 5. Gujing - Achieved its full-year prepayment target for 2024 by December 10, indicating strong distributor engagement [9]. Pricing Trends - Feitian Moutai: - Wholesale price increased by Rmb25 from Rmb2,235 to Rmb2,260 for original cases, and by Rmb10 from Rmb2,190 to Rmb2,200 for unpacked cases [20][31]. - Common Wuliangye: - Price remained stable at Rmb950 per bottle, with a slight increase noted in regional pricing references [20][31]. - Guojiao 1573: - Price remained stable at Rmb860 per bottle [20][31]. Market Dynamics - The spirits companies are adopting a cautious stance due to the gradual recovery expected in 2025, influenced by macroeconomic factors and policy stimuli [7]. - Distributors have low expectations for rebate levels, indicating a potential challenge in maintaining distributor motivation [8]. Export Performance - In the first ten months of 2024, China's spirits exports saw a volume increase of 3.3% and a value increase of 15.9% year-over-year [22]. Key Risks Identified - Potential regulatory changes, such as consumption tax hikes, environmental concerns, and macroeconomic recovery speed are significant risks for companies like Kweichow Moutai and Wuliangye Yibin [81]. - Intensifying competition in the high-end spirits market poses a threat to profitability across the sector [81]. Conclusion - The Chinese spirits industry is preparing for a cautious yet strategic growth phase as companies set their sights on the upcoming Lunar New Year. The focus remains on maintaining distributor relationships, managing pricing strategies, and navigating potential regulatory challenges while aiming for sustainable growth in a competitive landscape [7][8][9].